ING Groep NV scrapped proposed executive bonuses after the pay policy of the bailed-out lender sparked criticism, Chief Executive Officer Jan Hommen said.
“The variable remuneration for the management board for 2010 threatens to inflict renewed damage to the recovering trust of our customers and society,” Hommen, 68, said in a letter to Dutch newspaper De Volkskrant. “We have underestimated the signal this sends to society.” ING spokesman Raymond Vermeulen confirmed the letter.
ING last week said Hommen would get a 1.25 million-euro ($1.77 billion) bonus, split equally between cash and shares, after the biggest Dutch financial-services company reported its first profit in three years. That triggered criticism from lawmakers and Dutch Finance Minister Jan Kees de Jager said he was “disappointed” as the Amsterdam-based bank still has to repay 5 billion euros of state aid.
“This is a very good move” by ING’s top management, de Jager said in a post on his Twitter account today. “This goes further than agreements made in the past.”
The finance minister last week said he plans to propose legislation banning banks that need state aid in the future from paying bonuses as soon as possible.
“Last time, the deal was no profit, no bonus,” he said on Dutch television on March 20. “I now plan to introduce legislation with much stricter rules. As long as a bank is on the government drip, it cannot pay bonuses to its executives.”
ING’s board members have also agreed to forgo a 2 percent pay rise in 2011, Hommen said. The CEO’s base salary was 1.35 million euros last year. ING had net income of 3.22 billion euros last year, compared with losses in 2009 and 2008.
The bank and insurer has repaid half of the 10 billion-euro bailout it received in 2008. ING earlier this month said it plans to return another 2 billion euros on May 13, while aiming to complete the repayment by May 2012.
Hommen, who stepped down as chairman of ING’s supervisory board to become CEO in 2009, also faces the task of divesting the firm’s insurance operations and selling its U.S. online bank to comply with European Union conditions for approval of the state aid.
The remuneration proposed last week was in line with agreements made with the Dutch state and a self-regulatory banking code that took effect in 2010, Hommen and de Jager said.
© Copyright 2014 Bloomberg News. All rights reserved.