(Upper limit of the variable portion of remuneration payable to effective senior managers and certain categories of personnel – article L.511-78 of the French Monetary and Financial Code)
The Annual General Meeting, in accordance with the quorum and majority requirements laid down in article L.511-78 of the French Monetary and Financial Code, having read the Board of Directors’ report, hereby authorises the variable portion of individual remuneration allocated for 2014 to effective senior managers and categories of personnel, including risk-takers, employees engaged in a control function and any employee receiving total compensation that takes them into the same compensation bracket, whose professional activities have a significant influence on the risk profile of BNP Paribas or the BNP Paribas Group or an estimated number of employees up to of 830 , to be increased by a maximum of 200% of the fixed portion of the overall compensation of each of these employees, with the option to apply the discount rate specified in article L.511-79 of the French Monetary and Financial Code. Such authorization is valid for a period of 3 years period expiring at the end of the Ordinary General Meeting called in 2018 to approve the 2017 financial statements.
Presentation of the resolution
The seventeenth resolution, specific to the banking industry like the previous one, relates to the setting of a ceiling on the variable portion of the compensation of senior executives, who at BNP Paribas are the corporate officers as well as some categories of employees whose professional activities have a significant influence on the risk profile of the company or the Group.
The European Directive CRD4 of 26 June 2013 concerning access to the activity and the prudential supervision of credit institutions has a « governance» component that strictly regulates compensation policies in order to avoid potential excessive risk-taking.
In particular, it provides that the variable component should not exceed 100% of the fixed component of the total compensation for each individual. Nevertheless, it allows shareholders to approve a higher maximum ratio in so far as the overall level of the variable portion does not exceed 200% of the fixed portion of total compensation for each person concerned. A discount rate may be applied to a maximum of 25% of the total variable compensation provided its payment is in the form of instruments that are deferred for at least fiveyears. These provisions have been incorporated into French law inarticle L. 511-78 of the French Monetary and Financial Code.
The resolution submitted to your vote concerns the categories of employees identified in 2014 as MRTs according to all of the criteria defined by the European Banking Authority as well as by the Group’s additional internal criteria. The estimated number of employees to be subject to this upper limit is 830 employees. As a reminder, the Annual General Meeting of 14 May 2014 voted more than 75% in favour of increasing the ratio from 100 to 200% for the 2014 financial year. Raising this ratio for the 2014 financial year benefited only to 35% of the employees identified as MRTs in 2014.
By virtue of applying the MRT identification criteria, these capping rules apply for the 2014 financial year to a particularly large range of activities and positions mostly within the Corporate and Investment Banking businesses and, for the remaining part, within Retail Banking entities and the Group control functions. They are not limited to employees carrying out their activities within the European Union. With its international scope and presence in many countries, BNP Paribas operates in a highly competitive environment where some banking competitors are not subject to the same requirements governing the compensation policy. The resolution thus presented is consistent with the long-term interest of the shareholders as it enables the Bank to hire and retain the best employees covered by this requirement.
The variable compensation awarded, subject to these capping rules, is nevertheless strictly supervised and aligned with the long term interests of the Group and the shareholders (deferred payments, subject to performance criteria and partially indexed to the BNP Paribas share price performance or similar instruments as provided for in the regulation) and is compatible with sound financial management.
The Board therefore recommends that the Annual General Meeting approves, in compliance with the provisions of the aforementioned European Directive, that the variable portion of the compensation for the employees concerned may represent up to 200% of their fixed component. The resolution subject to your vote would be valid, until the Annual General Meeting called in 2018 to approve the financial statements for the 2017 financial year. In the event that the number of employees concerned would significantly change or if the compensation awarded by applying this resolution would no longer be compatible with sound financial management, the Board would submit to the Annual General Meeting a resolution adapted to the new situation before the end-date mentioned in this paragraph.
Nevertheless it should be noted that a report on the remuneration awarded to these employees is disclosed each year on the BNP Paribas website, and details the percentage of employees who actually have benefited from this raise.
The Board draws the shareholders’ attention to the fact that this resolution must be approved by a qualified majority depending on the quorum present at the final vote in the Meeting.
It is necessary to assemble:
■ 2/3 of the votes of shareholders if the quorum is greater than or equal to 50%;
■ 75% of the votes of shareholders if the quorum is less than 50%;
It should nevertheless be noted that the employees identified as MRTs are not authorised to vote for this resolution;
The Board further notes that abstention is treated by French law as a vote against the proposed resolution.