ING Groep NV, the biggest financial-services company in the Netherlands, said Dutch rules capping pay for top banking executives have created a gap with peers that threatens the lender’s prospects.
Total compensation for board members including Chief Executive Officer Jan Hommen, 69, was in “the lowest decile of the relevant benchmark and creates a significant gap between ING, the market and its peers in Europe,” the Amsterdam-based company said in its 2012 annual report, released today. “In the longer term, this is not a tenable situation for ING and its market positioning.”
ING’s top executives haven’t received bonuses for four years while their fixed compensation has remained unchanged since 2010. Responding to voter anger over bailouts in 2008 and 2009, including 10 billion euros ($13 billion) in state aid to ING and 30 billion euros spent to rescue parts of ABN Amro Holding NV and Fortis, the Dutch government imposed bonus rules that are tougher than the recent European Union deal capping variable compensation at twice fixed pay.
Deutsche Bank AG co-CEO Anshu Jain earned 4.8 million euros last year, the German bank’s supervisory board Chairman Paul Achleitner said today, more than triple what Hommen received.
Hommen, who is due to step down in October, received a base salary of 1.35 million euros last year. The salary of his successor, Ralph Hamers, currently chief of ING’s Belgian bank, hasn’t yet been disclosed. Chief Financial Officer Patrick Flynn, who may be appointed for a second term by shareholders in May, earned 750,000 euros. ING’s board has decided to forfeit any increases in fixed pay until it has repaid its bailout.
The firm has returned the Netherlands 7.8 billion euros in bailout money, as well as 2.4 billion euros in interest and premiums.
After paring bonuses for top banking executives to 100 percent of annual salaries in 2010, the Dutch government plans to limit bonuses to 20 percent of wages across the industry. Finance Minister Jeroen Dijsselbloem plans to present draft legislation about mid-year. Dutch banks that haven’t repaid their state aid are barred from paying bonuses to executive board members.
Outrage against bankers in the Netherlands flared after the state nationalized SNS Reaal NV on Feb. 1. It will cost taxpayers 3.7 billion euros as capital is injected into the bank and an earlier aid package is written down.
European Parliament lawmakers and Ireland, which holds the rotating presidency of the EU, earlier this week confirmed banker-pay rules set to take effect from 2015. Bonuses of more than twice fixed pay will be banned, with some scope to exceed that limit if payment is deferred for at least five years.
Deutsche Bank said it may lift salaries for management board members and senior executives. Even as the EU limits bonuses, the lender must pay top staff enough to compete with peers that aren’t affected by the new regulations, Juergen Hambrecht, who led an external committee that reviewed compensation at the lender, said today.
ING measured board compensation against companies in the Euro Stoxx 50 Index, including BNP Paribas SA, Deutsche Bank and Royal Philips Electronics NV.
Frans van Houten, CEO of Philips, the Dutch maker of lighting products and health-care equipment, received total compensation of 3.4 million euros last year, according to its annual report. That figure includes stock options, pension costs and other items.
Separately today, Aegon NV, the Dutch insurer that completed repayment of 3 billion euros in state aid in 2011, said it awarded CEO Alex Wynaendts 1.02 million euros in conditional variable compensation over 2012, half in cash and half in shares. Wynaendts will get 203,5346 euros, or 40 percent, of the cash component this year, and 65,111 shares. The remainder will be paid over subsequent years if certain conditions are met.
Wynaendts waived cash bonuses awarded to him in 2010 and 2011 and wasn’t awarded variable compensation in 2009, the year after Aegon’s bailout. His 2012 fixed salary was 1.05 million euros, a 9 percent increase from 2011.