The bank adjusted its compensation system in the reporting year. 2014 saw changes in European legislation through the Capital Requirements Directive IV (CRD 4), which restricted the ratio of fixed to variable compensation for certain bank employees to 1:1. While CRD 4 applies to “material risk takers” only, this regulation covers all employees globally based on the regulatory framework in Germany. In May 2014, the General Meeting approved the legal possibility of adopting a 1:2 fixed to variable compensation ratio for all employees and the bank implemented this rule. To ensure that total compensation levels remain competitive, Deutsche Bank adjusted the compensation structure for a number of employees through several measures, including a rebalancing of variable and fixed compensation. At the time of adjustment in July 2014, approximately 1,100 employees were identified as being eligible to receive fixed pay increases.
For many years, Deutsche Bank has used variable compensation to create incentives for, reward and retain high performing employees. The bank is committed to ensuring that a large portion of any variable compensation award for senior managers is linked to the bank’s long-term development and performance. Such variable compensation is subject to a structured deferral of a minimum of three years, along with robust performance conditions and forfeiture provisions. As of February 2014, a number of enhancements were made to the plan rules. For example, a Group performance forfeiture condition that previously applied only to material risk takers was introduced for all staff with deferred equity awards, and the breach of policy rules were expanded to cover lower levels of disciplinary action.
A robust and effective governance structure ensures that Deutsche Bank operates within the clear parameters of its compensation strategy and policy. In 2014, improvements to the governance structure focused on the remit and work of the Group Compensation Oversight Committee and thus delivered a strengthened and streamlined governance process. Enhancing the documentation of individual variable compensation allocation decisions and ensuring a greater emphasis on the importance of cultural considerations were key achievements in 2014.