5.1 Contents and stipulation procedure
5.1.1 Responsibility and stipulation procedure
The Appointments and Compensation Committee (see Point 3.5.2 «Composition of all Board of Directors committees, their tasks and terms of reference»), which is composed solely of independent members of the Board of Directors, prepares the principles and regulations governing the compensation for the members of the Board of Directors and the Board of Management, as well as the proposed amount of the compensation for the members of the Board of Directors and the Board of Management. The Board of Directors in corpore approves the principles and regulations governing the compensation of the members of the Board of Directors and specifies the amount of the compensation for the members of the Board of Management and its members. The members of the Board of Management are not present at the discussion and decision concerning the amount of the compensation for them.
No advisor is called in for the formulation of the compensation structure. Once a year, the Board of Directors prepares a summary of the compensation of board members, board chairman and management executives derived from publicly available sources and taking into consideration comparable banks in Liechtenstein and Switzerland. This summary serves as a guide to the market situation for the Board of Directors. The decision regarding the amount of the compensation of the members of the Board of Directors and the Board of Management is made at the discretion of the Board of Directors.
The principles and regulations governing the compensation of the members of the Board of Directors and the Board of Management are reviewed periodically. The amount of the compensation for the members of the Board of Directors and the Board of Management is stipulated each year.
The principal criteria determining the compensation of the members of the Board of Directors and the Board of Management comprise, on the one hand, quantitative objectives (above all, the business result attained) and, on the other, individual targets. The amount of the profit-related component depends primarily on the business result attained.
The compensation for members of the Board of Directors comprises a fixed compensation fee, meeting allowance (for meetings of committees and foundation boards) and a profit-related component, the size of which depends on the LLB Group's business result. The profit-related component is limited to the amount of the basic fee and is paid in cash. The compensation system does not incorporate any severance payment in the event of the ending of a mandate.
The employment relationship of members of the Board of Management is stipulated in individual employment contracts. The period of notice is either three or four months. The contracts of employment do not contain any special clauses in relation to a termination of employment in the event of a change in control of the company.
The compensation for members of the Board of Management is composed of a fee or basic salary plus a performance or profit-related remuneration component. The basic salary is paid in cash. On average it amounts to 66 percent of the total compensation. The profit-related component of compensation is contingent upon the business result of the LLB Group and is limited to the amount of the basic fee or salary. Payment is made in cash and through the allocation of LLB shares. The cash/shares allocation is defined in internal regulations as follows: three quarters LLB shares and one quarter cash payment. The members of the Board of Management do not have the right to specify the share/cash ratio. The price per share for the share-based remuneration component is calculated on the basis of the average share price in the last quarter of the financial year (2009: CHF 66.90). The issued shares are subject to a blocked period of three years. If the shareholder leaves the bank's employ, the blocked period is lifted. Apart from the allocation of shares as a profit-related component of compensation, there are no other share plans.
The entire profit-related remuneration amount is reported on an accrual basis in the 2009 profit and loss account. Payment is made, however, only in the following year.
The Liechtensteinische Landesbank extends the preferential conditions customary in the banking industry to all its staff (including management) on bank products. This generally takes the form of limited preferential interest rates on mortgage loans and credit balances. Standard market conditions apply to all transactions made by the Board of Directors with the bank.
In connection with the change in the composition of the Board of Management per 1 January 2007, in the 2009 report year an amount of CHF 194'517 was transferred from the Employer Foundation to the staff pension fund to finance future retirement pension payments.
5.2 Transparency of compensation, participation and loans of issuers domiciled abroad
The Liechtensteinische Landesbank has its registered office in Vaduz, Liechtenstein. In principle, therefore, it is not subject to Art. 663 of the Swiss Code of Obligations. However, to enable investors nevertheless to obtain the corresponding information, the SIX Swiss Exchange obliges issuers, whose registered office is not in Switzerland, to apply the provisions of Art. 663 Code of Obligations in the same manner within the scope of corporate governance reporting.
Details of the compensation and participations of members of the Board of Directors and the Board of Management, as well as loans to them can be found in the Notes to the financial statement of the LLB Group in «Related party transactions».