46. Administration costs
46.1 Personnel expenses
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
Personnel Expenses | Notes | Millions of Euros | ||
---|---|---|---|---|
2011 | 2010 | 2009 | ||
Wages and salaries |
|
4,122 | 3,740 | 3,607 |
Social security costs |
|
627 | 567 | 531 |
Defined-benefit plan expense | 26.2 | 51 | 37 | 44 |
Defined-contribution plan expense | 26.1 | 80 | 84 | 68 |
Other personnel expenses |
|
431 | 386 | 401 |
Total |
|
5,311 | 4,814 | 4,651 |
The breakdown of the average number of employees in the BBVA Group in 2011, 2010 and 2009, by professional categories and geographical areas, is as follows:
Average Number of Employees by Geographical Areas (*) |
Average number of employees | ||
---|---|---|---|
2011 | 2010 | 2009 | |
Spanish banks |
|
|
|
Executive managers | 1,115 | 1,084 | 1,043 |
Other line personnel | 21,103 | 20,901 | 20,700 |
Clerical staff | 4,364 | 4,644 | 5,296 |
Branches abroad | 846 | 666 | 653 |
Subtotal | 27,428 | 27,295 | 27,692 |
Companies abroad |
|
|
|
Mexico | 27,108 | 26,693 | 26,675 |
Venezuela | 5,418 | 5,592 | 5,935 |
Argentina | 4,844 | 4,247 | 4,156 |
Colombia | 4,439 | 4,317 | 4,289 |
Peru | 4,675 | 4,379 | 4,222 |
United States | 11,361 | 11,033 | 10,705 |
Other | 5,620 | 4,796 | 4,839 |
Subtotal | 63,465 | 61,057 | 60,821 |
Pension fund managers | 6,721 | 6,229 | 5,642 |
Other non-banking companies | 12,080 | 10,174 | 10,261 |
Total | 109,694 | 104,755 | 104,416 |
The breakdown of the average number of employees in the BBVA Group as of December 31, 2011, 2010 and 2009, by categories and gender, is as follows:
Number of Employees at the end of year Professional Category and Gender | 2011 | 2010 | 2009 | |||
---|---|---|---|---|---|---|
Male | Female | Male | Female | Male | Female | |
Executive managers | 1,723 | 361 | 1,659 | 338 | 1,646 | 328 |
Other line personnel | 24,891 | 21,920 | 23,779 | 20,066 | 21,960 | 18,687 |
Clerical staff | 26,346 | 35,404 | 26,034 | 35,100 | 26,913 | 34,187 |
Total | 52,960 | 57,685 | 51,472 | 55,504 | 50,519 | 53,202 |
46.1.1 BBVA Group general remuneration policy
The BBVA Group considers its remuneration policy to be a key element in value creation. Therefore, the Group has developed an advanced remuneration scheme based on the reciprocal generation of value for employees and for the Group that is in line with the interests of the shareholders and that hinges on prudent risk management.
The Group’s remuneration policy includes, amongst others, the following elements:
- Fixed remuneration based on the level of responsibility, which constitutes a significant part of the total compensation.
- Variable remuneration that is linked to the realization of previously-defined objectives and prudent management of risks, and also takes current and future risks into consideration.
In the general framework of its remuneration policy, BBVA has introduced several principles to be applied specifically to the group of individuals who, within the BBVA Group, carry out professional activities that could significantly affect the entity’s risk profile or who exercise supervisory functions. These individuals include the executive directors and members of the Management Committee, who are listed below.
- In the total remuneration, the fixed and variable components are duly balanced, and the fixed component is sufficient to allow the variable remuneration elements to be designed in a flexible manner.
- In the case of employees who carry out supervisory functions, the variable remuneration will depend more heavily on the objectives related to their functions, by favoring their independence in terms of the business areas they supervise.
- The variable remuneration scheme seeks a balance between the amounts to receive in cash and in shares or financial instruments.
- The payments of a part of the total variable remuneration are deferred.
- Clauses have been established that may limit or impede, in certain cases, the receipt of part of the outstanding deferred variable remuneration.
Based on these principles, a specific settlement and payment system for Annual Variable Remuneration was developed. It is made up of an ordinary variable remuneration, applicable to all employees, and a specific incentive in shares for the management team, the group indicated above. It has been adapted to the requirements established in Directive 76/2010, which was transposed to Spanish law by means of Royal Decree 771/2011, and is as follows:
- For each one of the Annual Variable Remuneration payments, at least 50 percent of the total will be paid in BBVA shares.
- The payment of 40 percent of the Annual Variable Remuneration, both from the part in cash and the part paid in shares, will be deferred. The deferred amount will be paid out in thirds over the next three years.
- The percent deferred increases in the case of executive directors and members of the Management Committee up to 50 percent of their Annual Variable Remuneration.
- The shares that are paid will be unavailable for a period of one year starting from the date of their provision. This retention is applied on the net amount of the shares, after discounting the part necessary to make the tax payment for the shares received.
- No hedging transactions can be carried out on the shares received as Annual Variable Remuneration.
46.1.2 Equity-instrument-based employee remuneration
BBVA understands that to better align the interests of its shareholders and to promote the generation of long-term value, it must maintain a specific variable share-based remuneration system for the Bank’s executives, considering their special influence on the Group’s strategy and earnings.
- Multi-year Variable Remuneration Plan 2010/2011
The Bank’s Annual General Meeting held on March 12, 2010 approved a Multi-Year Variable Share-Based Remuneration Program for 2010/2011 designed for the members of BBVA’s executive team. The result is obtained by multiplying the number of units assigned at the start of the Program to each beneficiary by a coefficient, between 0 and 2, established based on the evolution of the Bank’s total shareholders return (TSR) in 2010/2011 as compared to the evolution of this same indicator in a group of 18 international reference banks.
Once the Program’s duration is finalized, on December 31, 2011, a multiplier coefficient of 2 is applied to the units assigned to each beneficiary. These units reached 3,215,909 as of December 31, 2011.
This Program incorporated some restrictions to granting shares to the beneficiaries after the settlement. These shares are available as follows:
- 40 percent of the shares received shall be freely transferable by the beneficiaries at the time of their delivery;
- 30 percent of the shares are transferable one year after the settlement date of the Program; and
- The remaining 30 percent are transferable starting two years after the settlement date of the Program.
After this Program was established by the AGM, Royal Decree 771/2011 was published demanding the application of certain deferment, unavailability and limitation regulations to the remuneration granted and still unpaid prior to it taking effect, referring to services rendered since 2010.
Thus, this standard and the requirements established in the aforementioned Royal Decree 771/2011 must be applied to the 2010/2011 Program. Therefore, the AGM of the Bank set for March 16, 2012 will address the modification of the settlement and payment system of the 2010/2011 Program previously approved by the AGM to adapt it to the terms established in Royal Decree 771/2011. These specific standards will only apply to those executives, including executive directors and members of the Management Committee, who are beneficiaries of this Program and whose professional activity may significantly influence the entity’s risk profile. The settlement and payments of the shares corresponding to this Program will be made in line with the scheme defined for that effect, as explained in Note 56.
- BBVA Compass Long-Term Incentive Plan -
The Remuneration Committee of BBVA Compass has approved various long-term remuneration plans with BBVA shares for members of the management team and key employees of the entity and its affiliates. Currently, the following programs are in effect:
- 2009-2011 Plan: On November 27, 2009, the Remuneration Committee of BBVA Compass agreed to increase the number of ADS in the existing plan and set up a new plan for the 2009-2011 period, with a completion date of December 31, 2011.
This plan consists of granting “units" or theoretical shares to management staff (similar to those described above) and the granting of “restricted share units” to the rest of the beneficiaries of the Plan.
- 2010-2012 Plan: In May 2010, the Remuneration Committee of BBVA Compass approved a new long-term share-based remuneration plan solely for members of the executive team of BBVA Compass and its affiliates, for the period 2010-2012, with the completion date on December 31, 2012.
As of December 31, 2011, the maximum number of “units” and “restricted share units” for covering the payment from both plans was 1,727,384. During the period of operation of each of these plans, the sum of the commitment to be accounted for at year-end is obtained by multiplying the number of "units" assigned by the expected share price and the expected value of the multiplier coefficient, both estimated at the date of the entry into force of each of the plans.
- Variable Share-based Remuneration System
BBVA’s Ordinary General Meeting of Shareholders held on March 11, 2011 approved a new variable share-based remuneration system for BBVA’s executive team (hereinafter, “the System”).
This new system is based on a specific incentive for the members of the Executive Team (the “Incentive”). It consists of the annual allocation, to each beneficiary, of a number of units that serve as the basis for determining the number of shares that, if applicable, will correspond to them in the settlement of the Incentive based on the level of compliance with three indicators: Total Shareholder Return (TSR), the Group’s attributed net income and the Group’s recurrent Economic Profit (EP). Each of these indicators is scored from 0 to 2, based on the level achieved.
Once the Incentive terminated, on December 31, 2011, a multiplier coefficient of 1.3175 was applied to the units assigned to the beneficiaries. These units reached 6,604,768 as of December 31, 2011.
The resulting shares are subject to the following retention criteria:
- 40 percent of the shares received shall be freely transferable by the beneficiaries at the time of their delivery;
- 30 percent of the shares are transferable one year after the settlement date of the incentive; and
- The remaining 30 percent are transferable starting two years after the settlement date of the incentive.
However, for those executives, including executive directors and members of the Management Committee, who are beneficiaries of this Incentive and whose professional activity may significantly influence the entity’s risk profile, special regulations for settlement and payments are applied to their Annual Variable Remuneration System. This is in line with the scheme defined for that effect, as explained in Note 56.
The cost of said plans is accrued throughout their life. The expense associated in 2011, 2010 and 2009 for those plans reached €51 million, €33 million and €18 million, respectively. It is recognized under the heading “Personnel expenses – Other personnel expenses” in the accompanying consolidated income statements, and a balancing entry has been made under the heading “Stockholders’ funds – Other equity instruments” in the accompanying consolidated balance sheets, net of tax effect.
46.2 General and administrative expenses
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
General and Administrative Expenses | Millions of Euros | ||
---|---|---|---|
2011 | 2010 | 2009 | |
Technology and systems | 662 | 563 | 577 |
Communications | 299 | 284 | 254 |
Advertising | 378 | 345 | 262 |
Property, fixtures and materials | 849 | 750 | 643 |
Of which:Rent expenses (*) | 475 | 397 | 304 |
Taxes | 359 | 322 | 266 |
Other administration expenses | 1,246 | 1,129 | 1,009 |
Total | 3,793 | 3,393 | 3,011 |