The Compensation Policy Rules as well as the Risk Policy Framework Rules of VP Bank stipulate that the Bank’s compensation systems and human resources management are to be designed in a manner that minimises the potential for personal conflicts of interest and behavioural risks.

The Nomination & Compensation Committee (see section 3.5.2 ) makes proposals to the Board of Directors regarding the principles for compensation as well as the level of compensation paid to the members of the Board of Directors and the Executive Board. The Board of Directors approves these principles and determines the amount of total compensation payable to itself and the members of the Executive Board in keeping with the applicable rules.

5.1.1 Board of Directors

The Board of Directors receives compensation for the duties and responsibilities conferred on them by law and pursuant to Art. 20 of the Articles of incorporation. This is determined annually by the full Board of Directors at the proposal of the Nomination & Compensation Committee. Compen­sation to the members of the Board of Directors is paid on a graduated basis according to their functions in the Board of Directors and its committees or in other bodies (e.g. the pension fund). Three-quarters of this compensation is paid in cash and one-quarter in the form of freely disposable VP Bank bearer shares, the number of which is determined by the current market price at the time of receipt. 

At VP Bank, there are no agreements pertaining to severance compensation for members of the Board of Directors. 

5.1.2Executive Board

On 27 March 2014, the Board of Directors adopted a new compensation model for senior and second-level management throughout VP Bank Group. The new model supports the previous value-oriented approach. The overarching goal of the model is to base management remuneration on strategy implementation and long-term corporate success. In accordance with this model, compensation paid to management consists of four components:

1. A fixed base salary that is contractually agreed between the Nomination & Compensation Committee and the individual members. In addition to the base salary, VP Bank pays proportionate contributions to the management insurance scheme and the pension fund. 
2. A Performance Share Plan (PSP), a long-term variable management participation (in the form of bearer shares of VP Bank Ltd). This is based on the risk-adjusted profit (operating annual result adjusted for non-recurring items, less capital costs), weighted over three years as well as the long-term commitment of management to a variable compensation component in the form of equity shares. At the end of the plan period and depending upon performance, 0 to 200 per cent of the allocated vested benefits are transferred in the form of shares. This vesting multiple results from the weighting of an average return on equity (RoE) and the average cost/income ratio (CIR). Until the time of transfer of ownership, the Board of Directors reserves the right to reduce or suspend the allocated vested benefits in the case of defined occurrences or in extraordinary situations. The PSP makes up approximately half of the total variable performance-related remuneration. 
3. A Restricted Share Plan (RSP) based upon a risk-adjusted profit weighted over three years and settled in equal annual instalments in the form of equity shares over a three-year plan period. Until the time of transfer of ownership, the Board of Directors reserves the right to reduce or suspend the allocated vested benefits in the case of defined occurrences or in extra­ordinary situations. The RSP makes up approximately a quarter of the total variable performance-related remuneration. 
4. A cash compensation which also depends on the risk-adjusted profit weighted over three years. The share of this performance-related participation amounts to approximately one quarter of the total variable performance-related remuneration. 

The Board of Directors each year specifies the planning parameters for the performance-related remuneration (PSP, RSP and cash-based compensation) for the following three years. The target share of total compensation varies according to function and market customs. In the 2014–2016 programme, a target bonus of between 109 and 114 per cent of the fixed annual base salary is calculated in the event that the annual and three-year goals are met. 

In 2014, 1,092 shares with a market value on the date of allocation of CHF 100,955.40 were transferred to management as part of the 2011–2013 management equity participation plan. The vested benefits from previous management equity participation plans (2012–2014 and 2013–2015) will continue to run unchanged until the end of the plan period. 

VP Bank has not concluded any agreements on severance compensation with members of the Executive Board. 

An external advisor who has no other mandates from VP Bank Group was commissioned to structure the compensation model.

As a SIX Swiss Exchange-listed issuer domiciled outside Switzerland, VP Bank discloses information on compensation, shareholdings and loans within the context of Art. 5.2 of the Appendix to the Corporate Governance Directive dated 1 September 2014, i.e. by analogy to Art. 663bbis of the Swiss Code of Obligations. The details in this regard can be found in the financial report and individual company accounts of a href="/?id=650">VP Bank Ltd, Vaduz.