Variable compensation aims to remunerate achievements by directly linking pay to performance outcomes in the short, medium and long term. To strengthen the alignment of shareholders' interest and the interests of management and employees, performance measurement reflects the actual results of the Company overall, the business unit of reference and of the individual, constituting a mechanism of meritocratic differentiation and selectivity.
The Group Incentive System 2022, while preserving a strong link between remuneration, risk and sustainable profitability, has been redesigned compared to the prior year to better fit the new Group strategic direction as well as to increase its effectiveness in a time of high uncertainty. In addition, the new System aims at aligning top and senior management interests to the long-term value creation for shareholders, to share price and Group performance and to sustaining a sound and prudent approach to risk management, combining annual goals with additional long-term conditions to steer the performance management measurement towards sustainable results over time.
Compliance and Sustainability Drivers for Incentive Systems
Our remuneration policies include various compliance and sustainability drivers and in particular:
- build incentive systems based on profitability, financial solidity, sustainability and other drivers of sustainable business practice with particular reference to risk, cost of capital and efficiency;
- design incentive systems which do not, in any way, induce risk-taking behaviors in excess of the Group's strategic risk appetite; in particular the incentive systems should be coherent to the Risk Appetite Framework ("RAF");
- design incentive systems to set minimum performance thresholds below which zero bonus will be paid;
- subject the remuneration to correction mechanisms that allow it to be reduced (even significantly) or reduced to zero in case of evidence of misconduct or negligence on the part of the beneficiaries.
Group Incentive System
Similarly to last years, the Group Incentive System, as approved by UniCredit Board of Directors on February 21, 2022, provides for:
- the definition of a bonus pool at group level, with cascading at divisional level consistently with segment reporting disclosure, based on the actual divisional performance adjusted considering quality and risk indicators as well as cost of capital;
- allocation of a variable incentive defined on the basis of the determined bonus pool, individual performance evaluation, internal benchmark for specific roles/markets and maximum ratio between variable and fixed compensation;
- a malus condition (Zero Factor or Reduced Scenarios) which applies in case specific thresholds of profitability, capital and liquidity are not met at both Group and country/division level;
- risk adjusted metrics in order to guarantee long term sustainability, regarding company financial position and to ensure compliance with regulations;
- definition of a balanced structure of upfront (following the moment of performance evaluation) and deferred payments, in cash and/or shares for Group Material Risk Takers;
- deferred payments for selected beneficiaries subject to additional long-term performance conditions;
- distribution of financial instruments payments which take into account the applicable regulatory requirements regarding the application of retention periods.
The "KPI Bluebook", annually updated, serves as the performance measurement and evaluation framework within the Group Incentive System. The KPI Bluebook includes economic and non-economic performance indicators defined from the company strategy.
2020-2023 Group Long Term Incentive Plan
In 2020 it has been introduced a new Long Term incentive Plan which aims at aligning Top and Senior Management interests to the long-term value creation for the shareholder, to share price and Group performance appreciation and sustaining a sound and prudent risk management. The Plan also has the characteristic to be qualified as a "retention" tool in order to retain Key Players for the achievement of the mid-long term Group strategy.
The 2020-2023 LTI Plan provides for the allocation of UniCredit free ordinary shares, subject to the achievement of specific performance conditions linked to the 2020-2023 Multi-Year Plan. It is structured over a performance period of four years - consistently with the Strategic Plan - and foresees the possible award in 2024. The awarded shares will be subject to a 4-year deferral period, after the performance period, and to the respect, during the performance period, of the minimum conditions of profitability, capital requirements and liquidity as well as positive Risk Appetite Framework. In line with the regulatory requirements, an additional year of unavailability of the instruments (holding period) is applied at the end of the deferral period. For the first time under Long Term Plans, the performance indicators used to determine the number of shares to be awarded include sustainability criteria, linked in particular to ESG rating, customer satisfaction and People Engagement.
Considering the review of UniCredit Strategic Plan and the connected review of the variable remuneration framework, to minimize overlap between incentive plans it is proposed to offer the beneficiaries of LTIP 20-23 against an agreed reduction in the so-called bonus opportunity linked to the LTIP, a correlated increase in the so-called bonus opportunity under the 2022 Incentive System.
- Up to 50% of variable remuneration for SEVPs of UniCredit
- Up to 30% of variable remuneration for EVPs of UniCredit and of the Legal Entities of the Group
- Smaller amount for Key Players
- 4 years (aligned to UniCredit Strategic Plan Team 23)
- 4 years deferral subject to "malus" conditionsB
- Additional compulsory holding year (after which the shares become free to sell, only if the share ownership guidelines are respected)
B. Malus conditions that reduce the payable amount based on profitability, liquidity, capital position.
One award based on:
- Gateway conditions on profitability, liquidity, capital and risk position
- Achievement of a set of performance conditions focused on Group targets, aligned to the Strategic Plan Team 23
- 100% UniCredit Shares
- Ratable vesting for SEVP and EVPC
- Claw-back rules apply 5 years after each installment, regardless of the vesting scenario
C. 100% upfront vesting for Key Players not Identified Staff.
(A) Defined upfront on the basis of four years compensation.
For further information on 2022 Group Incentive System, please refer to 2022 Group Remuneration Policy and Report and for 2020-2023 Group Long Term Incentive Plan, please refer to 2021 Group Remuneration Policy and Report.
Compliance breach, Malus and Claw-back
We reserve the right to activate malus and claw-back mechanisms, namely the reduction/cancelation and the return respectively of any form of variable compensation, in case of verification of behaviors adopted during the performance period, for which the employee:
- contributed with fraudulent behavior or gross negligence to the group incurring significant financial losses, or by his/her conduct had a negative impact on the risk profile or on other regulatory requirements at Group or country/division level;
- engaged in misconduct and/or fails to take expected actions which contributed to significant reputational harm to the Group or to the country/division, or which were subject to disciplinary measures by the Authority;
- is the subject of disciplinary measures and initiatives envisaged in respect of fraudulent behavior or characterized by gross negligence during the reference period;
- infringed the requirements set out by articles 26 TUB and 53 TUB, where applicable, or the obligations regarding the remuneration and incentive system.
Consob Disclosure Documents
Information on the assignment of financial instruments to corporate officers, employees and collaborators pursuant to the provisions set forth in Article 114-bis of Legislative Decree no. 58 of February 24,1998, as well as to the provisions of the Issuer Regulation adopted by Consob with resolution no. 11971 of May 14, 1999.