5 Compensation, participations and loans

5.1 Contents and stipulation procedure

5.1.1 Responsibility and stipulation procedure

The Appointments and Compensation Committee (see Point 3.4.2 «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.

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 (exchange-listed private banks and cantonal banks with significant private banking business) 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 members of the Board of Management are not present at the discussion and the decision concerning the amount of their compensation. In accordance with Art. 12, Para 2 of the law concerning the Liechtensteinische Landesbank, the Board of Directors must inform the government about the compensation ruling specified for the Board.

In line with the Swiss Code of Best Practice for Corporate Governance, the Board of Directors specifically addressed the topic of compensation and remuneration at the General Meeting of 6 May 2011. As the Board of Directors wanted to base future actions on a definitive legal framework, it waived conducting an advisory vote. Various legal points, which are currently still open, led the Board to this decision. At the beginning of 2011, the new EU compensation regulation became law. As a member of the EEA, Liechtenstein incorporated this directive into national law through the passage of Appendix 4.4 to the ordinance on banks and securities firms (Banking Ordinance) into law on 1 January 2012. The Board's decision was also influenced by the legal situation in Switzerland, which still remains unclear; the future legal provision will also be binding for the LLB Group.

5.1.2 Fundamentals

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 compensation for members of the Board of Directors comprises a fixed compensation fee, meeting allowance (for meetings of committees and foundation boards) and a variable compensation component. The latter amounts (not including employer contributions) to 0.175 percent of the Group net profit for the respective year and may not exceed the amount of the fixed compensation component. Both the fixed and the variable compensation components are paid in cash. On account of legal provisions, no severance payment may be made in the event of the ending of a mandate (Art. 21, para.2 of the law concerning the control and supervision of public companies).

The compensation for members of the Board of Management is composed of a fixed compensation and a variable compensation component. The fixed compensation is paid in cash. The variable component of compensation is contingent upon the attainment of quantitative targets. The variable component (not including employer contributions) amounts to a maximum of 0.8 percent of the Group net profit for the respective calendar year. Individual performance is taken into consideration in allocating the variable component to the members of the Board of Management. The variable component is limited to the amount of the fixed component. 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 cash/share 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. The issued shares are subject to a blocked period of three years. If the shareholder leaves the Bank's employ, the blocked period is removed. Apart from the allocation of shares as a profit-related component of compensation, there are no other share plans.

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 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.

5.1.3 Elements

For the 2011 business year, the members of the Board of Directors received a fixed compensation of CHF thousands 826. Payment of a variable remuneration was waived. Contributions to welfare and pension schemes amounted to CHF thousands 45. The fixed compensation was paid in cash.

For the 2011 business year, the members of the Board of Managers received a fixed compensation of CHF thousands 2'491. Payment of a variable compensation was waived. Contributions to welfare and pension schemes amounted to CHF thousands 377. The fixed compensation was paid in cash.

In comparison with the previous year, the total compensation of the members of the Board of Directors and the members of the Board of Management decreased by 14.1 percent and 13.3 percent, respectively, in 2011. This is due, in particular, to payment of a variable remuneration being waived.

The entire remuneration of the members of the Board of Directors and the members of the Board of Management in the 2011 business year is reported on an accrual basis.

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. 663bbis of the Swiss Code of Obligations (OR). 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. 663bbis of the Swiss 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».

top of page