Directors’ Remuneration Report continued The Remuneration Committee does not utilise strict weighting of performance measures; this is in order to ensure that it has flexibility to adjust awards for example, if strategic objectives evolve or if business circumstances change during the year. The Remuneration Committee believes that this flexibility ensures that the Board can work with an Executive Director so that he or she does not take excessive risk to achieve KPIs. Even in a “good” year for an Executive Director (e.g. achievement of most of his or hers KPIs), if this coincides with a “bad” year for the Group (e.g. markets have turned), the Remuneration Committee has the discretion to award little or no discretionary remuneration to the Executive Director if it considers it appropriate to do so. The precise measures will be determined by the Remuneration Committee and disclosed retrospectively in the Remuneration Report following the year of the Remuneration Committee’s determination. Malus and Clawback Discretionary deferred shares are subject to malus and clawback in the following circumstances: •misconduct in the performance or substantial failure to perform duties by the Executive; •significant financial losses, serious failure of risk management or serious damage to the reputation of BOGG or the Bank caused by misconduct or gross negligence (including inaction) of the Executive; •material misstatement or material errors in the financial statements that relate to the area of responsibility of the Executive or can be attributed to action or inaction of the Executive’s performance of their duties; •deliberately misleading BOGG or the Bank in relation to financial performance; •failure to continue to meet the fitness and properness criteria for an Executive of the Bank; •material increase with respect to the required regulatory capital of the Bank that can be attributed to the action or inaction of the Executive; •misconduct that contributed to the imposition of material regulatory or other similar sanctions; and •payments based on erroneous or misleading data, for which malus and clawback apply to discretionary deferred remuneration for awarded for the year in question. Provided that the Policy is approved by shareholders at the AGM 2019, the above provisions will form part of Mr Gachechiladze’s service contract. The Group also intends to amend the Executive Equity Compensation Plan to reflect the above. Clawback is for up to one year from vesting and for the Group’s current Executive Director and CEO, Mr Gachechiladze, the Group also has unusually strong malus provisions where all unvested shares (including deferred share salary and discretionary deferred shares) lapse when the service contract is terminated under certain circumstances, including for “Cause” such as gross misconduct, failure to perform duties, material breach of obligations and unethical behaviour. This may be several years of deferred share salary and discretionary deferred shares. See the “Termination of the JSC Bank of Georgia service agreement” in the table on page 140. Discretion The Remuneration Committee retains a substantial degree of discretion in relation to discretionary share remuneration. This includes: •the determination of the award, if any; •selection of KPIs, which may vary from year to year in order to align with strategy and financial objectives; •any adjustments required to an Executive Director’s KPIs during the work year when, for example, there has been a change in strategy or business circumstances which results in one or more KPIs becoming an inaccurate gauge of performance; and •the discretion to override any formulaic outcomes when it considers it reasonable in the circumstances to do so prior to or upon vesting of discretionary deferred shares. For the avoidance of doubt the Group shall not award (or shall reduce the amount of the award accordingly) to the extent that such award would cause a breach of the NBG’s capital adequacy requirements and other regulatory ratios. 136 Annual Report 2018Bank of Georgia Group PLC