Equity-based compensation

Long-term equity-based remuneration is a means to attract and retain staff with key competences. It also builds long-term commitment to SEB and creates an incentive for the employees to become shareholders of SEB. The equity-based programmes provide scope for risk adjustment for both current and future risks, and thus the final outcome can subsequently be reduced in part or in full, in compliance with the rules of the Swedish Financial Supervisory Authority.

The 2017 Annual General Meeting approved two different programmes for 2017:

  • An SEB All Employee Programme for all employees in most of the countries where SEB operates similar to previous year’s programme  and
  • An SEB Share Deferral Programme for the Group Executive Committee (GEC), certain other senior managers and a number of other key employees. 

SEB All Employee Programme 2017

SEB All Employee Programme 2017 is a programme for all employees in most of the countries where SEB operates. 50 per cent of the outcome is paid in cash and 50 per cent is deferred for three years and paid in SEB A-shares in Sweden and in SEB A-shares or in cash adjusted for the SEB A-share’s Total Shareholder Return (TSR) outside of Sweden. The shares/cash deferral will normally be lost if the employee leaves SEB before the end of the three year period. The individual maximum allotment is proposed to be capped, in Sweden at SEK 75,000, and the outcome is based on the fulfilment of pre-determined Group targets, the financial targets (i) return on equity and (ii) cost development and the non-financial target (iii) customer satisfaction. Outcome is subject to a proposal at the Annual General Meeting 2018 on dividend distribution to the shareholders for 2017.

SEB Share Deferral Programme 2017

The GEC and certain other senior managers and a number of other key employees, approximately 2,000 participants in total, are granted an individual number of conditional share rights based on the fulfilment of pre-determined Group, business unit and individual targets outlined in SEB’s business plan. The targets are set on an annual basis as a mix of the financial target Return on Equity/Return on Business Equity, cost development as well as on e.g. customer satisfaction and parameters such as compliance, employee commitment, SEB’s corporate sustainability and risk. For GEC the initial allotment may not exceed 100 per cent of the base pay.

For GEC and other senior managers ownership of 50 per cent of the share rights are transferred to the participant after a qualification period of three years, 50 per cent after a qualification period of five years. For other participants ownership of the share rights are transferred after three years. After each respective qualification period there is an additional holding period of one year after which the share rights can be exercised during a period of three years. In order to facilitate share ownership and strengthen the shareholder alignment, in additional to the above mentioned exercise period, for GEC the exercise period is extended during the period that they are members of GEC. Each share right carries the right to receive one Class A-share in the Bank. For participants outside of Sweden the outcome may be deferred as above referred and paid in cash adjusted for the SEB A-share’s TSR. 

There is normally a requirement for vesting that the participant remains with SEB during the first three years. A further requirement for GEC and other senior managers is that they hold shares in SEB equal to a pre-determined amount, for GEC equivalent to one year salary net of taxes, acquired no later than during the initial three year vesting period.

The maximum number of shares that can be transferred under the programmes is 13.5 million. The calculated expected outcome is approximately 8.5 million shares. The maximum number of shares under the programmes equals approximately 0.62 per cent including and 0.34 per cent excluding the SEB All Employee Programme (expected outcome equals approximately 0.39 per cent including and 0.29 per cent excluding the SEB All Employee Programme) of the total number of shares in the Bank.

The maximum annual charge for the deferred part, i.e. shares and cash adjusted for TSR, of the AEP that may affect the profit and loss account is SEK 155m, out of which SEK 33m is related to social charges. The annual charge to the profit and loss account for the expected calculated outcome under the programme is estimated to SEK 66m, out of which SEK 14m is related to social charges. The expected aggregated charges during the total programme period in the profit and loss account are SEK 264m.

The maximum annual charge for the SDP that may affect the profit and loss account is SEK 230m, out of which SEK 53m is related to social charges. The annual charge to the profit and loss account for the expected calculated outcome under the programme is estimated to SEK 195m, out of which SEK 45m is related to social charges. The expected aggregated charge during the total programme period in the profit and loss account is SEK 780m.

The maximum calculated annual charge is based on the assumptions that the price of the SEB Class A-share is SEK 95 and that no participant is leaving SEB during the employment requirement period. Furthermore, it should be noted that should the SEB share price increase from the assumed SEK 95 the increase in maximum calculated annual charge will be approximately SEK 3m for every SEK in increase. The part of the programmes that will be settled in cash will create a higher volatility in the Income statement since the change in the share price is reported when it occurs.

The expected annual charge in the profit and loss account for the two programmes is equivalent to approximately 1.8 per cent of the total annual staff costs in the SEB Group.

Previous years’ programmes

SEB Performance Share Programme 2010/2017

The programme consists of not more than 18,900,000 performance shares allocated to 693 senior managers and other key employees of SEB. A performance share under the programme is a conditional right to acquire one SEB A-share at a future date. The outcome of the programme, that is, the number of allocated performance shares that can be utilised, is dependent on how certain pre-determined performance criteria are fulfilled. The performance criteria are measured during the initial three-year period. A further requirement is that the participant remains within SEB during the three-year period. The exercise price for each A-share is SEK 10. The number of outstanding performance shares as of December 31, 2016 was 1,274,019.

Share Matching Programme 2012

The programme comprises approximately 400 selected senior managers and key employees and is an extended share savings programme with a higher own investment in SEB Class A-shares with the possibility to receive share rights and additional performance based share rights. The investment amount is pre-determined and capped for each participant and may be performed with cash or with previously owned shares. After the three year performance period the participants receive one share right and a maximum of three performance based share rights for each retained share. Each share right carries the right to receive one Class A-share in the Bank. A further requirement is that the participant remains with SEB during the performance period. 

The programme has a performance period of three years and an exercise period of four years. To motivate participants to keep their share rights after the first day when they can be exercised, the holders are compensated for dividends to the shareholders during the exercise period. Thus, the number of share rights will be recalculated, after the Annual General Meeting each year during the exercise period, taking the dividend into account.

To reach full outcome of performance based share rights under the programme, two performance criteria, TSR compared to SEB’s competitors (1/3 of the total maximum outcome) and TSR compared to long-term interest rate (LTIR) (2/3 of the total maximum outcome), must be met. 

The value of the Share Matching Programme is capped at full vesting under the two performance criteria and a doubled share price based on a pre-determined initial share price. 

The number of outstanding rights that entitles to matching as of December 31, 2016 was 1,274,019.

Share Deferral Programme 2012

The Group Executive Committee and certain other executive managers, approximately 100 executives in total, are granted an individual number of share rights based on pre-determined Group and individual target levels. The targets are set on an annual basis and are both financial and non-financial. 50 per cent of the share rights are delivered to the participant after a vesting period of three years, 50 per cent after a vesting period of five years. There is a requirement for vesting that the participant remains with SEB during the first three years. A further requirement for vesting is that the participant holds shares in SEB equal to a pre-determined amount, acquired no later than on a pro-rata basis during the initial three year vesting period.

After each respective vesting period there is an additional holding period of one year after which the share rights can be exercised during a period of three years. Each share right carries the right to receive one Class A-share in the Bank. The holders are compensated for dividends to the shareholders during the duration of the programme. Thus, the number of share rights will be recalculated, after the Annual General Meeting each year, taking the dividend into account.

The number of outstanding share rights as of December 31, 2016 was 1,019,822.

SEB Share Deferral Programme 2013

The Group Executive Committee and certain other senior managers and other key employees with critical competences, approximately 300 executives in total, are granted an individual number of conditional share rights based on the fulfilment of pre-determined Group and individual target levels outlined in SEB’s business plan. The targets are set on an annual basis and are both financial (return on equity/return on business equity and cost development) and non-financial (customer satisfaction). 

50 per cent of the share rights are delivered to the participant after a vesting period of three years, 50 per cent after a vesting period of five years. There is a requirement for vesting that the participant remains with SEB during the first three years. A further requirement for vesting is that the participant holds shares in SEB equal to a pre-determined amount, acquired no later than on a pro-rata basis during the initial three year vesting period. 

After each respective vesting period there is an additional holding period of one year after which the share rights can be exercised during a period of three years. Each share right carries the right to receive one Class A-share in the Bank.

The holders are compensated for dividends to the shareholders during the duration of the programme. Thus, the number of share rights will be recalculated, after the Annual General Meeting each year, taking the dividend into account.

The number of outstanding share rights as of December 31, 2016 was 1,457,480.

SEB Share Matching Programme 2013

Approximately 200 selected key business employees with critical competences are offered to participate in a share purchase programme with own investment in SEB Class A-shares with the possibility to receive share rights and additional performance based share rights. The investment amount is based on previous year’s performance, pre-determined and capped for each participant. After the three year performance period the participants receive one share right and a maximum of three performance based share rights for each retained share. Each share right carries the right to receive one Class A-share in the Bank. A further requirement is that the participant remains with SEB during the performance period. 

The programme has a performance period of three years and an exercise period of four years. To motivate participants to keep their share rights after the first day when they can be exercised, the holders are compensated for dividends to the shareholders during the exercise period. Thus, the number of share rights will be recalculated, after the Annual General Meeting each year during the exercise period, taking the dividend into account.

To reach full outcome of performance based share rights under the programme, two performance criteria, total shareholder return (TSR) compared to SEB’s competitors (1/3 of the total maximum outcome) and TSR compared to long-term interest rate (LTIR) (2/3 of the total maximum outcome), must be met: 

The value of the SMP is capped at full vesting under the two performance criteria and a doubled share price based on the pre-determined initial share price.

The number of outstanding rights that entitles to matching as of December 31, 2016 was 1,097,171.

SEB All Employee Programme 2013

Based on the decision to not renew the Share Savings Programme after five years in order to simplify SEB’s current all employee offering, the previous collective cash-based profit sharing programme, SEB Resultatandel is adjusted to an all employee programme where 50 per cent of the outcome is paid in cash and 50 per cent is deferred for three years and paid in SEB A-shares. The shares will normally be lost if the employee leaves SEB before the end of the three year period. The individual maximum allotment is capped and the outcome is based on the fulfilment of pre-determined Group targets outlined in SEB’s business plan, both financial (return on equity and cost development) and non-financial (customer satisfaction). Outcome is subject to that the Annual General Meeting resolves on dividend to the shareholders for that year. Should the total outcome under the programme be below approximately 20 per cent of the maximum outcome, the total outcome may be paid in cash. In countries outside of Sweden the deferred amount may be paid in cash adjusted for the total shareholder return (TSR) in the SEB A-share. The programme is cost neutral compared to the former Share Savings Programme and the former SEB Resultatandel.

The number of outstanding rights that entitles to shares as of December 31, 2016 was 1,171,517 and that entitles to cash adjusted for TSR was 435,600.

SEB Share Deferral programme 2014

The GEC and certain other senior managers and other key employees with critical competences, approximately 600 participants in total, are granted an individual number of conditional share rights based on the fulfilment of pre-determined Group, business unit and individual target levels outlined in SEB’s business plan. The targets are set on an annual basis as a mix of the financial targets Return on Equity/Return on Business Equity and cost development and the non-financial target customer satisfaction. For GEC the initial allotment may not exceed 100 per cent of the base pay.

Ownership of 50 per cent of the share rights are transferred to the participant after a vesting period of three years, 50 per cent after a vesting period of five years. After each respective vesting period there is an additional holding period of one year after which the share rights can be exercised during a period of three years. Each share right carries the right to receive one Class A-share in the Bank. There is a requirement for vesting that the participant remains with SEB during the first three years. A further requirement for vesting is that the participant holds shares in SEB equal to a pre-determined amount, for GEC equivalent to one year salary net of taxes, acquired no later than on a pro-rata basis during the initial three year vesting period. 

The holders are compensated for dividends to the shareholders during the duration of the programme. Thus, the number of share rights will be recalculated, after the Annual General Meeting each year, taking the dividend into account.

The number of outstanding share rights as of December 31, 2016 was 1,912,528. 

SEB Share Matching Programme 2014

Approximately 200 selected key business employees with critical competences will participate in a share purchase programme with own investment and with the possibility to receive share rights and additional performance based share rights. The investment amount, which is based on previous year’s individual performance, pre-determined and capped for each participant, is taken from the cash based variable compensation outcome and mandatory deferred for three years. A determined number of deferral rights are allocated to each participant, one deferral right corresponds to the average market price for one SEB Class A-share during a pre-determined period. After the three year performance period the participants receive one share right in exchange for each deferral right and one matching share right and a maximum of three performance based share rights for each deferral right. Each share right carries the right to receive one Class A-share in the Bank. A further requirement is that the participant remains with SEB during the performance period. 

The programme has a performance period of three years and an exercise period of four years.

To motivate participants to keep their share rights after the first day when they can be exercised, the holders are compensated for dividends to the shareholders during the exercise period. Thus, the number of share rights will be recalculated, after the Annual General Meeting each year during the exercise period, taking the dividend into account.

The outcome of the programme, i.e. the number of performance based share rights received, depends on the extent of fulfilment of two pre-determined performance criteria. 

Performance criteria

To reach full outcome of performance based share rights under the programme, two performance criteria, total shareholder return (the nominal total return to shareholders, comprising share price appreciation and dividends, TSR) compared to SEB’s competitors (1/3 of the total maximum outcome) and TSR compared to long-term interest rate (LTIR) (2/3 of the total maximum outcome), must be met: 

The criterion TSR compared to SEB’s competitors gives a minimum outcome if the TSR increase for SEB per year equals TSR for a weighted Banking Index. Competitors are weighted 75 per cent Nordic banks and 25 per cent FTSEurofirst300 Banks Index. The outcome is then set at 20 per cent of the maximum outcome under this criterion. Above that level, the number of performance based share rights increases with a linear distribution within the interval until a ceiling of 7 per cent increase per year above the Banking Index is achieved. At that level the maximum outcome under this criterion is reached (1/3 of total maximum outcome). Performance is measured based on the average share price 1 January – 31 March 2014 compared to the average share price 1 January – 31 March 2017.

The criterion TSR compared to LTIR gives a minimum outcome if the TSR for SEB reaches LTIR + 2 per cent per year. The outcome is then set at 20 per cent of the maximum outcome under this criterion. Above that level, the number of performance based share rights increases with a linear distribution within the interval until a ceiling at a TSR increase of LTIR + 11 per cent per year is achieved. At that level the maximum outcome under this criterion is reached (2/3 of total maximum outcome). Performance is measured based on the average share price 1 January – 31 March 2014 compared to the average share price 1 January – 31 March 2017.

Cap for the SEB Share Matching Programme

The value of the SMP is capped at full vesting under the two performance criteria and a doubled share price based on the pre-determined initial share price.

If the share price at the time of vesting has more than doubled, the number of share rights and performance based share rights that are transferred to a participant will be reduced proportionately so that the value corresponds to the doubled share price capped value. 

The number of outstanding rights that entitles to matching as of December 31, 2016 was 314,812.

SEB All Employee Programme 2014

SEB All Employee Programme 2014 is a programme for all employees in most of the countries where SEB operates, where 50 per cent of the outcome is paid in cash and 50 per cent is deferred for three years and paid in SEB A-shares in Sweden and in cash adjusted for TSR outside of Sweden. The shares/cash deferral will normally be lost if the employee leaves SEB before the end of the three year period. The individual maximum allotment is capped and the outcome is based on the fulfilment of pre-determined Group targets outlined in SEB’s business plan, both financial (Return on Equity and cost development) and non-financial (customer satisfaction). Outcome is subject to a proposal at the Annual General Meeting 2015 on dividend to the shareholders for 2014. Should the total outcome under the programme be below approximately 20 per cent of the maximum outcome, the total outcome may be paid in cash without deferral. 

The number of outstanding rights that entitles to shares as of December 31, 2016 was 1,684,487 and that entitles to cash adjusted for TSR was 824,822.

SEB All Employee Programme 2015 

SEB All Employee Programme 2015 is a programme for all employees in most of the countries where SEB operates. 50 per cent of the outcome is paid in cash and 50 per cent is deferred for three years and paid in SEB A-shares in Sweden and in cash adjusted for TSR outside of Sweden. The shares/cash deferral will normally be lost if the employee leaves SEB before the end of the three year period. The individual maximum allotment is capped (in Sweden at SEK 55,000) and the outcome is based on the fulfilment of pre-determined Group targets according to business plan, the financial target return on equity, cost development and the non-financial target customer satisfaction. Outcome is subject to a proposal at the Annual General Meeting 2016 on dividend to the shareholders for 2015. Should the total outcome under the programme be below approximately 20 per cent of the maximum outcome, the total outcome may be paid in cash without deferral. 

The number of outstanding rights that entitles to shares as of December 31, 2016 was 2,221,704 and that entitles to cash adjusted for TSR was 1,138,059.

SEB Share Deferral Programme 2015 

The GEC and certain other senior managers with critical competences and a broadened number of other key employees, approximately 2,000 participants in total, are granted an individual number of conditional share rights based on the fulfilment of pre-determined Group, business unit and individual target levels outlined in SEB’s business plan. The targets are set on an annual basis as a mix of the financial target Return on Equity/Return on Business Equity, cost development as well as on customer satisfaction and parameters such as compliance and risk. For GEC the initial allotment may not exceed 100 per cent of the base pay.

For senior managers ownership of 50 per cent of the share rights are transferred to the participant after a qualification period of three years, 50 per cent after a qualification period of five years. For other participants ownership of the share rights are transferred after three years. After each respective qualification period there is an additional holding period of one year after which the share rights can be exercised during a period of three years. Each share right carries the right to receive one Class A-share in the Bank. 

For participants outside of Sweden the outcome is deferred and paid in cash adjusted for TSR. 50 per cent of the deferred amount is paid out after four years and 50 per cent after six years for senior managers. For other participants outside of Sweden the deferred amount is paid out after four years. 

There is a requirement for vesting that the participant remains with SEB during the first three years. A further requirement is that the participant holds shares in SEB equal to a pre-determined amount, for GEC equivalent to one year salary net of taxes, acquired no later than during the initial three year vesting period.

The holders are compensated for dividends to the shareholders during the duration of the programme. Thus, the number of share rights/the deferred amount will be recalculated, after the Annual General Meeting each year, taking the dividend into account.

The number of outstanding rights that entitles to shares as of December 31, 2016 was 2,546,169 and that entitles to cash adjusted for TSR was1,674,045.

SEB All Employee Programme 2016 

SEB All Employee Programme 2016 is a programme for all employees in most of the countries where SEB operates. 50 per cent of the outcome is paid in cash and 50 per cent is deferred for three years and paid in SEB A-shares in Sweden and in cash adjusted for the SEB A-share’s Total Shareholder Return (TSR) outside of Sweden.

The shares/cash deferral will normally be lost if the employee leaves SEB before the end of the three year period.

The individual maximum allotment is proposed to be capped, in Sweden at SEK 75,000 (SEK 55,000 for the 2015 programme), and the outcome is based on the fulfilment of pre-determined Group targets, the financial targets (i) return on equity and (ii) cost development and the non-financial target (iii) customer satisfaction. Outcome is subject to a proposal at the Annual General Meeting 2017 on dividend distribution to the shareholders for 2016. 

SEB Share Deferral Programme 2016 

The GEC and certain other senior managers and a number of other key employees, approximately 2000 participants in total, are granted an individual number of conditional share rights based on the fulfilment of pre-determined Group, business unit and individual targets outlined in SEB’s business plan. The targets are set on an annual basis as a mix of the financial target Return on Equity/Return on Business Equity, cost development as well as on e.g. customer satisfaction and parameters such as compliance, employee commitment, SEB’s corporate sustainability and risk. For GEC the initial allotment may not exceed 100 per cent of the base pay.

For GEC and other senior managers ownership of 50 per cent of the share rights are transferred to the participant after a qualification period of three years, 50 per cent after a qualification period of five years. For other participants ownership of the share rights are transferred after three years. After each respective qualification period there is an additional holding period of one year after which the share rights can be exercised during a period of three years. Each share right carries the right to receive one Class A-share in the Bank. For participants outside of Sweden the outcome is deferred as above referred and paid in cash adjusted for the SEB A-share’s total shareholder return.

There is a requirement for vesting that the participant remains with SEB during the first three years. A further requirement is that the participant holds shares in SEB equal to a pre-determined amount, for GEC equivalent to one year salary net of taxes, acquired no later than during the initial three year vesting period.

Allotment and cost
The maximum number of shares that can be transferred under the programmes is 14.1 million. The calculated expected outcome is approximately 9.5 million shares. The maximum number of shares under the programmes equals approximately 0.64 per cent including and 0.38 per cent excluding the SEB All Employee Programme (expected outcome equals approximately 0.44 per cent including and 0.32 per cent excluding the SEB All Employee Programme) of the total number of shares in the Bank.

The maximum annual charge for the deferred part, i.e. shares and cash adjusted for TSR, of the AEP that may affect the profit and loss account is SEK 155m, out of which SEK 34m is related to social charges. The annual charge to the profit and loss account for the expected calculated outcome under the programme is estimated to SEK 66m, out of which SEK 14m is related to social charges. The expected aggregated charges during the total programme period in the profit and loss account are SEK 264m.

The maximum annual charge for the SDP that may affect the profit and loss account is SEK 230m, out of which SEK 53m is related to social charges. The annual charge to the profit and loss account for the expected calculated outcome under the programme is estimated to SEK 195m, out of which SEK 45m is related to social charges. The expected aggregated charge during the total programme period in the profit and loss account is SEK 785m.

The maximum calculated annual charge is based on the assumptions that the price of the SEB Class A-share is SEK 85 and that no participant is leaving SEB during the employment requirement period.

Furthermore, it should be noted that should the SEB share price increase from the assumed SEK 85 the increase in maximum calculated annual charge will be approximately SEK 3m for every SEK in increase. The part of the programmes that will be settled in cash will create a higher volatility in the Income statement since the change in the share price is reported when it occurs.

The expected annual charge in the profit and loss account for the two programmes is equivalent to approximately 1.8 per cent of the total annual staff costs in the SEB Group.