Board Human Resources and Remuneration Committee Report

Composition of the Committee

The Board appointed Human Resources and Remuneration Committee comprises 3 Non-Executive Directors. The Managing Director of the Bank is present by invitation.

Mr. K.G.D.D. Dheerasinghe (Chairman)
Prof. U.P. Liyanage (Director) – until April 28, 2015
Mr. M.P. Jayawardena (Director)
Mr. S. Swarnajothi (Director) – Since April 29, 2015
Mr. J. Durairatnam (Managing Director/CEO) – By invitation

Brief profiles of each member are given on this section.

The Managing Director who is responsible for the overall management of the Bank, provides information to the Committee and participates in all deliberations, except in relation to those matters where the outcome had an impact on him.

Deputy General Manager – Human Resource Management functions as the Secretary of the Committee.

Charter of the Committee

The Committee is vested with power to evaluate, assess, decide and recommend to the Board of Directors, on any matter that may affect the Human Resource Management of the Bank and shall specifically include –

• Determining the compensation of the Chairman, Deputy Chairman, Managing Director and other members of the Board of Directors of the Bank, while ensuring that no Director is involved in setting his or her own remuneration.
• Determining the compensation and benefits of the KMP and establishing performance parameters in setting their individual goals and targets.
• Formulate guidelines, policies and parameters for the compensation structures for all Executive staff of the Bank and oversee the implementation thereof.
• Review information related to executive pay from time to time, to ensure same is in par with the market/industry rates or as per the strategy of the Bank.
• Evaluate the performance of the Managing Director and KMP against the pre-agreed targets and goals.
• Make recommendations to the Board of Directors from time to time, of the additional/new expertise required by the Bank.
• Assess and recommend to the Board of Directors, of the promotions of KMP, address succession planning and issues connected to the Organisational Structure.
• Evaluate, assess and make recommendations and provide directions pertaining to the Board of Trustees and the management of the Private Provident Fund of the Bank.
• Make recommendations/decisions/directions pertaining to the statutory payments made by the Bank on behalf of its employees (EPF, ETF, Terminal Benefits, etc.), ensuring the effective fulfilment of all commitments arising as a result of the employer-employee relationship.
• Recommend/decide/give directions on disciplinary matters resulting in a significant financial loss to the Bank caused by KMP of the Bank.
• Formulating formal and transparent procedures for developing policy on remuneration for Executives and Directors.
• Approving annual increments, bonuses, changes in perquisites and incentives.

Guiding Principles

The Overall focus of the Committee:

• Setting guidelines and policies to formulate compensation packages, which are attractive, motivating and capable of retaining qualified and experienced employees in the Bank. In this regard, the Committee sets the criteria such as qualifications, experience and the skills and competencies required, to be considered for appointment or promotion to the post of Managing Director and to Key Management positions.
• Setting guidelines and policies to ensure that the Bank upholds and adheres to the provisions of the Laws of the Land, particularly those provisions of the Banking Act No. 30 of 1988, including the Directions issued by the Monetary Board/Director of Bank Supervision in accordance with the provisions of such Act.
• Providing guidance and policy direction for relevant matters connected to general areas of Human Resource Management of the Bank.
• Ensuring that the performance related element of remuneration is designed and tailored to align employee interests with those of the Bank and its main stakeholders and supporting sustainable growth.
• Structuring remuneration packages to ensure that a significant portion of the remuneration is linked to performance, to promote a pay for performance culture.
• Promoting a culture of regular performance reviews, to enable staff to obtain feedback from their superiors, in furtherance of achieving their objectives and development goals.
• Developing a robust pipeline of raising talent capable and available to fill key positions in the Bank.

Methodology used by the Committee

The Committee recognised rewards as one of the key drivers influencing employee behaviour, thereby impacting business results. Therefore, the reward programmes are designed to attract and retain and to motivate employees to perform by linking performance to demonstrable performance based criteria. In this regard, the Committee evaluates the performance of the Managing Director and KMP against the pre-agreed targets and goals that balance short term and long term financial and strategic objectives.

The Bank’s variable (bonus) pay plan is determined according to the overall achievements of the pre-agreed targets of the Bank and individuals, which are based on various performance parameters. The level of variable pay is set to ensure that individual rewards reflect the performance of the Bank overall, the particular business unit and individual performance. The Committee makes appropriate adjustments to the bonus pool in the event of over or under achievement against pre-determined targets. In this regard, the Committee can seek external independent professional advice on matters falling within its purview.

Further, the Committee may seek external agencies to carry out salary surveys to determine the salaries paid to staff vis-à-vis the market position, enabling the Committee to make informed decisions regarding the salaries in the Bank.

Activities in 2015

The Committee held 5 meetings during the year under review, as stated in Table 4. The Chairman of the Committee can convene a special meeting in the event a requirement arises, provided all members are given sufficient notice of such special meeting. The quorum for a meeting is 2 members. Members of the Corporate Management were invited to participate at the sittings of the Committee meetings, as and when required by the Chairman, considering the topics for deliberation at such meetings. The proceedings of the Committee meetings were regularly reported to the Board of Directors.

During the year, the Committee interviewed – based on the succession plan, suitable candidates to fill the vacancies in the Corporate Management and such recommendations were accordingly approved by the Board of Directors and appointments were effected. The recent changes in the Key Management Positions and the ability of the Bank to ensure a smooth transition in each of these cases, signify the importance of and the attention paid to the talent management process of the Bank. In all promotions to the Corporate Management grade, the Committee applied leadership competencies to judge the suitability of the candidates.

During the year, the Committee reviewed and recommended for the approval of the Board, Employee Share Ownership Plan (ESOP). This plan will help to align the interest of all Executive staff of the Bank, with the interest of the shareholders. Top 20% of the Bank's employees will benefit under this scheme, which will help to retain the key talent with the Bank.

The Committee reviewed and approved the proposed changes to the organisational structure and reporting lines, which will facilitate current business initiatives.

During the year, the Committee reviewed and approved Compensation & Benefits and Reward Policy of the Bank, which will cover all aspects in the above-mentioned areas for the employees of the Bank.

The Committee also designed a Self Assessment system to evaluate the performance of the Committee.

During the year, The Committee reviewed the Outsourcing Policy of the Bank and ensured the inclusion of changes suggested by the CBSL.

The Committee reviewed and recommended for the approval of the Board, all salary revisions of the Executive carder of the Bank, which was necessary in view of the Collective Agreement signed with the Ceylon Bank Employees’ Union at the end of 2014, covering a period of 3 years, for Non-Executive grades.

The Committee also reviewed and approved the revision of pensions for the retired staff members of the Bank, who are entitled to pensions under the system which prevailed before year 2000.

The Committee reviewed and approved the Terms of Reference of the Human Resource Steering Committee of the Management.

The Committee reviewed and gave their advice and suggestions to the management about the succession plan of the Bank.

K.G.D.D. Dheerasinghe
Chairman – Board Human Resources and Remuneration Committee

Colombo
February 24, 2016