Corporate Governance Report
Remuneration policy
Directors’ remuneration is set annually by the Board following delegation by the Bank’s shareholders. Any proposals for changes are considered by the Nomination, Compensation & HR Committee prior to obtaining Board and, if necessary, shareholder approvals. According to federal laws and the Bank’s articles of association, Directors may not receive any remuneration in respect of a year when the Bank does not achieve net profits.
Please see further details here.
Directors’ Shareholdings as at 31 December 2014
| Shareholding in ADCB | |||
|---|---|---|---|
| As at 31 December 2013 | As at 31 December 2014 | Change in shareholding | |
| Abdulla Khalil Al Mutawa | 2,347,277 | 2,347,277 | 0 |
| Ala’a Eraiqat* | 2,200,000 | 2,391,877 | 191,877 |
| Aysha Al Hallami | 0 | 0 | 0 |
| Eissa Mohamed Al Suwaidi | 0 | 0 | 0 |
| Khalid Deemas Al Suwaidi | 0 | 0 | 0 |
| Khaled H Al Khoori | 190,000 | 0 | -190,000 |
| Mohamed Ali Al Dhaheri | 0 | 0 | 0 |
| Mohamed Darwish Al Khoori | 837,325 | 91,892 | -745,433 |
| Mohamed Sultan Ghannoum Al Hameli | 0 | 0 | 0 |
| Omar Liaqat | 0 | 0 | 0 |
| Sheikh Sultan bin Suroor Al Dhahiri | 2,835,147 | 2,835,147 | 0 |
Scroll to view full table
* Excluding 542,197 unvested restricted units in the Bank’s LTIP scheme of which (1) 241,556 will vest on 31 December 2015 subject to early vesting, and (2) 300,641 will vest on 31 December 2016 subject to early vesting.
Board Committees’ Fees
| Nomination, Compensation & HR Committee | Board Risk & Credit Committee | Audit & Compliance Committee | Corporate Governance Committee | Board Committee meeting fees (2014, AED) | Board member remuneration (AED, paid in 2014 for the year 2013) | Total (AED) | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Members | Sessions attended | Amount (AED) | Sessions attended | Amount (AED) | Sessions attended | Amount (AED) | Sessions attended | Amount (AED) | |||
| Eissa Mohamed Al Suwaidi | 5 | 20,000 | 26 | 130,000 | 150,000 | 1,000,000 | 1,150,000 | ||||
| Mohamed Sultan Ghannoum Al Hameli | 6 | 30,000 | 24 | 96,000 | 126,000 | 750,000 | 876,000 | ||||
| Khaled H Al Khoori | 29 | 116,000 | 124,0001 | 600,000 | 724,000 | ||||||
| Mohamed Darwish Al Khoori | 10 | 75,000 | 75,000 | 600,000 | 675,000 | ||||||
| Abdulla Khalil Al Mutawa | 6 | 24,000 | 9 | 54,000 | 78,000 | 600,000 | 678,000 | ||||
| Mohamed Ali Al Dhaheri | 6 | 24,000 | 5 | 25,000 | 49,000 | 600,000 | 649,000 | ||||
| Sheikh Sultan bin Suroor Al Dhahiri | 4 | 16,000 | 16,000 | 600,000 | 616,000 | ||||||
| Khalid Deemas Al Suwaidi | 4 | 16,000 | 16,000 | 600,000 | 616,000 | ||||||
| Aysha Al Hallami | 32 | 128,000 | 9 | 54,000 | 190,0001 | 450,000 | 640,000 | ||||
| Omar Liaqat | 8 | 48,000 | 5 | 20,000 | 78,0001 | 450,000 | 528,000 | ||||
| Total | 98,000 | 470,000 | 231,000 | 77,000 | 902,0001 | 6,550,0002 | 7,452,000 | ||||
Scroll to view full table
1. In 2013, the Board formed a special committee to consider the future strategy of the Bank’s Indian branches, and its members were paid fees of AED 26,000 in 2014 (Khaled H Al Khoori AED 8,000, Aysha Al Hallami AED 8,000 and Omar Liaqat AED 10,000).
2. Total includes the fees of the Board members who retired in 2013: Jean Paul Villain (AED 150,000) and Salem Mohamed Al Ameri (AED 150,000).
Note: Ala’a Eraiqat (Board Member and Chief Executive Officer) has waived his right to receive Board fees.
Board Remuneration
Board Member remuneration paid during 2014
| Director fees (AED per annum)* | |
|---|---|
| Chairman of Board | 1,000,000 |
| Vice-Chairman | 750,000 |
| Director | 600,000 |
Scroll to view full table
Board Committee meeting fees paid for attendance in 2014 (per meeting)
| Fees for attendance at Board Committee meetings (other than Audit & Compliance Committee) | Fees for attendance at Audit & Compliance Committee meetings | |
|---|---|---|
| Committee Chairman | AED 5,000 | AED 7,500 |
| Committee Member | AED 4,000 | AED 6,000 |
Scroll to view full table
Other benefits
As at 31 December 2014, the Bank’s Directors were not eligible for any bonus, long-term or other incentive schemes. Directors do not receive any pension benefits from the Bank.
Please see further details here.
Remuneration & Reward at ADCB
Guiding Principles
In line with ADCB’s commitment to sound governance and promotion of long-term sustainable shareholder value, ADCB’s objective is to provide transparency to shareholders and other stakeholders about its remuneration principles and incentives.
- ADCB supports levels of remuneration necessary to attract, retain and motivate employees of the calibre necessary to lead, manage and deliver in a competitive environment. However, ADCB seeks to avoid paying more than necessary for this purpose and has practices and policies in place that promote effective risk management.
- ADCB seeks to ensure that remuneration packages reflect duties and responsibilities, are fair and equitable, and incorporate clear and measurable rewards linked to corporate and individual performance. Rewards will be based only on the results of a rigorous appraisal process.
- As far as possible, bearing in mind market trends and constraints, remuneration shall align the interests of ADCB’s employees with the interests of shareholders and other stakeholders, and shall blend short- and long-term incentives. Performance-related elements shall be designed to minimise employee turnover and to give employees incentives to perform at the highest levels, whilst recognising the need to promote effective risk management.
Total Reward — Key Components
An employee’s rewards at ADCB are made up of:
Fixed Pay
This part of pay is fixed and based on the market rate for each role. It is influenced by each individual’s contribution over the year, and any fixed-pay reviews will depend on the achievement of an employee’s objectives and overall performance level.
Components:
Base Salary
Allowances
- social allowance (UAE nationals)
- job-specific allowances (such as a teller allowance, remote-area allowance or shift allowance)
- grade-based allowances (such as an education allowance)
Benefits such as:
- leave fare
- private medical insurance
- life insurance coverage
- annual leave
2014 Key Management Fixed Pay
In 2014, Key Management (defined as CEO and his direct reports) received fixed pay, which included basic salary and other allowances (excluding cash and deferred variable pay awards as detailed below) amounting to AED 28.7 mn.
Variable Pay
Employees may receive variable pay in addition to fixed pay. It is based on each individual’s performance over the year. Variable pay is not always payable, and the amount received may change from year to year.
Performance Criteria
Although individual award amounts are dependent on individual performance, variable pay is also aligned to the business function’s performance as well as the Bank’s overall performance.
- Individual performance
- Business function performance
- Bank’s overall performance
2013/14 Variable Pay Awards
For performance in 2013, the following awards were made to employees in 2014:
- Cash variable pay awards of AED 138.5 mn
- Deferred compensation plan awards of AED 50.2 mn
- Of the above, AED 30.5 mn was allocated to Key Management in cash and AED 25.4 mn in deferred compensation
Retention Scheme (New for 2014)
In 2014, ADCB introduced a share-based Retention Scheme for incumbents in key positions deemed as ‘mission critical’ and for UAE nationals deemed to have exceptional growth potential. The Retention Scheme is independent of variable pay awards, with the key driver to ensure business continuity by mitigating turnover risk and, in turn, operational risk. Invitations to join the Retention Scheme are at the sole discretion of the NCHR Committee, and members of the Management Executive Committee are excluded from participating. Retention Scheme awards vest after four years’ service.
Performance Criteria
- Incumbents in ‘mission critical’ positions
- UAE nationals with exceptional growth potential
2014 Retention Awards
Awards were made to 47 employees, of whom 70% were UAE nationals, and 1,665,000 shares were awarded at a value of AED 10.8 mn.
ADCB’s Bank-Wide Variable Pay Framework
In 2012, the Bank completed an extensive review of its variable pay (VP) practices, which it had commenced in 2011, and implemented several key changes aimed at improving remuneration governance and alignment with global best practices. These practices continue to evolve as the Bank reviews and enhances its policies and practices to ensure ongoing alignment with international regulations and, in particular, those associated with a robust decision-making process in all remuneration matters based on performance measurement and risk adjustment.
ADCB’s Variables Pay Framework & Governance — Key Facts
Aligns individual, business function’s and Bank-wide performance Yes
Differentiates between different functions of the Bank to ensure alignment to the relevant market Yes
Includes a deferred compensation plan Yes
Currency of deferred compensation Cash & Shares
Duration of deferred compensation plan 3 years
Awards subject to thresholds, caps, clawback rules, malus clause, and deferral and retention provisions Yes
Employs remuneration professionals experienced in the governance of all types of compensation and benefits Yes
Designed in conjunction with, and reviewed by, independent external advisors reporting directly to the Nomination, Compensation & HR Committee Yes
Conducts regular external benchmarking to ensure alignment with evolving global best practices Yes
Constantly monitors the developments in remuneration governance and revises practices to ensure all VP plans evolve in line with the Bank’s needs and external developments Yes
Designed to avoid excessive risk‑taking Yes
Active involvement of Risk in the review of VP plans Yes
Minimum Shareholding Rule for Key Management Yes
Aligns employees with the long-term performance of the Bank Yes
The NCHR Committee oversees the allocation of variable pay awards and retention awards, including (a) overall amounts, (b) distribution between business groups, (c) actual awards to the Bank’s senior management (including senior material risk-takers and senior members of the Bank’s control functions). Yes
The Bank’s Finance & Risk groups are involved in setting and reviewing the criteria used for performance measurement and risk adjustment for awards to key revenue-generating functions. Formula-based awards are based on adjusted revenues and may be adjusted based on risk assessments as well as source and quality/sustainability of revenues generated. Yes
Islamic Banking Governance
The Islamic Banking business at Abu Dhabi Commercial Bank PJSC (ADCB) is managed under the ADCB Islamic Banking (ADCB IB) brand, offering shari’ah-compliant financial solutions to Consumer Banking, Wholesale Banking and Treasury clients. It is an independently managed business comprising the Islamic Banking department (IBD), a business unit of ADCB, and Abu Dhabi Commercial Islamic Finance PJSC (ADCIF), a wholly owned subsidiary of ADCB.
ADCB IB and ADCIF are regulated by the Central Bank of the UAE and supervised by an independent Fatwa & Shari’ah Supervisory Board (FSSB). Shari’ah governance is carried out under the guidance of a three-member FSSB, which operates in accordance with the Islamic Financial Services Board (IFSB) standards and guidelines as laid out by the Accounting & Auditing Organisation for Islamic Financial Institutions (AAOIFI).
An independent Shari’ah Board approves all ADCB Islamic Banking products and services. No funds pertaining to ADCB Islamic Banking will be invested in non-shari’ah-compliant assets or obtained from any non-shari’ah-compliant sources. The following Shari’ah scholars are three of the most distinguished scholars in the Islamic finance industry and members of the FSSB:
Dr. Hussain Hamed Hassan — Chairman of the Board
Dr. Hassan holds a Ph.D. in the faculty of Shari’ah from Al Azhar University, Cairo, Egypt. He also chairs the Shari’ah Supervisory Board for 13 other Islamic financial institutions.
Dr. Mohamed Zoeir — Member of the Board
With a Ph.D. in Islamic Economy, Dr. Zoeir is a member of the Shari’ah Supervisory Board of many Islamic banks across the Middle East and Africa.
Dr. Muhammad Qaseem — Member of the Board
Dr. Qaseem is an influential Islamic scholar and Chairman of the Shari’ah Supervisory Board of Dubai Islamic Bank in Pakistan.
Through a retainer agreement, Dar Al Shari’ah Financial Consultancy Company provides day-to-day support and assistance on shari’ah-related matters and coordinates between ADCB IB and FSSB. Furthermore, in 2014 the Bank appointed its own in-house Shari’ah expert. Fatwas (edicts) are issued by the FSSB for all products and services as well as bespoke structured deals to certify compliance with principles of Shari’ah. This includes approving the product structure including the underlying Islamic contract, legal documentation, operational process flow and all associated product literature. The product Fatwas issued by the FSSB are published on the Bank’s website and displayed at the Bank’s branches.
ADCB IB maintains a separate set of general ledgers to ensure that the books of accounts for the Islamic business are accounted for separately and there is no mingling of Islamic funds with conventional funds. The Bank’s consolidated accounts include the results of ADCB IB and ADCIF and are separately disclosed in the notes.
