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This report describes DBS’ remuneration practices and policies
with reference to the following principles set out in the Code of
Corporate Governance.
Procedures for Developing Remuneration Policies
Principle 7: There should be a formal and transparent
procedure for fixing the remuneration packages of
individual directors. No Director should be involved
in deciding his own remuneration.
Level and Mix of Remuneration
Principle 8: The level of remuneration should be
appropriate to attract, retain and motivate the directors
needed to run the company successfully, but companies
should avoid paying more for this purpose. A proportion
of the remuneration, especially that of executive directors,
should be linked to performance.
Disclosure on Remuneration
Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration,
and the procedure for setting remuneration, in the
company’s annual report.
The Group’s remuneration philosophy and policies are an
integral part of its corporate strategy. We pay special attention
to developing employees as the Group’s most important resource
and as an important stakeholder, and recognise that a
transparent reward system is an important key driver of
performance (although not the only one).We focus on driving
desired employee behaviour and performance, supported by our
transparent remuneration policy and incentive system as well as
an open performance appraisal system.
Policy on Employee Remuneration
DBS’ remuneration policy seeks to:
| (a) |
Attract and retain talented and skilled employees who are
critical to the long-term success of DBS; |
| (b) |
motivate employees to perform at the highest levels to
achieve individual, business and group objectives; |
| (c) |
support a strong performance-oriented culture at all
employee levels by linking pay and reward directly to
individual, unit and group performance; and |
| (d) |
foster an ownership culture which aligns the interests of
employees with the interests of shareholders. |
The total compensation of each employee, which is
benchmarked to market total compensation for similar job
functions, consists of the following components:
| (a) |
base pay; |
| (b) |
cash bonuses; and |
| (c) |
long-term share incentives comprising DBSH performance
shares and share option awards. |
In determining the total compensation, individual, unit and DBS
Group performance as well as market remuneration
competitiveness are taken into consideration. Market
competitiveness data are obtained from external benchmarks,
including market surveys.
Long-term Share Incentives – Performance Share Plan,
Share Option Plan, Employee Share Plan and Share
Ownership Scheme
DBSH Group has in place share-based remuneration programmes
that allow its employees to share in the growth and success of
DBSH Group. These plans include a DBSH Performance Share Plan
(“PSP”), a DBSH Share Option Plan (“SOP”), an Employee Share
Plan (“ESP”) and a DBSH Share Ownership Scheme (“SOS”).
Managing Directors, Senior Vice Presidents and Vice Presidents
are eligible to participate in the PSP and SOP. Select high-performing
Assistant Vice Presidents are eligible to participate in
the SOP. The awards made under the PSP and SOP are part of
the annual incentive remuneration, which comprises cash
bonuses and share-based awards. The share portion (i.e., PSP
and SOP) of an employee’s annual incentive remuneration
increases correspondingly with the amount of the employee’s
total annual incentive remuneration, such that employees with
higher annual incentive remuneration receive a larger portion of
their compensation in share-based awards.
For the PSP and SOP, vesting periods are imposed. The number of
shares eventually awarded upon vesting under the PSP is based
on DBS Group’s performance for a three-year performance
period as measured by the Group’s return on equity (ROE). The
aggregate total number of new DBSH ordinary shares that may
be issued under the SOP and the PSP at any time may not exceed
7.5% of the issued ordinary shares of DBSH.
Employees of DBSH Group who are not eligible for the SOP or
PSP are eligible to participate in the ESP and SOS. Under the ESP,
employees are awarded DBSH ordinary shares when DBS Group
meets certain performance targets. These awards vest after a
period of three years. The SOS is a market purchase plan
administered by DBS Trustee Ltd, a wholly-owned subsidiary
company of DBS Bank. Under the SOS, all confirmed employees
with at least one year of service can subscribe up to 10% of their
monthly base pay to buy units of DBSH ordinary shares, with DBS
contributing an additional 50% of what the employee contributes.
Within certain business units or countries, it is not possible to
operate all or part of the above share-based remuneration
programmes, typically because of securities laws and regulatory
issues or market driven practices.
Policy on Directors’ Fees
DBS Group’s policy on Directors’ fees is that it should be
competitive with regional competitors and should align directors’
interests with the interests of the shareholders. Directors receive
basic directors’ fees, and fees for being the Chairmen or
members of the Executive Committee, Audit Committee and
Board Risk Management Committee.
Directors are encouraged, but are not obliged, to invest half of their
fees in DBSH shares and to hold not less than 50% of these shares
for the duration of their respective terms. Directors’ fees are approved
by shareholders at the annual general meeting (AGM) of DBSH.
Remuneration of Executive Directors
In determining the remuneration for executive directors, the
Compensation Committee takes into account the following
principles:
| (a) |
the remuneration should motivate the executive directors to
achieve DBS Group’s performance targets, both annual and
long-term; |
| (b) |
the performance-related elements of remuneration should
form a significant part of their total remuneration package; |
| (c) |
the interest of the executive directors should be aligned with
shareholders; and |
| (d) |
the remuneration is directly linked to the performance of DBS
Group and individual performance. |
The Compensation Committee recommends specific remuneration packages for each executive director for
endorsement by the full Board.
Executive directors are recruited by DBS under employment
contracts covering their services as employees.
These employment contracts have general clauses for termination
of service as employees, rather than a specific provision for early
termination. The contracts do not deal with directorship matters,
which are approved separately by the Board. An executive
director’s term on the Board is determined by the Board.
Remuneration of Non-Executive Directors
Following a review of industry benchmarks, with effect from
January 1, 2004, the basic annual fee paid to each director of
DBSH is proposed to be increased from $40,000 to $50,000,
while the annual fee paid to the Board Chairman is raised from
$50,000 to $85,000. Fees paid to Audit, Board Risk
Management and Executive Committee members are increased
from $6,000 to $20,000 each per annum. Fees for the
Chairmen of the Audit and Board Risk Management Committees
are raised from $15,000 to $35,000 each per annum, while the
annual fee for the Chairman of the Executive Committee is
increased from $10,000 to $35,000 per annum.
The revised fee structure will be presented to shareholders for
approval at the AGM on April 29, 2005.
Breakdown of Directors’ Remuneration
The following table shows the breakdown (in percentage terms) of the remuneration of directors, including those appointed and
resigned/retired during the year. They are grouped by bands of $250,000 for the year ended December 31, 2004.
1) Valuation based on Black Scholes model
2) Refers to the number of unissued DBSH ordinary shares of par value S$1 under the
DBSH
Share Option Plan
3) Fees are not retained by directors
4) Appointed on May 3, 2004
5) Resigned on April 30, 2004
Key Executives’ Remuneration
The Code requires the remuneration of at least the top five key
executives who are not also directors to be disclosed within
bands of $250,000. DBS believes that disclosure of the
remuneration of individual executives is disadvantageous to its
business interests, given the highly competitive industry
conditions, where poaching of executives has become
commonplace in a liberalised environment.
Immediate Family Member of Director
The following table shows the breakdown (in percentage terms) of the annual remuneration of employees who are immediate
family members of directors.
1) Valuation based on Black Scholes model
2) Refers to the number of unissued DBSH ordinary shares of par value S$1 under the
DBSH Share Option Plan
Share Plans
Details of the DBSH Performance Share Plan and the DBSH Share Option Plan (the “Plan”) appear in pages 150 to 152 of the
Directors’ Report. In compliance with Rule 852 of the SGX Listing Manual, the following participants in the Plan received the
following number of options:
* DBSH has no controlling shareholders and no disclosure is made in this respect
# The options granted were in accordance with the terms of the Plan
During the financial year:
| (a) |
no options were issued to any participant totalling 5% or
more of the total number of options available under the Plan; |
| (b) |
no options were issued to any director or employee of
DBSH or its subsidiaries totalling 5% or more of the total
number of options available to all directors and employees
of DBSH and its subsidiaries under the Plan; and |
| (c) |
no options were granted at a discount. |
The aggregate number of options granted to the directors and
employees of the DBS Group for the financial year under
review is 7,494,000.
The aggregate number of options granted to the directors and
employees of the DBS Group since the commencement of the Plan
to the end of the financial year under review is 46,749,383.
Approval by shareholders
Shareholders’ approval was previously obtained for the
implementation of the DBSH Share Option Plan and the DBSH
Performance Share Plan. Directors’ fees are also approved by
shareholders at the AGM. The remuneration framework for
executive directors and executives has also been approved by
the Compensation Committee and endorsed by the Board. The
Board considers that the remuneration framework does not
need to be approved by shareholders. |