Composition of the Board Human Resources and Remuneration Committee

The Board appointed Human Resources and Remuneration Committee as at the end of the year comprises following members, all of whom are Non-Executive Directors.

Mr. D.S. Weerakkody - Chairman
(appointed w.e.f. December 30, 2011)

Mr. K.G.D.D. Dheerasinghe -
(appointed w.e.f. December 30, 2011)

Prof. U.P. Liyanage -
(appointed w.e.f. December 30, 2011)

Mr. D.S. Weerakkody who was a member of the Committee, was appointed the Chairman of the Committee w.e.f. December 30, 2011, with the resignation of Mr. M.J.C. Amarasuriya, the former Chairman of the Bank and the Committee. Dr. H.S. Wanasinghe who was the other member of the Committee ceased to be a member upon ceasing to be a Director of the Bank w.e.f. December 31, 2011.

Refer Brief profiles of each member.

The Managing Director who is responsible for the overall management of the Bank provides information to the Committee and participates in its deliberations by invitation. The Managing Director took part in all deliberations except in relation to those matters where the outcome had an impact on him.

In addition, Mr. W.M.R.S. Dias - Executive Director/Chief Operating Officer of the Bank also attends Meetings by invitation.

Charter of the Board Human Resources and Remuneration Committee

The Committee is vested with power to evaluate, assess, decide and recommend to the Board of Directors on any matter that may affect the Human Resource Management of the Bank and includes inter-alia the following:

• To determine the compensation of the Chairman, Deputy Chairman, Managing Director and other members of the Board of Directors of the Bank, while ensuring that no Director is involved in setting his or her own remuneration.
• To determine the compensation and benefits of the Key Management Personnel and to establish performance parameters in setting their individual goals and targets.
• To lay down guidelines, policies and parameters for the compensation structures for all Executive Staff of the Bank and oversee the implementation thereof.
• To review information related to executive pay from time to time to ensure same is in par with the market/industry rates or as per the strategy of the Bank.
• To evaluate the performance of the Managing Director and the Key Management Personnel against the pre-agreed targets and goals.
• To make recommendations to the Board of Directors from time to time of the additional/new expertise required by the Bank.
• To assess and recommend to the Board of Directors of the promotions of the Key Management Personnel, address succession planning and issues connected to the organisational structure.
• To evaluate, assess and make recommendations and provide directions pertaining to the Board of Trustees and the management of the private provident fund of the Bank.
• To make recommendations/decisions and provide directions pertaining to the statutory payments made by the Bank on behalf of its employees (EPF, ETF, Terminal Benefits, etc.), ensuring the effective fulfillment of all commitments arising as a result of the employer-employee relationship.
• To recommend, decide, are provide directions on disciplinary matters resulting in a significant financial loss to the Bank caused by the Key Management Personnel of the Bank.
• To formulate formal and transparent procedures for developing policy on remuneration for Executives and Directors.
• To approve annual increments, bonuses, changes in perquisites and incentives.

Board Human Resources and Remuneration
Committee Guiding Principles

The overall focus of the Committee:

• Setting guidelines and policies to formulate compensation packages, which are attractive, motivating and capable of retaining qualified and experienced employees in the Bank. In this regard, the Committee sets the criteria such as qualifications, experience and the skills and competencies required, to be considered for appointment or promotion to the post of Managing Director and to key management positions.
• Setting guidelines and policies to ensure that the Bank upholds and adheres to the provisions of the laws of the land particularly those provisions of the Banking Act No. 30 of 1988, including the Directions issued by the Monetary Board/Director of Bank Supervision in accordance with the provisions of such Act.
• Providing guidance and policy direction for relevant matters connected to general areas of Human Resource Management of the Bank.
• Ensuring that the performance related element of remuneration is designed and tailored to align employee interests with those of the Bank and its main stakeholders and support sustainable growth.
• Structuring remuneration packages to ensure that a significant portion of the remuneration is linked to performance, to promote a pay for performance culture.
• Promoting a culture of regular performance reviews to enable staff to obtain feedback from their superiors in furtherance of achieving their objectives and development goals.
• Developing a robust pipeline of raising talent capable and available to fill key management positions in the Bank.

Board Human Resources and Remuneration Committee Meetings

The Committee held seven Meetings during the year under review. The attendance of Committee Members at Meetings is stated in the table. The Chairman of the Committee can convene a special meeting in the event a requirement arises provided all members are given sufficient notice of such special meeting. The quorum for a meeting is three members.

Members of the Corporate Management were invited to participate at the sittings of the Committee Meetings as and when required by the Chairman, considering the topics for deliberation at such meeting.

The proceedings of the Committee Meetings were regularly reported to the Board of Directors.

Methodology Adopted by the Board Human Resources and Remuneration Committee

The Committee recognises rewards as one of the key drivers influencing employee behaviour, thereby impacting business results. Therefore, the reward programmes are designed to attract and retain and to motivate employees to perform by linking performance to demonstrable performance based criteria. In this regard, the Committee evaluates the performance of the Managing Director and the Key Management Personnel against the pre-agreed targets and goals that balance short term and long term financial and strategic objectives of the Bank. The Bank’s variable pay plan is determined according to the overall achievements of the Bank and pre-agreed individual targets, which are based on various performance parameters. The level of variable pay is set to ensure that individual rewards reflect the performance of the Bank overall, the particular business unit and individual performance. The Committee makes appropriate adjustments to the bonus pool in the event of over or under achievement against pre-agreed targets. In this regard, the Committee seeks external independent professional advice on matters falling within its purview. The Committee also provides oversight and support for the wider management succession process and reviews the results of the employee engagement survey.



D.S. Weerakkody
Chairman - Board Human Resources and
Remuneration Committee

Colombo
February 09, 2012