UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment
No. )
Filed by
the Registrant
x
Filed by
a party other than the Registrant
o
Check the
appropriate box:
o
Preliminary
Proxy Statement
o
Confidential, for Use of the
Commission Only (as permitted by Rule 14a–6(e)(2))
x
Definitive
Proxy Statement
o
Definitive
Additional Materials
o
Soliciting
Material under §240.14a–12
(Name of
Registrant as Specified In Its Charter)
(Name of Person(s) Filing
Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No
fee required
o
Fee
computed on table below per Exchange Act Rules 14a–6(i)(1) and 0–11
(1)
Title of each class of securities to which transaction
applies:
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(2)
Aggregate number of securities to which transaction
applies:
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(3)
Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0–11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
Proposed maximum aggregate value of transaction:
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(5)
Total fee paid:
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o
Fee
paid previously with preliminary materials.
o
Check
box if any part of the fee is offset as provided by Exchange Act Rule 0–11(a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1)
Amount Previously Paid:
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(2)
Form, Schedule or Registration Statement No.:
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(3)
Filing Party:
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(4)
Date Filed:
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Santander
Tower, B-7 Tabonuco Street
Guaynabo,
Puerto Rico 00968
Dear
Stockholder:
On behalf
of the Board of Directors, I cordially invite you to attend the 2010 Annual
Meeting of Stockholders of Santander BanCorp. The meeting will be
held on April 26, 2010 at 10:00 a.m. at the Conference Room located at the
parking level of Santander Tower, B-7 Tabonuco St., Guaynabo, Puerto Rico,
00968. The formal notice and proxy statement for this meeting are
attached to this letter.
It is
important that your shares be represented and voted at the
meeting. Therefore, we urge you to sign, date and return your proxy
card as soon as possible in order to ensure that your shares are represented at
the meeting. If you attend the meeting, you may still choose to vote
your shares in person even though you have previously designated a
proxy. Your vote is important no matter how many shares you
own.
I thank
you for your cooperation.
Sincerely,
Juan S.
Moreno Blanco
President
& Chief Executive Officer
SANTANDER
BANCORP
Santander
Tower, B-7 Tabonuco Street
Guaynabo,
Puerto Rico 00968
NOTICE
OF 2010 ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on Monday, April 26, 2010
To our
Stockholders:
NOTICE IS
HEREBY GIVEN that the 2010 Annual Meeting of Stockholders of Santander BanCorp.
for the year 2010 will be held on Monday, April 26, 2010 at 10:00 a.m. (local
time) at our principal executive offices located at Santander Tower, B-7
Tabonuco St., Guaynabo, Puerto Rico, 00968, at the Conference Room located
at the parking level of the building.
At the
meeting, stockholders will be asked to consider and vote on the following
matters:
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(1)
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To
elect 3 directors for a three-year
term;
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(2)
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To
ratify the selection of Deloitte & Touche, LLP as our independent
registered public accounting firm for 2010;
and
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(3)
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To
act on any other business that may be properly brought before the meeting
or any adjournment thereof.
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Stockholders
of record at the close of business on March 19, 2010, the record date for the
meeting, are entitled to notice of and to vote at the meeting. Your
Board of Directors recommends that you vote FOR the election of each of the
directors named in the proxy statement and FOR the ratification of the selection
of Deloitte & Touche, LLP as our independent registered public accounting
firm.
Please review the attached proxy
materials and take the time to cast your vote.
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By
Order of the Board of Directors,
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Rafael
S. Bonilla, Esq.
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Secretary
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San Juan,
Puerto Rico
March 26,
2010
IT
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU
OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE POSTAGE PAID
ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. YOU MAY REVOKE IN WRITING OR IN
PERSON ANY PROXY GIVEN AT ANY TIME PRIOR TO THE EXERCISE
THEREOF.
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TABLE
OF CONTENTS
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Page
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ABOUT
THE MEETING
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1
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SOLICITATION
OF PROXIES
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1
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PROPOSALS,
VOTING SECURITIES AND VOTE REQUIRED FOR APPROVAL
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2
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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3
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Beneficial
Ownership by Officers, Directors or Nominees
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3
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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4
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PROPOSAL
1: ELECTION OF THREE CLASS A DIRECTORS FOR A THREE-YEAR
TERM
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4
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BOARD
OF DIRECTORS
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5
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Nominees:
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5
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Class
A Directors – Terms Expiring in 2013
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5
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Members
of the Board of Directors:
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6
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Class
B Directors – Terms Expiring in 2011
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6
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Class
C Directors – Terms Expiring in 2012
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6
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CORPORATE
GOVERNANCE
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7
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General
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7
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Director
Candidates and Shareholder Communications
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8
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Board
of Directors Meetings and Committees
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8
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Board
Leadership Structure
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8
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Audit
and Compliance Committee
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9
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Compensation
and Nomination Committee
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9
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Compensation
Committee Interlock and Insider Participation
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10
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Investment
Committee
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10
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ALCO
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10
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Board
Credit and Risk Committee (“BCRC”)
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10
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Director
Criteria and Diversity
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11
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Board’s
Role in Risk Oversight
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11
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Risk
Considerations in the Corporation’s Compensation Program
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12
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COMPENSATION
OF DIRECTORS
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12
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EXECUTIVE
OFFICERS
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13
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COMPENSATION
OF EXECUTIVE OFFICERS
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15
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Compensation
Disclosure and Analysis
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15
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Employee
Agreements, Termination of Employment and Change in Control
Arrangements
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28
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Report
of the Compensation and Nomination Committee
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29
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TRANSACTIONS
WITH RELATED PARTIES
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29
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PROPOSALS
OF SECURITY HOLDERS TO BE PRESENTED AT THE 2011 ANNUAL MEETING OF
STOCKHOLDERS
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31
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CORPORATE
GOVERNANCE GUIDELINES
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31
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DISCLOSURE
OF AUDIT FEES
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31
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Audit
Fees
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32
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Audit-Related
Fees
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32
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Tax
Fees
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32
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All
Other Fees
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32
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Pre-Approval
Policy and Procedures
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32
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REPORT
OF THE AUDIT COMMITTEE
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32
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PROPOSAL
2: INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
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33
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INTERNET
AVAILABILITY
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33
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ANNUAL
REPORT AND OTHER MATTERS
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34
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SANTANDER
BANCORP
Santander
Tower, B-7 Tabonuco Street
Guaynabo,
Puerto Rico 00968
PROXY
STATEMENT
For the
Annual Meeting of Stockholders
To be
held on Monday, April 26, 2010
ABOUT
THE MEETING
This
proxy statement is being made available to our stockholders in connection with a
solicitation of proxies by the Board of Directors of Santander BanCorp. (the
“Corporation,” “we,” “us,” or “our”) for use at the 2010 Annual Meeting of
Stockholders and at any adjournment or postponement of the
meeting. The meeting will be held at 10:00 a.m. on Monday, April 26,
2010, at the Conference Room located at the parking level of Santander Tower,
B-7 Tabonuco St., Guaynabo, Puerto Rico.
This
proxy statement includes our Annual Report to Stockholders, including audited
financial statements, for the fiscal year ended on December 31,
2009. Our financial statements were audited by Deloitte & Touche,
LLP (“D&T”), our independent registered public accounting
firm. This proxy statement, the Notice of Meeting of Stockholders,
the form of proxy and our Annual Report to Stockholders are being sent to
stockholders on or about March 26, 2010.
All
shares represented by each properly executed and returned proxy card in the
accompanying form, unless revoked, will be voted at the meeting. The
proxies we are soliciting also confer on our Board discretionary authority to
vote with respect to the approval of the minutes of the 2009 Annual Meeting of
Stockholders, the election of any substitute nominee designated by our Board if
any nominee is unable to serve or for good cause will not serve, matters
incident to the conduct of the meeting, and upon such other matters as may
properly come before the meeting. With respect to any other matter
that may properly come before the meeting, the proxy holders will vote as
recommended by our Board or, if no recommendation is given, in their own
discretion.
SOLICITATION
OF PROXIES
We will bear the cost of solicitation
of proxies, including preparing and mailing the Notice of Meeting, this proxy
statement and the proxy card. We have engaged the services of Mellon
Investor Services, LLC, our transfer agent, to assist us in the solicitation of
proxies for this meeting for a fee not to exceed $6,500, plus reimbursement of
all out-of-pocket expenses. Brokers, fiduciaries, custodians and
other nominees who are holders of record of our shares of common stock (the
“Common Stock”), will be asked to forward proxy soliciting material to the
beneficial owners of such shares and will be reimbursed by the Corporation for
their expenses in connection therewith at customary and reasonable
rates. In addition to solicitation by mail, our directors, officers
and employees may solicit proxies by telephone, facsimile transmission or other
personal contact, for which such persons will not receive any additional
compensation.
PROPOSALS,
VOTING SECURITIES AND VOTE REQUIRED FOR APPROVAL
At the
meeting, stockholders will consider and vote on the following
matters:
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1.
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The
election of 3 directors for a three-year term;
and
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2.
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The
ratification of the selection of Deloitte & Touche, LLP as our
independent registered public accounting firm for
2010.
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To be
able to vote, you must have been a stockholder of record of the Corporation at
the close of business on March 19, 2010. This date is the “Record
Date.” Stockholders of record on the Record Date are entitled to vote
on each proposal at the meeting or any postponement or adjournment of the
meeting. As of the close of business on the Record Date, there were
46,639,104 shares of Common Stock outstanding, excluding shares held as treasury
stock. Each share of our Common Stock that you owned on the Record
Date entitles you to one vote on each matter that is voted on. All
shares of our Common Stock will vote together as a single class on all matters
brought before the meeting.
You may
vote in the following ways:
(a)
By Mail
- You may vote by
completing and signing the proxy card enclosed with this proxy statement and
promptly mailing it in the enclosed postage-paid envelope. You do not
need to put a stamp on the enclosed envelope if you mail it in the United
States. The shares you own will be voted according to your
instructions on the proxy card you mail. If you return the proxy
card, but do not give any instructions on a particular matter described in this
proxy statement, the shares you own will be voted in accordance with the
recommendation of our Board.
(b)
In Person -
If you attend the
meeting, you may vote by delivering your completed proxy card in person or you
may vote by completing a ballot. Ballots will be available at the
meeting.
All
proxies will be voted in accordance with the instructions they
contain. If you do not specify your voting instructions on your
proxy, it will be voted in accordance with the recommendation of our
Board. You can change your vote and revoke your proxy at any time
before it is exercised at the meeting either by (i) delivering another duly
executed proxy with a later date; (ii) giving our Secretary written notice to
that effect before or at the meeting, before the polls close with respect to a
particular matter for which you want to revoke your proxy; or (iii) attending
the meeting and voting in person. Proxies solicited hereby may be
exercised only at the meeting and any adjournment thereof and will not be used
for any other meeting.
If the shares you own are held in
“street name” by a brokerage firm, your brokerage firm, as the record holder of
your shares, is required to vote your shares according to your
instructions. In order to vote your shares, you will need to follow
the directions your brokerage firm provides you. Under the current
rules of the New York Stock Exchange (the “NYSE”), if you do not give
instructions to your brokerage firm, it will still be able to vote your shares
with respect to certain “discretionary” items, but will not be allowed to vote
your shares with respect to certain “non-discretionary” items. The ratification
of the selection of Deloitte & Touche, LLP as our independent registered
public accounting firm (Proposal 2) is considered to be a discretionary item
under the NYSE rules and your brokerage firm will be able to vote on that item
even if it does not receive instructions from you, so long as it holds your
shares in its name. Starting this year, the election of directors
(Proposal 1) is a “non-discretionary” item. If you do not instruct
your broker how to vote with respect to this item, your broker may not vote with
respect to this proposal and those votes will be counted as “broker non-votes.”
“Broker non-votes” are shares that are held in “street name” by a bank or
brokerage firm that indicates on its proxy that it does not have or did not
exercise discretionary authority to vote on a particular matter.
If your
shares are held in street name, you must bring an account statement or letter
from your broker, fiduciary, custodian or other nominee showing that you are the
beneficial owner of the shares as of the Record Date in order to be admitted to
the meeting. To be able to vote your shares held in street name at the meeting,
you will need to obtain a proxy card from the holder of record.
The presence, in person or by proxy, of
a simple majority of the shares entitled to vote will constitute quorum for the
meeting. Abstentions, which may be specific or on all matters (except
the election of directors), will be considered shares present and entitled to
vote on all matters and, accordingly, will have the same effect as a vote
against a matter. Broker non-votes are included in the determination
of the number of shares present and voting; however, they are not
counted
for purposes of determining the number of votes cast with respect to a
particular proposal. Accordingly, broker non-votes are not counted as
votes for or against a particular proposal. The only outstanding
voting securities of the Corporation are shares of its Common
Stock.
The affirmative vote of a majority of
the shares of Common Stock present at the meeting is required for the approval
of Proposals 1 and 2. Our Board recommends that you
vote:
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Ø
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FOR
the election of each of the 3 nominees to serve as directors on the Board
of Directors for a term of 3 years;
and
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Ø
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FOR
the ratification of the selection of Deloitte & Touche, LLP as our
independent registered public accounting firm for
2010.
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We will report the voting results in a
Current Report on Form 8-K within four business days after the end of our
meeting.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains
information regarding the beneficial ownership of our Common Stock as of March
19, 2010 by the shareholders we know to beneficially own more than 5% of our
outstanding Common Stock. Information regarding the beneficial
ownership by Banco Santander, S.A. (“BSSA”) is derived from information
submitted by BSSA to the Corporation.
Name and Address of Beneficial Owner
(1)
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Amount and Nature
of Beneficial
Ownership
(2)
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Banco
Santander, S.A. (“BSSA”) (formerly known as Banco Santander Central
Hispano, S.A.)
Ciudad
Grupo Santander
Boadilla
del Monte
Madrid,
Spain 28660
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42,252,418
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(4)
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90.59
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%
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(1)
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For
purposes of this table, “beneficial ownership” is determined in accordance
with Rule 13d-3 under the Securities Exchange Act of
1934.
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(2)
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For
each person, the “Amount and Nature of Beneficial Ownership” column may
include shares of a class of common stock attributable to the person
because of that person’s voting or dispositive power or other
relationship. The inclusion in the table of any shares,
however, does not constitute an admission of beneficial ownership of those
shares by the named shareholder.
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(3)
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Based
on 46,639,104 shares of our Common Stock outstanding as of March 19,
2010.
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(4)
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Includes
shares of Common Stock owned by certain
subsidiaries.
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Beneficial
Ownership by Officers, Directors or Nominees:
The
following table contains information regarding the beneficial ownership of our
Common Stock as of March 19, 2010 by (i) each director and nominee for director
named in this proxy statement, (ii) each executive officer named in the Summary
Compensation Table in this proxy statement, and (iii) all of our directors and
executive officers as a group.
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Corporation’s Common Stock
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BSSA Common Stock
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Name of
Beneficial Owner
(1)
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Amount and Nature
of Beneficial
Ownership
(2)
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Percent of
Class
(3)
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Amount and
Nature of
Beneficial
Ownership
(2)
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Percent of
Class
(3)
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Directors:
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Gonzalo
de Las Heras
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-
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*
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41,909
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*
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Víctor
Arbulu
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-
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*
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-
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*
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Stephen
A. Ferriss
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-
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*
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-
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*
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Roberto
H. Valentín
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3,769
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*
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2,856
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*
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Jesús
M. Zabalza
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-
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*
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440,330
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(4)
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*
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José
R. González
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14,531
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(5)
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*
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10,304
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(6)
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*
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María
Calero
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10,705
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(7)
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*
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41,460
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(8)
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*
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Corporation’s Common Stock
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BSSA Common Stock
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Name of
Beneficial Owner
(1)
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Amount and Nature
of Beneficial
Ownership
(2)
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Percent of
Class
(3)
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Amount and
Nature of
Beneficial
Ownership
(2)
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Percent of
Class
(3)
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Named
Executive Officers:
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Juan
S. Moreno
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-
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*
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30,570
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*
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Roberto
Jara
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-
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*
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715
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*
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José
Alvarez
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-
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*
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15,962
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(9)
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*
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Justo
Muñoz
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-
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*
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2,695
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(10)
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*
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James
Rodríguez
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5,532
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(11)
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*
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5,759
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(12)
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*
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Total
shares owned by directors, nominees and Executive Officers, as a
group
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35,389
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*
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618,881
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*
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* Less
than one percent (1%).
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(1)
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For
purposes of this table, “beneficial ownership” is determined in accordance
with Rule 13d-3 under the Securities Exchange Act of
1934. Under this rule, a person is deemed to be the beneficial
owner of securities that can be acquired by such person within 60 days of
the record date upon the exercise of options or warrants or upon the
vesting of deferred stock awards.
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(2)
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For
each person, the “Amount and Nature of Beneficial Ownership” column may
include shares of a class of common stock attributable to the person
because of that person’s voting or dispositive power or other
relationship. Unless otherwise indicated, each person in the table has
sole voting and investment power over the shares listed. The inclusion in
the table of any shares, however, does not constitute an admission of
beneficial ownership of those shares by the named
shareholder.
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(3)
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Based
on 46,639,104 shares of our Common Stock and 8,228,833,000 shares of
common stock of BSSA outstanding as of March 19,
2010.
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(4)
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This
amount includes 61,702 stock options of BSSA beneficially owned by Mr.
Zabalza.
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(5)
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Mr.
González’ shares of the Corporation are held in a margin securities
account with Santander Securities
Corporation.
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(6)
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9,494
of these shares of BSSA are also held in a margin securities account with
Santander Securities Corporation.
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(7)
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Ms.
Calero’s shares of the Corporation are held in a margin securities account
with Santander Securities
Corporation.
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(8)
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16,460
of Ms. Calero’s BSSA shares are held in a margin securities account with
Santander Securities Corporation.
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(9)
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5,721
of Mr. Alvarez’s shares of BSSA are held in a margin securities account
with Santander Securities
Corporation.
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(10)
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Mr.
Muñoz’s shares of BSSA are held in a margin securities account with
Santander Securities Corporation.
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(11)
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Mr.
Rodríguez’s shares of the Corporation are held in a margin securities
account with Santander Securities
Corporation.
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(12)
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5,659
of Mr. Rodríguez’s BSSA shares are held in a margin securities account
with Santander Securities Corporation
.
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires that the
directors and executive officers and the holders of more than 10% of the
Corporation’s Common Stock file with the Securities Exchange Commission (the
“SEC”) initial reports of ownership of our Common Stock on Form 3 and reports of
changes in such ownership on Form 4 or Form 5. They are also
required to furnish the Corporation with copies of all Section 16(a) forms they
file.
To our
knowledge, based solely on a review of our records and written representations
by the persons required to file these reports, all filing requirements of
Section 16(a) were satisfied with respect to our most recent fiscal
year.
PROPOSAL
1: ELECTION OF THREE CLASS A DIRECTORS FOR A THREE-YEAR
TERM
At the
meeting, three nominees who are currently directors assigned to “Class A” will
be elected to serve until the 2013 annual meeting of stockholders or until their
respective successors are elected and qualified. The remaining
directors will continue to serve as directors, as follows: until the 2011 annual
meeting of stockholders, in the case of the directors assigned to “Class B,” and
until the 2012 annual meeting of stockholders, in the case of the directors
assigned to “Class C,” or in each case, until their successors are elected and
qualified.
The
persons named as proxies in the accompanying proxy form have advised us that,
unless otherwise instructed, they intend to vote at the meeting the shares
covered by the proxies
FOR
the election of the three
nominees named below, and that if any one or more of such nominees should become
unavailable for election they intend to vote such shares
FOR
the election of such
substitute nominees as our Board may recommend. We have no knowledge
that any nominee will become unavailable for election.
There are
no cumulative voting rights for the election of directors. The vote
in favor of the majority of the total shares of Common Stock eligible to be
voted at the meeting is required for the approval of this Proposal
1.
BOARD
OF DIRECTORS
The
following paragraphs provide qualification information for directors and
nominees for election as of the date of this proxy statement. The
information presented includes information each director has given us about his
age, all positions he holds, principal occupation and business
experience for at least during the past five years, and the names of other
publicly-held companies of which he or she currently serves as a director or has
served as a director at least during the past five years. In addition
to the information presented below regarding each director or nominee’s specific
experience, qualifications, attributes and skills that led our Board to the
conclusion that he or she should serve as a director, we also believe that all
of our director nominees have a reputation for integrity, commitment and
adherence to high ethical standards. They each have demonstrated business acumen
and an ability to exercise sound judgment, as well as a commitment of service to
the Corporation and our Board. Finally, we value their significant
experience on other public company boards of directors and board
committees.
Nominees:
Class A Directors – Terms Expiring in
2013
Víctor
Arbulu
(68
years).
Since 2002, he has served on the Board of Directors of
the Corporation. Mr. Arbulu also serves as a Director and member of
Audit Committees in several banking entities of the Santander Group, including
Banco Santander Chile, S.A., which is a publicly held company. Mr.
Arbulu worked for J.P. Morgan for nearly 25 years in various positions in
Europe, North America and South America. Mr. Arbulu was Managing
Director, member of the European management committee and Chief Executive
Officer of J.P. Morgan for Spain and Portugal, from 1988 until
1998. Prior to joining J.P. Morgan, Mr. Arbulu worked as an officer
of the Interamerican Development Bank in Washington, D.C., and also as a
financial consultant and in management positions of industrial companies in
Spain and Latin America. Mr. Arbulu holds a degree in Mechanical and
Electrical Engineering from Universidad Nacional de Ingeniería in Lima, Perú and
a Master’s in Business Administration from Escuela para Graduados (ESAN) in
Lima, Perú. We believe that Mr. Arbulu’s qualifications to serve on
our Board of Directors include his prior experience in investment banking where
he dedicated a substantial amount of time to financial analysis and evaluation
of companies both for credit purposes and for merger and acquisitions, and his
experience as chief executive officer of financial institutions for over ten
years, directorships of financial institutions for more than five years, his
extensive experience with global companies, and his financial
expertise.
María
Calero
(57
years).
Since 2001, she has served on the Board of Directors
of the Corporation. Ms. Calero was named Senior Executive Vice
President and Chief Compliance Officer of the Corporation and its subsidiaries
on November 2008. From 2001 to November 2008, Ms. Calero had served
as Executive Vice President and Chief Accounting Officer of the
Corporation. Ms. Calero was appointed Director of the Board of
Directors of Banco Santander Puerto Rico (“Bank”) in May 2000. Ms.
Calero also serves as Director of several of the Corporation’s affiliates and
subsidiaries in Puerto Rico. From April 1996 to December 2000, Ms.
Calero held the position of First Senior Vice President of the Compliance and
Legal Department at the Bank. From April 1995 until April 1996, Ms.
Calero held the title of Senior Vice President of the Compliance Department, and
from November 1998 to April 2003, Ms. Calero was in charge of the Corporation’s
Investor Relations. Prior to her employment at the Bank in April
1995, she held the position of Senior Vice President, Administration/Finance at
Santander National Bank from November 1992 to March 1995, having served
previously, from September 1985 to October 1992, as a private consultant to
those institutions on accounting and regulatory matters. Ms. Calero
also worked for Deloitte, Haskins & Sells in the San Juan office from August
1975 to August 1985; as Audit Manager, Savings & Loans Industry, from June
1980 to August 1985. Ms. Calero is a member of the American Institute
of Certified Public Accountants, the Puerto Rico Society of Certified Public
Accountants, and the Florida Institute of Certified Public
Accountants. We believe Ms. Calero’s qualifications to sit on our
Board include her unique insights into the Corporation’s challenges and
operations due to her employment with the bank for eighteen years, and her
extensive knowledge of accounting and compliance issues arising from her
experience as a manager of a national accounting firm, as Chief Accounting
Officer, and her various positions as compliance officer.
Stephen A.
Ferriss
(64 years).
Mr. Ferriss is a private investor. Since 2003, he has served
on the Board of Directors of the Corporation. Since March 2006, Mr.
Ferriss is also a member of the Audit Committee, Chairman of the Nominations
Committee and a member of the Board of Management Consulting Group,
PLC. Mr. Ferriss served as President and Chief Executive Officer of
Santander Central Hispano Investment Securities, Inc. in New York from 1999 to
2002, and as Director of Banco Santander Serfin from 2000 to
2003. Prior to that appointment, from 1987 to 1999, Mr. Ferriss
served in various positions at Bankers Trust, which include Managing Director
and Partner within Bankers Trust’s Global Investment Bank in London, England and
New York. He also served as Managing Director for Bankers
Trust
Emerging
Markets (Eastern Europe, Middle East, and Africa) in London. Prior to
joining Bankers Trust, Mr. Ferriss served for 17 years at Bank of America in
various positions, which include tenure as Senior Vice President managing the
Spain and Portugal operations for the bank in Madrid, Spain. Mr.
Ferriss has a Bachelor’s Degree from Columbia College and a Masters in
International Affairs from Columbia University. We believe Mr.
Ferriss’s qualifications to sit on our Board include his financial literacy and
expertise. Mr. Ferriss understands financial accounting issues, as a
result of having spent over thirty years in executive roles in banking and
investment banking in financial companies in the United States, Europe and Latin
America. He also has had extensive board level experience at
financial firms in Spain, Mexico and the United States.
Members
of the Board of Directors:
Class B Directors – Terms Expiring in
2011
José R.
González
(55 years).
Mr. González served as President and Chief Executive Officer of the
Corporation and as Vice Chairman of the Board of Directors of the Corporation
from October 2002 to August 2008. He has served as Director of the
Corporation since June 2000. He also served as Chairman of the Board
of Directors of several of the Corporation’s subsidiaries in Puerto
Rico. Prior to his appointment as President and Chief Executive
Officer of the Corporation, Mr. González served as Senior Executive Vice
President and Chief Financial Officer of the Corporation from July 2001 to
October 2002. From 1996 to July 2001, Mr. González served as
President and Chief Executive Officer of Santander Securities
Corporation. From 1995 to 1996, Mr. González was Vice President and
Chief Financial Officer of MOVA Pharmaceutical Corporation, a privately held
pharmaceutical manufacturing company based in Caguas, Puerto
Rico. Prior to this, Mr. González was at Credit Suisse First Boston,
a securities broker-dealer, from 1983 to 1986 as Vice President of Investment
Banking, and from 1989 to 1995 as President of the Puerto Rico operations of the
firm. From 1986 to 1989, Mr. González was President and Chief
Executive Officer of the Government Development Bank for Puerto
Rico. Mr. González is a member of the Board of the Federal Home Loan
Bank of New York since January 2004, a public company, and was elected Vice
Chairman of said board in 2008. Mr. González received a Bachelor’s
Degree in Economics from Yale University in 1976, and has a Masters in Business
Administration and
Juris
Doctor
degrees from Harvard University in 1980. We believe Mr.
González’s qualifications to sit on our Board include his commercial and
investment banking experience, derived from the various professional positions
held by him, and also his background as a lawyer and as chief executive officer
of a governmental bank, provides a unique perspective to the
Board. Moreover, Mr. González’s experience as Chief Executive Officer
and Chief Financial Officer of the Corporation bring knowledge of the
Corporation’s challenges and operations.
Roberto H.
Valentín
(69
years).
Since 2000, he has served on the Board of Directors of
the Corporation and since 1992 he has served on the Board of Directors of the
Bank. Mr. Valentín is a private investor and has served as founder
and President of several private firms. Mr. Valentín has served as a
member of the Board of Directors of several private companies, and as a member
of the Board of Trustees of Universidad del Sagrado Corazón. Mr.
Valentín has served as a member of the Board of Directors of the Puerto Rico
Industrial Development Company, and as director in several other governmental
entities. We believe Mr. Valentín’s qualifications to sit on our
Board include his business and board experiences, which have entailed direct
responsibility for financial and accounting issues. Also, having
founded several companies, he brings to the Board entrepreneurial experience and
expertise in strategy and opportunities.
Class C Directors – Terms Expiring in
2012
Gonzalo de Las
Heras
(70
years).
Since 2002, he has served as Chairman of the Boards of
Directors of the Corporation and the Bank. Prior to his appointment
as Chairman of the Board, Mr. de Las Heras held a position as Director of the
Bank since June 1998 and Director of the Corporation since May
2000. Mr. de Las Heras joined BSSA in 1990. He currently
serves as Executive Vice President of BSSA, supervising its North American
business. He is Chairman of several of Santander Group global
entities, and Director of Sovereign BanCorp. Prior to that, Mr. de
Las Heras held various positions at J.P. Morgan, lastly as Senior Vice President
and Managing Director. He has served as director of other private and
public companies. Mr. de Las Heras has a law degree from the
University of Madrid and as a Del Amo Scholar pursued postgraduate studies in
Business Administration and Economics at the University of Southern
California. From 1993 to 1997, Mr. de Las Heras served on the New
York State Banking Board. He is Director and past Chairman of the
Foreign Policy Association, a Trustee and past Chairman of the Institute of
International Bankers, and a Director of both The Spanish Institute and the
Spain-US Chamber of Commerce. We believe Mr. de las Heras’s
qualifications to sit on our Board include his forty years of experience in
banking, twenty years in board level experience in boards of listed companies in
the United States and Europe, his experience with the New York State Banking
Board, a banking regulatory board, and other positions in banking or commerce
related representative entities.
Jesús M.
Zabalza
(51
years).
Since 2002, he has served on the Board of Directors of
the Corporation. Mr. Zabalza currently serves as Executive Managing
Director of BSSA, responsible for Latin America since July
2002. Prior to joining BSSA, Mr. Zabalza held various positions at La
Caixa (“Caja de Ahorros y Pensiones de Barcelona”) where he directed from 1996
to 2002 the retail-banking sector for Madrid and related areas. Prior
to joining La Caixa, Mr. Zabalza worked at Caja Postal as Managing Director and
also served as Managing Director of Banco Hipotecario y Caja Postal from 1992 to
1996. From 1982 to 1992, Mr. Zabalza held several positions at Banco
de Vizcaya, including Director of Commercial Banking, Director of Central
Services and Director of Area. Mr. Zabalza holds an Industrial
Engineer degree. We believe Mr. Zabalza’s qualifications to sit on
our Board include his extensive commercial and retail-banking experience,
derived from the various professional positions held by him, as well as his
extensive knowledge of the Santander Group operations.
Juan S.
Moreno
(45
years).
Since August 28, 2008, he has served on the Board of
Directors of the Corporation and the Bank. Mr. Moreno was appointed
President and Chief Executive Officer of the Corporation in October
2008. He was appointed Chief Executive Officer of the Bank in October
2008, and President of the Bank effective on February 2009. Mr.
Moreno also serves as Director of several of the Corporation’s affiliates and
subsidiaries in Puerto Rico. Mr. Moreno has been with Santander Group
since 1997, where he has held different positions. Prior to his
appointment to his positions with the Corporation and the Bank, Mr. Moreno
served as Director of Business Development for Santander America’s Division
since January 2006. From 1997 to 2005, Mr. Moreno held various
positions at Banco Santander México, including General Director for Wholesale
and Institutional Banking. He also worked for Bankinter from 1987 to
1994 and for Booz, Allen & Hamilton from 1994 to 1997. Mr. Moreno
holds a business administration degree with a major in Finance from the
University of Houston. We believe Mr. Moreno’s qualifications to sit
on the Board include his day to day leadership as Chief Executive Officer of the
Corporation and the Bank, which provides him with intimate knowledge of the
Corporation’s operations. Also, Mr. Moreno’s previous positions with
the Santander Group brings to the Board the perspective of a leader with
problem-solving orientation, facing external economic, social and governance
issues.
There are
no arrangements or understandings between the Corporation and any person
pursuant to which such person has been elected a director, and no director is
related to any other director or executive officer of the Corporation by blood,
marriage or adoption (excluding those that are more remote than first
cousin).
CORPORATE
GOVERNANCE
General
Our
Articles of Incorporation and By-laws give our Board the power to set, by
resolution of an absolute majority, the number of directors at no less than five
nor more than eleven and always an odd number. Our Board has fixed
the number of directors at nine. We currently have eight directors
and a vacancy. Our directors are also the members of the Board of
Directors of the Bank, which is a wholly owned subsidiary of the
Corporation.
Article
Fifth of our Articles of Incorporation and Section 2 of Article II of our
By-Laws establish a three-class structure for the election of members of the
Board. It provides that the Board shall be divided into three classes
as nearly equal in number as possible and that the members of each class shall
be elected for a term of three years and until their successors are elected and
qualified. Section 2 of Article II of our By-laws gives the Board the
power to fill any vacancy occurring, by a majority of the remaining
directors. A director elected to fill a vacancy shall be elected to
serve until the next election of directors by the stockholders.
Under the
NYSE listing standards, a “controlled company” is a company of which more than
50% of the voting power is held by an individual, a group or another
company. Our Board has determined that we are a “controlled company”
within the meaning of the NYSE’s listing standards. The basis for
such determination is BSSA’s ownership of approximately 90.59% of our voting
shares. As a “controlled company,” we are exempt from certain NYSE
listing standards regarding corporate governance. Specifically, we
are not required to have: (a) a board of directors comprised of a majority of
independent directors; (b) a compensation and nomination committee comprised of
independent directors; or (c) director nominees selected or recommended for
selection by the Board of Directors by a majority of the independent directors
or by a nominating committee comprised of independent directors. We,
however, are not exempt from other NYSE corporate governance standards,
including the requirements of having an audit committee comprised of at least
three independent directors and holding regularly scheduled meetings in which
only the independent directors are present. Our Board has made the
determination that the members of the Audit and Compliance Committee satisfy
such independence requirements. (For more information, please see
“Audit and Compliance Committee” below).
Since we
qualify as a “controlled company,” we do not have a Board consisting of a
majority of independent directors. Our Board, however, has three
independent directors, Mr. Víctor Arbulu, Mr. Stephen A. Ferriss and Mr. Roberto
H. Valentín.
The non-management directors are
Gonzalo de las Heras, Jesús Zabalza, Stephen Ferriss, Roberto Valentín, Víctor
Arbulu and José González.
Director
Candidates and Shareholder Communications
The
Corporation has established procedures for stockholders or other interested
parties to communicate directly with the Board of Directors. Such
parties may contact the Board of Directors by mail at: Santander
BanCorp., Investor Relations, Attention: Mr. Gonzalo de Las Heras,
Chairman of the Board, P.O. Box 362589, San Juan, P.R.
00936-2589. Any communication made by these means will be received by
the Chairman of the Board, who will in turn distribute the received
communication to all the members of the Board, or to the member to whom the
communication is directed.
Board of Directors Meetings and Committees
Our Board holds regular meetings at
least quarterly. Special Board meetings are held when called by or at
the request of the Chairman of our Board, the President of the Corporation or
one-third of the directors. Our Board and that of the Bank held 12
meetings each, during the fiscal year ended on December 31, 2009. We
have various standing committees as described below, in addition to other
management committees. All the directors attended more than 75% of
the meetings held during 2009 by our Board and the corresponding committees in
which the directors served, except for Ms. María Calero who was duly excused
from several committee meetings of the Corporation.
While we strongly encourage our
directors to attend all Annual and/or Special Meetings of Stockholders, we have
not adopted a formal policy that all directors must attend the Annual Meeting of
Stockholders. All members of our Board attended the 2009 Annual
Meeting of Stockholders, except for Mr. Jesús Zabalza, Mr. Gonzalo de Las Heras,
and Mr. José González who were duly excused prior to the meeting.
Executive
sessions of the independent members of our Board are held concurrently with each
regularly scheduled meeting of the Audit and Compliance
Committee. The role of “presiding director” during executive sessions
rotates every year amongst non-management directors that serve during these
meetings. Mr. Stephen Ferriss currently presides over executive
sessions of the independent directors. The Corporation has
established procedures for stockholders or other interested parties to
communicate directly with the independent directors of the Board of Directors.
Such parties can contact the Board of Directors by mail at: Independent
Directors of Santander BanCorp., c/o Investor Relations, Attention: Mr. Stephen
Ferriss, P.O. Box 362589, San Juan, P.R. 00936-2589.
Board
Leadership Structure
The Chair of our Board, Mr. Gonzalo de
las Heras, is independent of the principal executive officer, Mr. Juan
Moreno. This model follows the model used by BSSA, which owns
approximately 90.59% of the outstanding shares of Common Stock. The
Chairman, Mr. de las Heras, has eight years of experience in serving our Board
of Directors, and over twenty years of experience in boards of listed companies
in the United States and Europe.
We believe it is the chief executive
officer’s responsibility to run the Corporation and the Chairman’s
responsibility to run the Board. By having another director serve as
Chairman of the Board, Mr. Moreno will be able to focus his entire energy on
running the Corporation, and to focus on the challenges that the Corporation is
facing in the current business environment. The Chairman, in turn,
provides leadership to the Board, oversees the actions of the chief executive
officer, and provides independent criteria and insights to the actions of the
Board or management.
Also, our Board has six non-management
members, three of which are independent members. A number of the
independent Board members are currently serving or have served as members of
senior management of other public companies and have served as directors of
other public companies. We do not have a lead director, but our
independent directors meet in executive session at each meeting of the Audit and
Compliance Committee, and the independent directors will rotate in presiding at
these executive sessions. We believe that the number of independent,
experienced directors that make up our Board, along with the independent
oversight of our Board by the non-executive Chairman, benefits us and our
stockholders.
We have employed this same basic
leadership structure since 2000. We believe that this leadership
structure is effective because it strengthen our corporate governance,
transparency and risk management.
Our Board
has five standing committees, the Audit and Compliance Committee (the “Audit
Committee”), the Compensation and Nomination Committee (the “Compensation
Committee”), the Investment Committee, the Assets and Liability Management
Committee (“ALCO”), and the Board Credit and Risk Committee (the
“BCRC”). Information regarding the Audit Committee, Compensation
Committee, ALCO, the BCRC, and the Investment Committee follows:
Audit
and Compliance Committee
The Audit
Committee is a committee of our Board which also serves as the audit committee
for our subsidiaries. The Audit Committee represents and assists the
Board in discharging its oversight responsibility regarding the Corporation’s
and its subsidiaries’: (i) accounting principles and financial reporting
policies and practices, (ii) systems of internal control over financial
reporting, (iii) integrity of the financial statements and the independent audit
thereof, and (iv) compliance with applicable legal and regulatory
requirements. The Audit Committee also evaluates the performance of
our internal audit department, and the qualification, independence and
performance of our and our subsidiaries’ independent registered public
accountants, and is responsible for the appointment, compensation and oversight
of the work of the independent registered public accountants. The
Audit Committee meets with the independent registered public accounting firm,
D&T, to approve the scope of the audit, review their report on the
examination of the Corporation’s consolidated financial statements and the
Corporation’s and its subsidiaries’ internal controls, and review other reports.
Also, the Audit Committee oversees the internal audit function, including
approval of the internal audit plan and reports prepared by the Internal Audit
Department on their examinations of the operating and business units and other
special examinations.
The
current members of the Audit Committee are the Chairman Mr. Víctor Arbulu, Mr.
Stephen A. Ferriss and Mr. Roberto H. Valentín. Our Board has
determined that Mr. Arbulu and Mr. Ferriss are “audit committee financial
experts” as defined by Item 407(d)(5)(i) of Regulation S-K under the Securities
and Exchange Act of 1934, as amended. For a brief listing of the
relevant experience of the members of the Audit Committee, please see “Board of
Directors” above.
Our Board
has affirmatively determined that all the members of the Audit Committee satisfy
the independence requirements under SEC rules and the listing standards of the
NYSE. Under the NYSE guidelines, a director of the Corporation
qualifies as “independent” if our Board affirmatively determines that the
director has no material relationship with the Corporation. In
assessing whether a director has a material relationship with the Corporation
(either directly or as a partner, shareholder or officer of an organization that
has a relationship with the Corporation), the Board uses the criteria outlined
in Section 303A.02 of the NYSE Listed Company Manual. For
relationships not covered by the NYSE guidelines, the determination of whether a
material relationship exists is made by the members of our Board who are
independent under said guidelines.
The Audit
Committee met 16 times during 2009. None of the members of the Audit
Committee are officers or employees of the Corporation or the Bank.
The Audit
Committee operates pursuant to a Charter adopted by the Board of Directors of
the Corporation. The Charter is reviewed on a yearly basis by the
Audit Committee and the Board of Directors. The Charter is available
on the Corporation’s website at
www.santandernet.com
. Investors
may request a print copy by writing to Rafael Bonilla, Esq., P.O. Box 362589,
San Juan, P.R. 00936-2589.
Compensation
and Nomination Committee
The
Compensation Committee has been established to carry out the Board of Directors’
overall responsibility relating to executive compensation and to support and
advise our Board on the composition of the Board and executive management of the
Corporation. The Compensation Committee has drafted and approved a
charter, available for review in the Corporation’s website at
www.santandernet.com
. Investors
may request a print copy by writing to Rafael Bonilla, Esq., P.O. Box 362589,
San Juan, P.R. 00936-2589.
The
Compensation Committee annually reviews and approves corporate goals and
objectives relevant to the compensation of the Corporation’s Chief Executive
Officer and President, evaluates his performance in light of those goals and
objectives, and sets his compensation level based on this
evaluation. The Compensation Committee also reviews and approves the
executive officers’ compensation, including salary and performance bonus
compensation levels; deferred
compensation;
executive perquisites; severance arrangements; change-in-control benefits and
other forms of executive officer compensation.
Among the
duties of the Compensation Committee in connection with its nominating functions
are to recommend to the Board of Directors the candidates that can fill
vacancies in the Board of Directors, establish and periodically review the
qualifications of the candidates to be nominated or appointed to the Board of
Directors, and recommend to the Board of Directors candidates to occupy the
position of executive officers of the Corporation. The description of
the qualities and skills considered by the Compensation Committee are set forth
below under the caption “Director Criteria and Diversity.”
Potential candidates recommended by
stockholders will receive the same consideration as potential candidates
recommended otherwise. The information of the potential candidates
recommended by a stockholder must be sent to the attention of the Secretary of
the Board of Directors of the Corporation at our principal executive offices
at Santander Tower, B-7 Tabonuco St., Guaynabo, Puerto Rico,
00968.
The Compensation Committee’s duties are
to ensure that the Board of Directors has the plans, procedures, and resources
needed to identify, recruit, and retain directors. The Compensation
Committee will identify the individuals who, in their judgment, are best
qualified to serve in the Board of Directors and will present their
recommendations to the Board of Directors for nominations at the Annual
Stockholder’s Meeting. The Compensation Committee will also make
recommendations to fill any vacancies in the Board that might arise from time to
time.
The Compensation Committee has the
authority to hire and terminate the services of any professional third party
search firm to identify potential candidates for the position of director and
executive officer. No such professional third party was hired for
year 2009.
The
Compensation Committee is currently composed of Messrs. De Las Heras, Zabalza
and Arbulu. Our Board has made the determination that Mr. Arbulu
satisfies the applicable independence requirements as currently defined under
the listing standards of the NYSE. Messrs. De Las Heras and Zabalza
are employees of BSSA, which owns approximately 90.59% of the outstanding shares
of Common Stock. The Compensation Committee met 5 times during
2009.
Compensation
Committee Interlock and Insider Participation
None of
Messrs. De Las Heras, Zabalza and Arbulu is or has been an employee of the
Corporation or its subsidiaries. None of the executive officers of
the Corporation served as a director, executive officer or compensation
committee member of any other entity which had an executive officer who served
as a compensation committee member or director of the Corporation at any time
during 2009.
Investment
Committee
The Investment Committee is responsible
for designing, establishing and supervising appropriate systems and internal
controls to assure that the investment activities and portfolio are consistent
with the Corporations’ strategies, ensuring that the investment strategies are
consistent with the Corporation’s objectives, supervising compliance with the
investment policies and procedures, evaluating and pre-approving all purchases
and sales of financial assets with no readily available market value, and
reviewing and ratifying hedging transactions. The current members of
the Investment Committee are: Mr. Juan S. Moreno, Ms. María Calero, Mr. Roberto
Jara, Mr. Justo Muñoz, Ms. Catalina Mejía, Mr. Juan M. Díaz, Mr. Gonzalo Bava,
Mr. Fernando Bruno, and Mr. Alberto A. Aveleyra. The Investment
Committee met 19 times during 2009.
ALCO
The ALCO is responsible for the
administration of asset and liability management policies, including
establishing methods to measure interest rate risks and monitoring
liquidity. The current members of the ALCO are: Mr. Juan S. Moreno,
Ms. María Calero, Mr. Roberto Jara, Mr. Justo Muñoz, Ms. Catalina Mejía, Mr.
Gonzalo Bava, Mr. Fernando Bruno and Mr. Alberto A. Aveleyra. The
ALCO met 12 times during 2009.
Board
Credit and Risk Committee (“BCRC”)
The BCRC
is responsible for assisting our Board in its responsibility to oversee and
manage credit and other risks, with the exception of compliance risks, and its
mission is to protect the Corporation by taking actions to optimize
income
while
minimizing the adverse consequences of risk taking, which includes requiring
management to take steps necessary to properly manage credit risk and enterprise
risk. The BCRC also has approval authorities and oversees the
activities of executive managers and the Management Credit and Risk
Committee.
The
charter of the BCRC was approved on December 16, 2008. The current
members are Mr. Juan Moreno, Mr. Roberto Valentín, and the third position is
vacant. The BCRC met 9 times during 2009.
Director
Criteria and Diversity
The
Compensation Committee develops qualifying criteria for the directors of our
Board and is responsible for seeking, interviewing, and selecting those that, in
their judgment, are best qualified, and make the appropriate recommendations to
our Board. The Compensation Committee shall establish a formal and
transparent procedure for the selection and appointment of new directors to our
Board. Throughout this process, the Compensation Committee may verify
that the selected individuals demonstrate the following specific qualities or
skills, set forth in our Corporate Governance Guidelines: (a)
experience or relevant knowledge, (b) time availability and commitment, (c) good
reputation, (d) analytical thinking, (e) ability to work as a team, (f) kinship
with other members of the Board and management, and (g) independent
judgment. In addition, the Compensation Committee may include other
requirements which it may deem necessary to strengthen the
Corporation. Members and nominees are not discriminated against on
the basis of race, religion, national origin, sexual orientation, disability or
any other basis proscribed by law.
Board’s Role in Risk
Oversight
We
believe that the Board of Directors provides effective oversight of the risk
management function through the BCRC and the Audit
Committee. Management has also established various committees to
provide effective risk oversight. These committees are the Management
Credit and Risks Committee (“MCRC”) and the Management Compliance
Committee.
The BCRC
assists our Board in its responsibility to oversee and manage risks, with the
exception of compliance risks. The BCRC is established and chartered by
our Board, chaired by the Chief Executive Officer and vice-chaired by a
non-management/independent director. The BCRC also has approval
authorities and oversees the activities of executive managers and the
MCRC.
The BCRC is responsible for overseeing
risk management, and our Board regularly engages in discussions of risk
management and receives reports on risk management from the executive vice
president of Risk Management, other Corporation officers and by the
BCRC.
Each of the Corporation’s other Board
committees also considers the risk within its area of
responsibilities. Risks are identified, measured and monitored
through various committees, including the ALCO, BCRC and Investment Committee,
among others, who report to the Board. As a risk management
mechanism, executive management has established the MCRC with the mission of
protecting the Corporation from adverse consequences of risk-taking. The
MCRC is established and chartered by the Executive Management Committee, chaired
by the Chief Executive Officer. The MCRC has responsibility over all
aspects of risk management through: (i) direct responsibility for the management
of credit risks; and (ii) direct responsibility for the management of all other
categories of risk, with the exception of compliance risk, which is the
responsibility of Management’s Compliance Committee. The MCRC main
objectives are:
|
1.
|
To
enhance corporate governance by clarifying risk assessment and oversight
responsibilities.
|
|
2.
|
To
provide a corporate view of those kinds of risks that could significantly
impact the achievement of our goals (operational, compliance or financial
reporting).
|
|
3.
|
To
integrate risk management practices into a multidimensional program across
the entity to eliminate a one dimensional view of
risks.
|
|
4.
|
To
identify and manage existing and new risks in a planned and coordinated
manner with the minimum of disruption and
cost.
|
|
5.
|
To
develop a "risk aware" culture that encourages all staff to identify risks
and associated opportunities and to respond to them with cost effective
actions;
|
|
6.
|
To
ensure that we are perceived by stakeholders as a leading institution
through adopting best risk management
practice.
|
|
7.
|
To
build up confidence, both internally and externally, by increasing risk
transparency and overall
preparedness.
|
|
8.
|
To
assure regulatory compliance by continuously monitoring non-compliance
risks and the corresponding action
plans.
|
All efforts executed by the MCRC are
focused in the management of the following risk types: interest/market risk
(including the four standard market risk factors of equity risk, interest rate
risk, currency risk, commodity risk), credit risk, operational risk, information
technology risk, liquidity risk, financial reporting risk, strategic risk,
reputation risk.
Compliance/Legal Risk is overseen by
the Management Compliance Committee at management level, and reports directly to
the Audit Committee of our Board. The Audit Committee oversees
compliance risks related to legal and regulatory requirements, and discusses
policies with respect to risk assessment and risk management. Such
discussions include our major financial and accounting risk exposures and the
steps management has undertaken to control them. The Audit Committee
reports to the Board on a regular basis and makes such recommendations as the
Audit Committee may deem necessary or appropriate.
Risk
Considerations in the Corporation’s Compensation Program
We
believe that risks arising from our compensation policies and practices for our
employees are not reasonably likely to have a material adverse effect on
us. In addition, the Compensation Committee believes that the
elements of executive compensation do not encourage management to assume
excessive or unnecessary risks. The elements of compensation consist
of both fixed and variable compensation and take into account financial and
non-financial components. The fixed portion of compensation is
designed to provide a steady income regardless of stock price performance,
balancing between different business metrics. The variable portions
of compensation are designed to reward short-, medium- and long-term corporate
performance.
In
addition, under the Code of Business Conduct and Professional Ethics all
employees, Directors and officers are required to place our interests and those
of our clients above their own private interests, or the interests of their
relatives or related third parties.
COMPENSATION
OF DIRECTORS
We only
compensate those directors who are not officers of the Corporation or
BSSA. The directors receive a fee of $1,000 for each meeting of the
Board and the Bank they attend. When these meetings are held on the
same date, the directors receive a maximum compensation of
$1,000. The members of the BCRC receive $500 for each meeting
attended. The Audit Committee members receive $1,500 for each Audit
Committee meeting attended. In addition, directors of the Corporation
receive a monthly allowance of $1,000. In the event any Board or
committee meeting, other than the Audit Committee, is held on the same date,
directors receive a maximum compensation of $1,000 for said date. In
the event any BCRC meeting is held on the same date as the Audit Committee
meeting, members of said Committee receive a maximum compensation of
$1,500.
In
addition, directors may receive health insurance coverage
benefits. During 2009, Mr. Víctor Arbulu, Mr. Stephen Ferriss and Mr.
Roberto Valentín were the only directors who received health insurance coverage
benefits for their services as directors. Mr. José González received
health insurance coverage under a separate agreement with the Corporation (see
table below).
The following table sets forth the
compensation received by the directors during 2009:
Name
|
|
Fees Earned or
Paid in Cash
(1)
|
|
|
All other compensation
|
|
|
Total
|
|
Gonzalo
de Las Heras
Chairman
of the Board of Directors
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Juan
S. Moreno
Director
(2)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Víctor
Arbulu
Director
|
|
$
|
43,500
|
|
|
$
|
6,983
|
(3)
|
|
$
|
50,483
|
|
Stephen
Ferriss
Director
|
|
$
|
41,000
|
|
|
$
|
6,983
|
(4)
|
|
$
|
47,983
|
|
Roberto
Valentín
Director
|
|
$
|
49,000
|
|
|
$
|
7,296
|
(5)
|
|
$
|
56,296
|
|
Jesús
Zabalza
Director
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
José
R. González
Director
|
|
$
|
0
|
|
|
$
|
173,331
|
(6)
|
|
$
|
173,331
|
|
María
Calero
Director
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
(1)
|
Amount
includes retainer fees and fees for attendance to Board of Directors
meetings and committee meetings.
|
|
(2)
|
Mr.
Moreno is also a named executive officer and his compensation is fully
reflected in the Summary Compensation Table
below.
|
|
(3)
|
Amount
corresponds to health insurance
premiums.
|
|
(4)
|
Amount
corresponds to health insurance
premiums.
|
|
(5)
|
Amount
of $6,983 corresponds to health insurance premiums, and $313 estimated
value for personal use of Club Memberships at 50% of memberships’
payments.
|
|
(6)
|
Mr.
González received a monthly fee of $20,833 for services rendered as
consultant pursuant to a one-year consulting services agreement with the
Corporation, which started on September 2, 2008 and ended on September 2,
2009. The amount of consulting fees received for 2009 is
$166,666.64. Mr. González and his dependents are also entitled,
at the Corporation’s expense, to health insurance coverage under the
Bank’s group health insurance policy until the earlier of August 31, 2011
or the date Mr. González obtains coverage under a different health
insurance policy, pursuant to separation agreement executed on August 28,
2008 due to his separation as executive officer of the
Corporation. The health insurance premiums amount to
$6,664.80.
|
EXECUTIVE
OFFICERS
Our
executive officers are appointed by our Board and hold office at its discretion.
Listed below are our current executive officers, their respective positions and
certain biographical information, with the exception of Mr. Juan S. Moreno and
Ms. María Calero, who are executive officers and directors of the Corporation
and were already mentioned under the “Nominees for Directors” and “Members of
the Board of Directors” sections of this proxy statement.
Carlos
Acevedo
(35
years)
. Mr. Acevedo was appointed President of Santander
Insurance Agency, Inc. in March 16, 2009. He served as Operations and
Underwriting Vice-President of Santander Insurance Agency, Inc. from January
2008 to March 2009, and as Sales and Marketing Vice-President from December 2004
to December 2007. Prior to joining Santander Insurance Agency, Inc.,
Mr. Acevedo worked for BBVA Seguros, Inc., as Vice-President in charge of the
business operation. Mr. Acevedo holds a Bachelor’s Degree in Business
Administration and an MBA with a major in Finance from the University of Puerto
Rico. He holds the life, disability, miscellaneous and title
insurance licenses issued by the Puerto Rico Commissioner of Insurance
Office.
José Alvarez
(53 years).
Mr.
Alvarez was named Executive Vice President in August 2006. Mr.
Alvarez
joined the Corporation as First Senior Vice President and
Director of Operations and Information Technology in 2004. Since
1979, Mr. Alvarez has held various responsibilities within BSSA and its
subsidiaries such as Director of Operations for the America Division in
Madrid, Spain, Project Coordinator for the implementation of the Euro, and
International Coordinator of Management Information Technology for
Latin-American branches. In the past, he also held positions as
Systems Director of Banco Santander in New York, and International
Branches Coordinator for the implementation of the information and software
systems for the New York, Hong Kong, and Frankfurt branches of
Banco Santander. Prior to this, in Frankfurt, Germany, he held various
responsibilities as Operations Manager, Systems Analyst, and Systems Director
for the Bank of America Visa International Division. Mr. Alvarez has
a Bachelor’s Degree in Business Administration with a concentration in
Information Systems and is a graduate of the Werner von Siemens and the
Frankfurt Chamber of Commerce.
Rafael S. Bonilla
(38
years).
Mr. Bonilla has served as Senior Vice President
and
General Counsel since
September
2005. Mr. Bonilla arrived at the Corporation in 2001 as Assistant General
Counsel in the Legal and Compliance Division. In
August
2003, Mr. Bonilla became Vice President, Legal Counsel and Director of the
Litigation and Legal Collection Department in the Collection Division of the
Corporation. In
January
2005, Mr. Bonilla became Director of Administration in Commercial
Banking. From September 2005 to July 2008, Mr. Bonilla served as
Director of Corporate Compliance in addition to his current positions as Senior
Vice President and General Counsel. Mr. Bonilla serves as Director of
Santander Financial Services, Inc., Santander Insurance Agency, Inc. and BST
International Bank, Inc. Mr. Bonilla also serves as Secretary of the
Board of the Corporation and several of its subsidiaries and affiliates,
including the Bank, Santander Securities Corporation, Santander Insurance
Agency, Inc., Santander International Bank, Inc., Santander
Financial
Services, Inc., Island Insurance Corporation, Crefisa, Inc., Universia Puerto
Rico, Inc., and BST International Bank, Inc. Prior to joining the
Corporation in
January
2001, Mr. Bonilla worked as an attorney in the litigation division of Fiddler,
González & Rodríguez, LLP. Mr. Bonilla holds a Bachelor’s Degree in
Business Administration from the University of Florida and a
Juris Doctor
from the
University of Puerto Rico, School of Law.
Miguel
Cabeza
(41
years)
.
In April 2006, Mr.
Cabeza
was
appointed Senior Vice President and Internal Audit Director of the
Corporation. Before that date, Mr. Cabeza served as Internal Audit
Director of Santander Group in Switzerland from April 2002 to November
2005. He also served as Internal Audit Team Manager of the Internal
Audit Department of BSSA. Mr. Cabeza joined BSSA in June 1997 as Analyst
of the Group Financial Department (General Intervention). Prior to joining
Santander, Mr. Cabeza worked as Financial Manager in several small
companies. Mr. Cabeza holds a Bachelor’s Degree in Economics from
Valladolid University, Spain, a Master’s Degree in Banking and Financial Markets
from the University of Cantabria, Spain. Mr. Cabeza is a Certified
Internal Auditor.
Eric
Delgado
(47
years).
Mr. Delgado was appointed First Senior Vice
President and Middle Market Director in October 2006. Prior to
joining the Corporation, Mr. Delgado worked for Doral Bank from 2003 to 2006 as
an Executive Vice President in the areas of Commercial Banking and Credit
Administration. Prior to that, he worked for Banco Popular de Puerto
Rico from 1996 to 2003 as an Assistance Vice President and Commercial Lending
Officer. Mr. Delgado holds a Bachelor’s Degree in Business
Administration with a major in Finance from the Interamerican University in
Puerto Rico.
Mario
Delgado
(49
years)
. Mr. Delgado was appointed President of Santander
Financial Services, Inc. in August 2008. Prior to his appointment as
President, Mr. Delgado served as Executive Vice President of Santander Financial
Services, Inc. since March 2006. From 2002 to 2006, Mr. Delgado was
Executive Vice President and Chief Operations Officer of Island Finance Puerto
Rico, Inc. Prior to this, Mr. Delgado was at AXA Advisors, LLC, a
member of the Global AXA Group, from 1996 as Vice President and District
Manager, and from 2000 to 2002 as Executive Vice President and Branch Manager of
the Puerto Rico operations of the firm. From 1990 to
1996, Mr. Delgado was a partner at Vazquez, Delgado & Associates, a private
consulting and accounting firm. Prior to this, Mr. Delgado was at
BanPonce Corporation, a bank holding company, from 1986 to 1989 as Vice
President and General Auditor of the Corporation, and from 1989 to 1990 as Vice
President of the Consumer Banking Group. From 1984 to 1986, Mr.
Delgado worked with Touche Ross & Co. (now Deloitte Touche), and from 1981
to 1984 with Peat, Marwick, Mitchell & Co. (now KPMG). Mr.
Delgado holds a Bachelor’s Degree in Business Administration with a major in
Accounting from the University of Puerto Rico. Mr. Delgado currently
serves as President of FINANCO, Puerto Rico’s Finance Company
Association.
Roberto
Jara
(50
years)
. Mr. Jara was appointed Executive Vice President &
Chief Accounting Officer of the Bank and the Corporation in November 2008,
subject to the approval of his non-immigrant visa petition. Mr.
Jara’s visa was approved with a valid date as of December 1, 2008, and he is
currently serving in such position. Prior to his appointment with the
Bank and the Corporation, Mr. Jara served as Accounting Director of Banco
Santander Chile from 1989 to 2008. Mr. Jara holds a Bachelor’s Degree
in Accounting with a major in Auditing from the University of Instituto
Profesional – Chileans Association of Accountants. Also he has a
degree on Tax Management from Adolfo Ibañez University – Business School and
graduated from Business Studies at the Universidad de Los Andes,
Chile.
Justo
Muñoz
(57
years).
Mr. Muñoz was appointed Executive Vice President
and Chief Credit Officer of the Corporation in May 2008. Prior to
such appointment, he served as Executive Vice President and Consumer Business
Director of the Corporation since May 2007. Prior to joining the
Corporation, Mr. Muñoz worked for Citigroup for 26 years, until his retirement
in April 2006, where he served in various positions, including Senior Country
Risk Manager for the Global Consumer Bank in Brazil, Mexico and
Japan. Mr. Muñoz holds a Bachelor’s Degree in Business Administration
with a major in Finance and an MBA, both from Loyola University.
James A.
Rodríguez
(53
years).
Mr. Rodríguez joined Santander Securities Corporation
in April 2005, as Managing Director and Branch Manager and on January 1, 2006,
he was promoted to President and Chief Executive Officer. Prior to
joining Santander Securities Corporation, Mr. Rodríguez worked for ten years as
Managing Director in charge of Institutional Sales for Popular
Securities. He started in 1983 as a trainee at The First Boston
Corporation where he went on to become a Director. After his
graduation from Princeton University with a Bachelor’s Degree in Economics, Mr.
Rodríguez worked for the General Electric Corporation in Philadelphia,
Pennsylvania. He then went on to obtain a Master’s in Business
Administration in Finance from Indiana University as a Fellow of The Consortium
for Graduate Study in Management.
José
Santoni
(53
years).
Since July 2003, Mr. Santoni has served as First
Senior Vice President and Credit Risk Admissions Director of the
Bank. Mr. Santoni joined the Bank in 1985 where he held various
positions including Assistant
Vice
President of the Credit Department, Vice President and Assistant to the
President of Santander National Bank, a former affiliate, and Senior Vice
President and Director of the Credit Administration Division of the
Bank. From 1976 to 1983, Mr. Santoni worked for the Division of Bank
Supervision of the Federal Deposit Insurance Corporation, New York
Region. Mr. Santoni holds a Bachelor’s Degree in Finance from the
University of Puerto Rico.
Frank Serra
(39
years)
. Mr. Serra was appointed President and Chief Executive
Officer of Santander Asset Management Corporation (“Santander Asset Management”)
in January, 2009, and Senior Vice President of the Trust Division of the Bank in
October 2008. Prior to such appointment, Mr. Serra served as Senior
Vice President and Chief Operating Officer from 2005 to 2008, and as Vice
President, Administration and Operations Director of Santander Asset Management
from 2003 to 2005. Prior to joining Santander Asset Management, Mr.
Serra held various positions with Banco Popular de Puerto Rico, including
Assistant Vice President and Assistant Manager in the Trust Department for the
Mutual Fund Products. Mr. Serra holds a Bachelor’s Degree in Business
Administration with a major in Accounting from the University of Puerto
Rico.
Tomás E.
Torres
(47
years).
Mr. Torres was appointed Executive Vice President of
the Bank in September 2006 and Chief Credit Officer of the Corporation in
December 2006. Since 2009 he serves as Executive Vice President of
Collections and Workout for the Group in Puerto Rico. He also serves
as director of Santander Overseas Bank, Inc., and Crefisa, Inc. since September
2006. Prior to his employment with the Bank, Mr. Torres served as
Senior Executive Vice President of Doral Bank Puerto Rico, from 2002 to
2006. From 1994 to 2002, Mr. Torres served in the Bank, in various
positions, including First Senior Vice President and Director of the Credit
Administration Department of the Bank. Mr. Torres holds a Bachelor’s
Degree in Business Administration from Inter American University of Puerto
Rico. Mr. Torres has 22 years of experience in the banking
industry.
COMPENSATION
OF EXECUTIVE OFFICERS
Compensation
Disclosure and Analysis
This
Compensation Disclosure and Analysis (“CD&A”) provides information related
to our compensation policies and the pay levels of our named executive officers
(“NEOs”) for 2009. The information provided below includes, among
other things, the objectives of our compensation program and the elements of
compensation that we provide to our NEOs.
The
employees of our subsidiaries are deemed to be our employees. Our
NEOs are: Mr. Juan S. Moreno, President and Chief Executive Officer
(“CEO”); Mr. Roberto Jara, Executive Vice President and Chief Accounting Officer
(“CAO”); and the three most highly-compensated executive officers other than the
CEO and the CAO, which are: Mr. James Rodríguez, President of Santander
Securities Corporation; Mr. Justo Muñoz, Executive Vice President and Chief
Credit Officer; and Mr. José Alvarez, Executive Vice President and Director of
Operations and Information Technology.
Mr.
Moreno, Mr. Jara, and Mr. Alvarez are foreign employees (the “Expatriated NEOs”)
who serve as executive officers of the Corporation under BSSA’s expatriate
program (the “Expatriated Program”). The Expatriated Program was
created and is administered by BSSA in response to the fast growing
international financial industry. The main objective of the
Expatriated Program is to develop human resources with international skills to
implement new strategies and facilitate all kind of international
transactions. The Expatriated NEOs contribute to the Corporation with
their knowledge and expertise on international affairs and new global business
strategies. Once an Expatriated NEO is assigned to us, he or she
becomes our employee for a certain period of time, pursuant to the terms of the
Expatriated NEO’s letter of condition.
Overview of Compensation
Program and Philosophy
The
Compensation Committee is responsible for determining and recommending to the
Board of Directors the compensation of our NEOs. The Compensation
Committee endeavors to maintain an executive compensation that is fair,
reasonable, and consistent with our size and the compensation practices of the
financial services industry. The main objective of the Compensation
Committee is to develop a compensation program which creates shareholder value
by (i) competing for, attracting and retaining, talented professionals in the
banking and financial institutions industry; (ii) motivating employees to
achieve superior results for the Corporation; and (iii) obtaining the maximum
performance from each employee. These objectives and policies guide
the Compensation Committee in assessing the proper allocation between the
elements of compensation discussed below.
The
Compensation Committee considers, among other factors, competitive pay practices
in order to develop a stronger relationship between executive compensation and
our short-term and long-term performance. We benchmark
our
overall
compensation and benefits program, against our peers, using the survey
coordinated by the Puerto Rico Bankers’ Association. For 2009 the
survey was performed by Watson Wyatt & Company. We generally
target our initial overall compensation and benefits program in the 75
th
percentile of the peer group for our officers and in the 50
th
percentile of the peer group for the rest of our employees. Any
changes to the overall compensation and benefits program are analyzed in light
of our overall objectives, including the effectiveness of the retention and
incentive features of such program and the targeted percentile range. The peer
group used by the Compensation Committee for comparison purposes is reviewed in
light of industry developments and significant mergers/acquisitions, to ensure
that it is consistent with our size and objectives. The peer group
currently consists of the following financial institutions: Banco Bilbao Vizcaya
Argentaria, Banco Popular de Puerto Rico, Doral Financial Corporation, Citibank,
FirstBank, R-G Financial Corporation, Oriental Financial Group, Westernbank and
Scotiabank Puerto Rico, all of which are located in Puerto Rico and have a
strong component in retail banking.
Our
compensation and benefits program for NEOs (the “NEOs Compensation Program”)
consists of the following elements: a base salary, a performance bonus incentive
plan, an optional 1165(e) plan, a Christmas bonus, car allowance, medical, life
and other insurance coverage, and other incidental benefits. The
compensation and benefits program applicable to the Expatriated NEOs (the
“Expatriated NEOs Compensation Program” and together with the NEOs Compensation
Program the “Compensation Program”) consist of the following elements: a base
salary, a performance bonus incentive plan, and certain perquisites such as
housing, school payments, utilities, vacations, tax gross-ups and other related
expenses. In addition to the elements of compensation mentioned
above, we assign stock awards to qualifying executive officers, including the
NEOs, under certain incentive plans sponsored by BSSA. Said elements
of compensation have been chosen because each is considered useful and necessary
to meet one or more of the objectives of the compensation
program. The Compensation Program is designed to reward superior
individual performance and employee longevity. The Compensation
Committee has developed a compensation strategy that ties a significant portion
of executive compensation to our success. The overall objective of
this strategy is to provide compensation levels that recognize each executive’s
individual contributions, as well as overall business results.
Prior to
2009, an optional deferred compensation plan was available for some of our
executive officers of the Corporation, through the Bank, Santander Financial
Services, Inc. and Santander Securities Corporation. This element of
compensation is no longer offered, and the only NEO enjoying the optional
deferred compensation benefit is Mr. James Rodríguez for compensation received
in 2007. See Deferred Compensation Table below.
The
CEO of the Corporation submits to the Board of Directors each year a plan
setting forth our annual short-term and long-term quantitative and intangible
goals. The evaluations of the NEOs’ performances are made based in
part on such goals and their individual performance to help attain such
goals. The Compensation Committee takes into account the
recommendations of the CEO in their evaluation of each NEOs’ compensation (other
than the CEO’s compensation).
The elements of
compensation
:
A.
Base
Salary
Base
salaries enable us to attract management with the required skills and
experience. Base salaries are designed to reward experience, skills
and responsibilities undertaken by the NEOs.
Our NEOs’
base salaries are initially determined by evaluating the responsibilities of the
position to be held and the experience of the individual. As
discussed above, to help identify the appropriate amount of base salary for each
NEO, the Compensation Committee considers the individual experience and skills
and the competitive pay practices in the financial industry.
The NEOs
are usually entitled to increases of base salary, when
appropriate. The base salary increases are based mainly on merit and
the NEOs undertaking of new responsibilities. The salary increase
strategy allows discretionary salary increases to provide the opportunity to
recognize changes in performance levels and responsibilities. Salary
adjustments are determined by evaluating the performance of the Corporation and
of each NEO. The Compensation Committee exercises judgment and
discretion in the information it reviews and the analysis it considers, and when
appropriate, also considers non-financial performance
measures. Non-financial performance measures may include increases in
market share, financial strength, regulatory reviews, efficiency gains,
improvements in services, and improvements in relations with customers and
employees.
Expatriated
NEOs’ base salary is initially determined using the base salary of the
Expatriated NEO prior to his/her relocation to the Corporation, revised to
reflect any changes in position or responsibilities, if applicable, and adjusted
by the difference in the cost of living between the country of origin and Puerto
Rico, including taxes, plus the expatriation fees established by BSSA’s
applicable policies and procedures for Expatriated NEOs. The
Expatriated NEOs’ base salary is established in a letter of conditions executed
by the Expatriated NEO with BSSA. The Expatriated NEOs may be
entitled to base salary increases, when appropriate, under conditions similar to
those applicable to the NEOs.
None of
the NEOs’ base salaries were increased or revised during 2009, except the salary
of Mr. José Alvarez and Mr. Justo Muñoz.
B.
Performance Bonus Incentive
Plan
We chose
to provide the Performance Bonus Incentive Plan (the “Bonus Incentive Plan”)
because it is a powerful tool to motivate employees to attain high levels of
performance and to take actions to support our goals and strategies during each
year. The Compensation Committee exercises judgment and discretion in
the information it reviews and the analysis it considers, and where appropriate,
also considers non-financial performance measures in order to provide its
employees with a performance bonus. Among the factors taken into
consideration to determine the performance bonus are the financial results for
the applicable fiscal year, the percentage of attainment of our pre-established
goals, individual performance goals, anticipated difficulty and importance of
achieving such goals, and the financial results and market conditions in the
financial industry. Accordingly, the amount of the bonuses paid will
vary from year to year and will depend on actual performance.
The
amount of performance bonus is directly linked to our financial results
determined in accordance with GAAP, compliance with our objectives for the
fiscal year and the NEOs’s individual achievement of their respective
goals. The NEOs are individually evaluated after the end of each
fiscal year.
The
weighting between the Corporation’s goals and the individual performance reflect
the degree of influence a participant has over the achievement of our
goals. The following table shows the weighting between the
achievement of Corporation’s and individual goals in order to determine the
applicable performance bonus:
NEO
|
|
Corporation’s Financial Results
and Compliance with
Corporate Objectives
|
|
|
NEO’s Individual Performance
|
|
Juan
S. Moreno
|
|
|
30
|
%
|
|
|
70
|
%
|
Roberto
Jara
|
|
|
20
|
%
|
|
|
80
|
%
|
José
Alvarez
|
|
|
20
|
%
|
|
|
80
|
%
|
James
Rodríguez
|
|
|
20
|
%
|
|
|
80
|
%
|
Justo
Muñoz
|
|
|
20
|
%
|
|
|
80
|
%
|
To be eligible for the performance
bonus, a NEO must remain an employee of the Corporation for the entire fiscal
year. Performance bonuses are paid in cash and are designed to reward
progress toward and achievement of performance goals.
For 2009,
the Compensation Committee reviewed and evaluated the individual and corporate
performance against the targeted goals, taking into consideration the factors
mentioned above and additional factors that might have affected the achievement
of such targets, such as changes in financial market
conditions. Based on such evaluations, the Compensation Committee
recommended the applicable performance bonuses reflected in the Summary
Compensation Table below for each of the NEOs. The Compensation
Committee believes that the recommended performance bonus awards were consistent
with the objectives of the Bonus Incentive Plan. At the time the
performance goals for 2009 were set, the Compensation Committee believed that
the targeted goals would be difficult but achievable with significant
effort.
C.
Performance Shares
Plan
BSSA
sponsors a “Performance Shares Plan” that provides medium- and long-term
incentive compensation. The Performance Share Plan was developed to
align, to an appropriate extent, the interests of management with those of
BSSA’s shareholders. The Performance Shares Plan consists of a
multi-year bonus plan under which BSSA awards to a
select
group of key employees of the Corporation and its subsidiaries, including some
of the NEOs, shares of common stock of BSSA, subject to certain
conditions. This plan is executed in cycles, with one cycle ending
each year. To-date, BSSA has made awards under four cycles, each of
which referred to as the “I09 Plan,” the “I10 Plan,” the “I11 Plan,” and the
“I12 Plan”, also known as the 1
st
cycle,
2
nd
cycle, 3
rd
cycle
and 4
th
cycle,
respectively. Each cycle is for a three-year period, except for
the I09 Plan, which was for two years, with payout of shares no later than July
31 of the year following the end of the cycle.
Under
each Plan, except the I12 Plan, the actual number of shares to be received by
the NEOs will depend on the sum of the two different rankings for the BSSA
shares when compared to a group of 21 international financial institutions to be
determined by BSSA as follows:
BSSA’s ranking based on
Total Stockholder Return
|
|
% of shares to be awarded
|
|
BSSA’s ranking based on
Earnings Per Share
Growth
|
|
% of shares to be awarded
|
|
1
st
to 6
th
|
|
|
50
|
%
|
1
st
to 6
th
|
|
|
50
|
%
|
7
th
|
|
|
43
|
%
|
7
th
|
|
|
43
|
%
|
8
th
|
|
|
36
|
%
|
8
th
|
|
|
36
|
%
|
9
th
|
|
|
29
|
%
|
9
th
|
|
|
29
|
%
|
10
th
|
|
|
22
|
%
|
10
th
|
|
|
22
|
%
|
11
th
|
|
|
15
|
%
|
11
th
|
|
|
15
|
%
|
12
th
and below
|
|
|
0
|
%
|
12
th
and below
|
|
|
0
|
%
|
As of December 31, 2009, the I09 Plan
has vested and the number of actual shares received by each NEO is set forth
below in the Option Exercises and Stock Vested Table. The maximum
number of shares is assigned by the Executive Committee of BSSA. The
maximum number of shares that each participant is eligible to receive under the
I10 was determined by dividing a percentage of the participant’s base salary by
the daily average weighted volume of the average weighted listing prices of
BSSA’s shares on May 7, 2007 (
€
13.46), and the
maximum number of shares under the I11 Plan and the I12 Plan per participant was
not based on a mathematical calculation, rather it was entirely discretionary
based on the each participant’s level within the BSSA organization.
Each plan defines Total Stockholder
Return as the difference between the value of a hypothetical investment in
ordinary shares of each of the members of the peer group and BSSA at the end of
the cycle and the value of the same investment at the beginning of the
cycle. Dividends or similar amounts received by shareholders will be
considered as if such amounts were invested in more shares. The
trading price on the exchange with the highest trading volume will be used to
calculate the initial and final share prices.
Each plan (except the I12 Plan, for
which it is inapplicable) defines growth in earnings per share as the percentage
ratio between the earnings per common share as the applicable entity discloses
in its consolidated annual financial statements at the beginning and end of each
cycle.
The peer group is chosen from among the
world’s largest financial institutions, on the basis of their market
capitalization, geographic location, and the nature of their
businesses. A member of the peer group may be removed from the
calculations in the event it is acquired by another company, is delisted, or
otherwise is otherwise ceases to be in existence. In such a case,
BSSA will adjust the maximum number of shares that a participant earns to
equitably reflect such removal.
When termination of the employment
relationship with BSSA or another Santander Group institution is due to
retirement, pre-retirement initiated by the employer, unfair dismissal,
unilateral waiver by the participant for just cause, forced leave of absence,
permanent disability, death, or the employer ceases to be an entity of the
Santander Group, the right to receive stocks shall remain as if none of these
situations had occurred, except for the following modifications:
|
-
|
in
case of death, this right will pass on to the successors of the
participant;
|
|
-
|
in
case of death, retirement, pre-retirement, dismissal, leave, or other
circumstance, the participant (or his or her beneficiary, in the case of
death), will receive a pro-rated portion of the participant’s award as per
the formula set forth in the plan;
|
|
-
|
in
case of justified temporary leave, maternity leave, leave of absence to
care for the children or other family members, no change will occur in the
rights of the participant;
|
|
-
|
should
the participant be transferred to another company belonging to the
Santander Group (including international assignment and/or expatriation),
without any other modification circumstances, no change will occur in the
participant’s rights; and
|
|
-
|
whenever
the employment relationship is terminated by mutual agreement or because
the participant obtains a leave of absence not referred to in any of the
preceding paragraphs, the terms set forth in the established termination
or leave of absence agreement will
apply.
|
The maximum number of shares to be
granted under each of the plans to the NEOs as of the end of 2009 is as
follows:
NEO
|
|
I10 Plan
|
|
|
I11 Plan
|
|
Juan
S. Moreno
|
|
|
31,500
|
|
|
|
32,000
|
|
Roberto
Jara
|
|
|
1,800
|
|
|
|
3,000
|
|
José
Alvarez
|
|
|
10,000
|
|
|
|
10,000
|
|
James
Rodríguez
|
|
|
10,000
|
|
|
|
10,000
|
|
Justo
Muñoz
|
|
|
4,000
|
|
|
|
10,000
|
|
The I12 Plan was approved on February
26, 2010 by our Board. Under the I12 Plan, a percentage of the maximum number of
shares will vest in accordance with pre-established BSSA Total Stockholder
Return goals compared to a peer group of 16 international financial
institutions. The maximum number of shares payable under these awards is as
follows:
NEO
|
|
I12 Plan
|
|
Juan
S. Moreno
|
|
|
40,000
|
|
Roberto
Jara
|
|
|
6,000
|
|
José
Alvarez
|
|
|
11,000
|
|
James
Rodríguez
|
|
|
5,000
|
|
Justo
Muñoz
|
|
|
11,000
|
|
I09 Plan and I10
Plan
:
On
December 3, 2007, our Board approved the first two cycles of the Performance
Shares Plan sponsored by BSSA, the I09 Plan and I10 Plan, for certain of our
employees and those of our subsidiaries. Both plans are subject to
the following conditions:
Conditions
|
|
I09 Plan
|
|
I10 Plan
|
Service
Condition
|
|
From
grant date through June 30, 2009
|
|
From
grant date through June 30, 2010
|
Stockholder
Return Condition
|
|
Up
to 50% of the shares to be awarded will be based on BSSA Total Stockholder
Return, as defined for the plan, measured from 2007 through
2009.
|
|
Up
to 50% of the shares to be awarded will be based on BSSA Total Stockholder
Return, as defined in the plan, measured from 2007 through
2010.
|
Earnings
Per Share Condition
|
|
Up
to 50% of the shares to be awarded will be based on BSSA Earnings Per
Share Growth, as defined for the plan, measured based on the audited
consolidated financial statements of BSSA and 21 international financial
institutions for 2006 through 2008.
|
|
Up
to 50% of the shares to be awarded will be based on BSSA Earnings Per
Share Growth, as defined for the plan, measured based on the audited
consolidated financial statements of BSSA and 21 international financial
institutions for 2006 through
2009.
|
The peer
group for the I09 Plan and the I10 Plan is made up of the following 21 financial
institutions:
|
|
|
ABN
AMRO Holding
|
|
JP
Morgan Chase & Co.
|
Banco
Bilbao Vizcaya Argentaria, S.A.
|
|
Lloyds
TSB Group
|
Banco
Itaú
|
|
Mitsubishi
|
Bank
of America
|
|
Nordea
Bank AB
|
Barclays
|
|
Royal
Bank of Canada
|
BNP
Paribas
|
|
Royal
Bank of Scotland Group
|
Citigroup
|
|
Société
Générale S.A.
|
Credit
Agricole
|
|
UBS
AG
|
HBOS
plc
|
|
UniCredito
Italiano
|
HSBC
Holdings plc
|
|
Wells
Fargo & Co.
|
Intesa
Sanpaolo S.p.A.
|
|
|
Under the
I09 Plan, participant employees, including the NEOs, received shares of BSSA
stock on July 31, 2009. See Option Exercises and Stock Vested Table
below.
Under the
I10 Plan, participant employees, including the NEOs, will receive their
corresponding shares of BSSA no later than July 31, 2010.
We
recognized a compensation expense for the I09 Plan of $106,900, $1,599,620 and
$664,564 in 2007, 2008 and 2009, respectively. We also recognized a
compensation expense for the I10 Plan of $97,500, $1,447,212 and $1,377,504, in
2007, 2008 and 2009, respectively.
I11
Plan
:
On
February 26, 2009, our Board approved the third cycle under the Performance
Shares Plan, the I11 Plan, for certain of our employees and those of our
subsidiaries. The I11 is subject to the following
conditions:
Conditions
|
|
I11 Plan
|
Service
Condition
|
|
From
grant date through June 30, 2011
|
Stockholder
Return Condition
|
|
Up
to 50% of the shares to be awarded will be based on BSSA Total Stockholder
Return, as defined for the plan, measured from 2008 through
2011.
|
|
|
|
Earnings
Per Share Condition
|
|
Up
to 50% of the shares to be awarded will be based on BSSA Earnings Per
Share Growth, as defined for the plan, measured based on the audited
consolidated financial statements of BSSA and 21 international financial
institutions for 2006 through
2010.
|
The peer group for the I11 Plan is made
up of the following 21 financial institutions:
|
|
|
Banco
Itaú
|
|
JP
Morgan Chase & Co.
|
Banco
Bilbao Vizcaya Argentaria, S.A.
|
|
Lloyds
TSB
Group
|
Bank
of America
|
|
Mitsubishi
|
Barclays
|
|
Nordea
Bank AB
|
BNP
Paribas
|
|
Royal
Bank of Canada
|
Citigroup
|
|
Royal
Bank of Scotland Group
|
Credit
Agricole
|
|
Société
Générale S.A.
|
Deutsche
Bank
|
|
UBS
AG
|
HBOS
plc
|
|
UniCredito
Italiano
|
HSBC
Holdings plc
|
|
Wells
Fargo & Co.
|
Intesa
Sanpaolo S.p.A.
|
|
|
Under the
I11 Plan, participant employees will receive their corresponding shares of BSSA
stock no later than July 31, 2011. We recognized a compensation
expense for the I11 Plan of $363,783 in 2009.
I12
Plan
:
On
February 26, 2010, our Board approved a fourth cycle under the Performance
Shares Plan, hereinafter referred to as I12 Plan, for certain of our employees
and those of our subsidiaries. The I12 is subject to the following
conditions:
Conditions
|
|
I12 Plan
|
Service
Condition
|
|
From
grant date through June 30, 2012
|
Stockholder
Return Condition
|
|
Up
to 50% of the shares to be awarded will be based on BSSA Total Stockholder
Return, as defined for the plan, measured from 2009 through
2012.
|
BSSA’s ranking based on
Total Stockholder Return
|
|
% of shares to be awarded
|
|
1
st
to 5
th
|
|
|
100
|
%
|
6
th
|
|
|
82.5
|
%
|
7
th
|
|
|
65
|
%
|
8
th
|
|
|
47.5
|
%
|
9
th
|
|
|
30
|
%
|
10
th
and below
|
|
|
0
|
%
|
The peer group for the I12 Plan is made
up of the following 16 financial institutions:
|
|
|
Banco
Bilbao Vizcaya Argentaria, S.A.
|
|
Mitsubishi
UFJ Financial Group, Inc.
|
BNP
Paribas
|
|
Nordea
Bank AB
|
Credit
Suisse Group A.G.
|
|
Royal
Bank of Canada
|
HSBC
Holdings plc
|
|
Société
Générale S.A.
|
ING
Group N.V.
|
|
Standard
Chartered PLC
|
Intesa
Sanpaolo S.p.A.
|
|
UBS
AG
|
Itaú
Unibanco Banco Múltiplo, S.A.
|
|
UniCredito
Italiano
|
JP
Morgan Chase & Co.
|
|
Wells
Fargo & Co.
|
Under the
I12 Plan, participant employees will receive their corresponding shares of BSSA
stock no later than July 31, 2012. There has been no compensation
expense recognized by the Corporation for the I12 Plan during the year ended
December 31, 2009.
D.
Retirement-Related
Benefits
Our
qualified defined benefit and contribution plans are intended to help encourage
the accumulation of wealth over a long period of time. These benefits
are also part of our strategy to compete for and retain talent that might
otherwise be lured away by competing financial institutions who offer their
employees similar compensation packages.
Pension
Plan
We have a
qualified defined benefit retirement plan that provides eligible employees
(including executive officers) with defined retirement benefits (the “Retirement
Plan”). The Retirement Plan was frozen as of December 31, 2006.
The
compensation basis used for the Retirement Plan formula is basic annual earnings
and is subject to the limitations under the U.S. Internal Revenue Code (the
“Code”). The normal retirement age under the Retirement Plan is 65
years of age; early retirement age is 55 years of age and 15 years of
service. At early retirement, benefits are subject to actuarial
reduction. The Retirement Plan complies with the Employees Retirement
Income Security Act of 1974, as amended (“ERISA”), and pension costs are funded
according to ERISA’s minimum funding standards. The total
contribution to the Retirement Plan for 2007, 2008 and 2009 was $5,743,000,
$3,335,000 and $1,893,000, respectively.
Benefits
are paid on the basis of a straight life annuity plus supplemental death
benefits and are not reduced for social security or other retirement benefits
received by participants. None of the NEOs received any benefit
payments from the Retirement Plan during 2009.
Employees
Savings Plans
We have a
defined contribution savings plan pursuant to Section 1165 (e) of the Puerto
Rico Internal Revenue Code of 1994, as amended (the “Puerto Rico Code”), which
is similar to Section 401-K of the Code. The plan complies with ERISA
and is qualified under the Puerto Rico Code. Employees from the Bank,
Santander Insurance Agency, Inc., and Santander International Bank, Inc.,
benefit from this savings plan. The employees are eligible to
participate in the savings plan after completing six (6) months of
service. There is no minimum age requirement to
participate. Pursuant to certain recent amendments to the Puerto Rico
Code, the maximum amount that may be contributed by participating employees is:
(i) $9,000 for the calendar year beginning after January 1, 2009, (ii) $10,000
for the calendar year beginning after January 1, 2011, and (iii) $11,000 for the
calendar year beginning after January 1, 2013. Prior to the
amendment, Section 1165(e) permitted employee pretax contributions up to a
maximum of 10% of their annual compensation of $8,000, whichever was
less. Our contributions to the savings plan, which consisted of 50%
of the employee’s contributions for a particular year up to not less than 4% nor
more than 6% of the employee’s total compensation, as approved by our Board on
an annual basis, were frozen as of April 1, 2009. We did not make
contributions to the Savings Plan during 2009. Our contributions
become 100% vested after five years from the date the employee became a
participant under the savings plan.
Santander
Securities Corporation has a deferred arrangement profit sharing plan under
Section 1165(e) of the Puerto Rico Code, which became effective January 1,
1997. Employees from Santander Securities Corporation and Santander
Asset Management Corporation benefit from the Santander Securities Corporation’s
profit sharing plan. Under this plan, Santander Securities
Corporation makes contributions to match 50% of employees’ allowable
contributions as defined under the Puerto Rico Code. In addition, the
plan provides for Santander Securities Corporation to make contributions based
on its profits and such contribution is allocated between employees based on the
compensation of eligible employees, as defined therein. Santander
Securities Corporation contributed approximately $206,000 in matching funds to
the plan during 2009 and did not make a contribution pursuant to the profit
sharing provision. Santander Securities Corporation’s contributions
become 100% vested once the employee attains five years of service.
Santander
Financial Services, Inc. also has its own defined contribution savings plan
under Section 1165(e) of the Puerto Rico Code for its employees. The
plan complies with ERISA and is qualified under the Puerto Rico
Code. The employees of Santander Financial Services, Inc. are
eligible to participate in the savings plan after completing six (6) months of
service. There is no minimum age requirement to participate.
Pursuant to certain recent amendments to the Puerto Rico Code, the maximum
amount that may be contributed increases to: (i) $9,000 for the calendar year
beginning after January 1, 2009, (ii) $10,000 for the calendar year beginning
after January 1, 2011, and (iii) $11,000 for the calendar year beginning after
January 1, 2013. Prior to the amendment, Section 1165(e) permitted
employee pretax contributions up to a maximum of 10% of their annual
compensation of $8,000, whichever was less. Previously under this
plan, Santander Financial Services, Inc. made contributions to match 50% of
employees’ allowable contributions up to 6% of the employee’s total
compensation. Santander Financial Services, Inc.’s contributions
become 100% vested once the employee attains five years of
service. Santander Financial Services, Inc.’s contributions to the
savings plan for 2009 amounted to approximately $42,195. Employer
contributions were frozen as of April 1, 2009.
Mr. Juan
S. Moreno participates in a defined contribution plan funded by Banco Santander
Serfin Mexico, pursuant to which Mr. Moreno may contribute up to 6% of his
annual compensation. Under this plan, Banco Santander Mexico
also makes a 2% fixed contribution of his annual compensation including salary,
bonus and vacation license, and a
contribution
of 166.66% of the total contribution made by the employee to the plan, the
percentage being based on his years of service and contributions to the
plan. The number of years of service credited to Mr. Moreno under the
plan is 22.97 years. Banco Santander Mexico’s contributions to Mr.
Moreno’s savings plan during 2009 amounted to $49,011 (based in the amount of
640,039 MXN, using an exchange rate of 13.059 as of December 31,
2009).
Mr. José
Alvarez participates in a defined contribution plan for executive officers
funded by BSSA. Under this plan, BSSA makes a fixed annual
contribution of 22% of Mr. Alvarez’s annual salary. Mr. Alvarez is
also entitled to a one time extraordinary contribution in the amount established
by BSSA based on prior years of service. The number of years of
service credited to Mr. Alvarez under the plan is 16.45 years. BSSA’s
contributions to the plan of Mr. Alvarez for 2009 amounted to $37,238 as
ordinary contribution (based in the amount of 25,960 €). The dollar
amount was calculated using an exchange rate of 1.4345 as of December 31,
2009.
Mr.
Moreno and Mr. Alvarez, as expatriated NEOs also participate in an employees’
pension plan funded by BSSA. The plan is available to employees after
completing two years of service. Under this plan, the employees
contribute up to the established legal limits according to Spanish law, and BSSA
contributes a fixed amount of 560 € annually.
E.
Perquisites
We offer our NEOs certain perquisites
under our policies and procedures and depending on the terms and conditions of
the employment agreements with the NEOs, if any. These perquisites
are offered as part of the Compensation Program as an additional incentive to
fulfill our objectives. Following is a brief description of the
perquisites we offered to the NEOs.
Company
Owned Cars
Company owned cars are assigned to the
President and CEO up to an amount determined by our Board from time to time and
to the Senior Executive Vice Presidents and the Executive Vice Presidents up to
$60,000. Company owned cars are assigned and may be used in
accordance with the company owned car policies and procedures approved by our
Board. Company owned cars are changed every four to five years, depending on the
manufacturer’s warranty. We reimburse all expenses related to the
company owned cars, including gasoline, insurance and maintenance.
Car
Allowance
We offer car allowance benefits to
those executive officers who are not eligible to use company owned cars but
whose responsibilities require performing a substantial part of his/her job
outside the premises of the Corporation. The amount of the car
allowance is determined by our Human Resources Department based on factors such
as the position and responsibilities of each executive officer, and based on car
allowance policies and procedures. The car allowance amount is
payable in cash in equal monthly installments as part of the compensation
package of the executive officer.
Club
Memberships
We offer
social club memberships to our NEOs to encourage business relationships with
existing or prospective customers. To be eligible for the club
memberships, we will evaluate if the NEOs’ participation will increase the
business value and if it is closely related with the performance of the NEOs’
professional responsibilities. Club memberships are assigned and may
be used in accordance with the club membership’s policies and
procedures.
Expatriated
NEOs’ Perquisites
Under the
Expatriated NEOs Compensation Program, the Expatriated NEOs are entitled to
certain perquisites such as housing, school payments, utilities, vacations, tax
gross-ups and other related expenses. These perquisites are offered
to compensate the Expatriated NEOs for the difference in the cost of living
between his/her country of origin and Puerto Rico. The amount of the
perquisites assigned to each Expatriated NEO will be based on the position held,
responsibilities, cost of living and status before the transfer to Puerto Rico,
and will be specified in the corresponding employment agreement with such
Expatriated NEO.
The Compensation
Tables
:
The
following Summary Compensation Table provides information regarding reportable
compensation for each of our NEOs.
SUMMARY COMPENSATION TABLE
|
|
Name and
principal position
of NEOs
|
|
Year
|
|
Base salary
$
|
|
|
Bonus
$
(1)
|
|
|
Stock
Awards
|
|
|
Option
Awards
$
(3)
|
|
|
Non-equity
incentive plan
compensation
$
(4)
|
|
|
Change in pension plan
value
& non-qualified
deferred
compensation
earnings
$
(5)
|
|
|
All other
compensation
$
|
|
|
Total
Compensation
$
|
|
Juan
S. Moreno
President
and
|
|
2009
|
|
|
775,000
|
|
|
|
600
|
|
|
|
185,919
|
(6)
|
|
|
-
|
|
|
|
699,400
|
|
|
|
-
|
|
|
|
313,070
|
(7)
|
|
|
1,973,989
|
|
CEO
|
|
2008
|
|
|
249,641
|
(8)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
600,000
|
|
|
|
-
|
|
|
|
165,650
|
(9)
|
|
|
1,015,291
|
|
Roberto
Jara
Executive
Vice President and
|
|
2009
|
|
|
457,619
|
(10)
|
|
|
600
|
|
|
|
17,430
|
(11)
|
|
|
-
|
|
|
|
199,400
|
|
|
|
-
|
|
|
|
305,755
|
(12)
|
|
|
980,804
|
|
Chief
Accounting Officer
|
|
2008
|
|
|
35,168
|
(13)
|
|
|
200,000
|
(14)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
(15)
|
|
|
-
|
|
|
|
111,676
|
(16)
|
|
|
346,844
|
|
José
Alvarez
Executive
Vice President and
|
|
2009
|
|
|
214,168
|
(17)
|
|
|
600
|
|
|
|
58,100
|
(18)
|
|
|
-
|
|
|
|
119,400
|
|
|
|
-
|
|
|
|
212,243
|
(19)
|
|
|
604,511
|
|
Director
of Operations and
|
|
2008
|
|
|
233,087
|
(20)
|
|
|
600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
-
|
|
|
|
854,796
|
(21)
|
|
|
1,163,483
|
|
Information
Technology
|
|
2007
|
|
|
199,492
|
(22)
|
|
|
3,810
|
|
|
|
344,632
|
|
|
|
-
|
|
|
|
92,000
|
|
|
|
-
|
|
|
|
265,856
|
(23)
|
|
|
905,790
|
|
James
Rodríguez
President
of Santander
|
|
2009
|
|
|
250,000
|
|
|
|
2,000
|
|
|
|
58,100
|
(24)
|
|
|
-
|
|
|
|
148,000
|
|
|
|
298
|
|
|
|
23,957
|
(25)
|
|
|
482,355
|
|
Securities
|
|
2008
|
|
|
250,000
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
400,000
|
|
|
|
1,177
|
|
|
|
20,101
|
(26)
|
|
|
673,278
|
|
Corporation
|
|
2007
|
|
|
250,000
|
(27)
|
|
|
2,000
|
|
|
|
344,632
|
|
|
|
-
|
|
|
|
600,000
|
|
|
|
1,068
|
|
|
|
18,774
|
(28)
|
|
|
1,216,474
|
|
Justo
Muñoz
Executive
Vice President
Chief
Credit Officer
|
|
2009
|
|
|
331,375
|
(29)
|
|
|
2,000
|
|
|
|
58,100
|
(30)
|
|
|
-
|
|
|
|
248,000
|
|
|
|
-
|
|
|
|
5,880
|
(31)
|
|
|
645,355
|
|
(1)
|
Includes
Christmas bonuses earned for the corresponding fiscal
year.
|
(2)
|
For
fiscal year 2009, represents the aggregate grant date fair value computed
in accordance with FASB ASC Topic 718 in connection with the I11 Plan
granted on 2009. The computation is based upon the probable
outcome of the performance condition (rather than the maximum potential
value of the award), using the I11 formula assuming that BSSA will keep
the same rankings it has as of December 31, 2009. For fiscal
year 2008, no stock award was granted. For fiscal year 2007,
represents the aggregate grant date fair value computed in accordance with
FASB ASC Topic 718 in connection with the I09 and I10 Plans granted on
2007 (while in the 2007 and 2008 Summary Compensation Table represented
the dollar amount recognized for financial statement purposes pursuant to
FAS123R in connection with the I09 and I10 Plans). The stock
award balances shown in this column are computed using an exchange rate of
1.43445 as of December 31, 2009.
|
(3)
|
No
option awards were granted in fiscal years 2007, 2008 and
2009.
|
(4)
|
The
amounts included as non-equity incentive compensation correspond to
performance bonuses earned for each fiscal
year.
|
(5)
|
None
of the NEOs participate in the pension plan. Mr. Rodríguez
participates in a deferred compensation plan that paid interest compounded
annually at a 7%, annual rate (see below under the Deferred Compensation
Table). Said 7% rate exceeds 120% of the applicable federal
long-term rate, with compounding at the rate that corresponds most closely
to the rate under the Santander Securities Corporation’s plan at the time
the interest rate or formula is set (4.811% at December 29,
2006). For previous years, the above-market or preferential
earnings on said deferred compensation plan were $1,177 for 2008, and
$1,068 for 2007, which were not included in the 2007 and 2008 Summary
Compensation Tables.
|
(6)
|
The
maximum potential value of the performance-based award, assuming the
highest level of performance achievement under the I11 Plan formula, is
$235,938.
|
(7)
|
Includes:
$102,000 (rent); $24,571 (children school payments); $3,749 (utilities);
$74,627 (vacations); $44,131 (tax gross-up); $6,322 (estimated perquisite
value for use of company car at 50% of company car costs and expenses for
2009); $688 (estimated value for personal use of Club Memberships at 50%
of membership’s payments); $319 (other expenses); and the following
amounts paid by BSSA in Euros, converted at December 31, 2009 at the
exchange rate of 1.43445: $3,318 (2,313.25 € health insurance); $803
(560.04 € BSSA employees pension plan); $71 (49.68 € life insurance); and
$3,460 (2,412.27 € social security); and the amount of $49,011 contributed
by Banco Santander Serfin in Mexico under a defined contribution plan
(640,039 MXN converted at December 31, 2009 at the exchange rate of
13.059).
|
(8)
|
Mr.
Moreno commenced as President and CEO on October 2008. The
amount of $143,077 was paid by the Bank and the amount of $106,564 was
paid by BSSA (76,449.99 € converted at December 31, 2008 at the exchange
rate of 1.3939). The amount paid by BSSA corresponds to the
months of September to December 2008, including the period prior to his
appointment as President and CEO of the Corporation and the Bank, during
which Mr. Moreno acted as Director of the
Corporation.
|
(9)
|
Includes:
$8,008 (car allowance); $25,500 (rent); $96,394 (relocation costs); and
$2,320 (estimated perquisite value for use of company car at 50% of
company car costs and expenses for 2008); the following amounts paid by
BSSA in Euros, converted at December 31, 2008 at the exchange rate of
1.3939: $663 (475.41 € health insurance); $781 (560.04 € BSSA employees
pension plan); $48 (34.30 € life insurance); $1,403 (1,006.83 € car);
$1,012 (726.37 € expenses and utilities); $10,913 (7,828.95 € housing
assistance); and $626 (448.96 € social security); and the amount of
$17,982 contributed by Banco Santander Serfin in Mexico under a defined
contribution plan (245,873.40 MXN converted at December 31, 2008 at the
exchange rate of 13.6733).
|
|
The
amounts paid by BSSA and Banco Santander Serfin correspond to the months
of September to December 2008, including the period prior to his
appointment as President and CEO of the Corporation and the Bank, during
which Mr. Moreno acted as Director of the Corporation.
|
(10)
|
Includes
base salary of $395,914 plus a differential of $61,704 reimbursed to Banco
Santander Chile for salary payments made to Mr. Jara while Mr. Jara was
serving in Puerto Rico.
|
(11)
|
The
maximum potential value of the performance-based award, assuming the
highest level of performance achievement under the I11 Plan formula, is
$22,119.
|
(12)
|
Includes:
$106,545 (rent); $13,785 (utilities); $70,340 (vacations); $50,501 (moving
expenses); $60,883 (installation costs); $2,924 (estimated perquisite
value for use of company car at 50% of company car costs and expenses for
2009); $777 (other expenses).
|
(13)
|
Mr.
Jara’s assignment in Puerto Rico was effective December 1,
2008. The base salary corresponds to the month of December
2008.
|
(14)
|
Relocation
bonus paid by the Bank.
|
(15)
|
Banco
Santander Chile paid Mr. Jara a performance bonus of $120,000 for services
rendered to Banco Santander Chile.
|
(16)
|
Includes:
$15,000 (rent); $29,432 (travel expenses); $60,000 (installation
expenses); $1,124 (vacations); $477 (health insurance); $502 (savings
plan); and $1,144 (other benefits); and the following amount paid by BSSA:
$3,997 (health insurance in the amount of 2,867.58 € and converted at the
exchange rate of 1.3939 as of December 31,
2008).
|
(17)
|
Mr.
Alvarez’s base salary was increased to $214,240 effective on August 29,
2009.
|
(18)
|
The
maximum potential value of the performance-based award, assuming the
highest level of performance achievement under the I11 Plan formula, is
$73,731.
|
(19)
|
Includes:
Car Allowance - $18,000; Housing - $72,000; School payments - $20,329;
Utilities - $4,964; Currency changes - $1,565; Vacations - $30,629;
Expenses: $743; $313 (estimated value for personal use of Club Memberships
at 50% of memberships’ payments); and the following amounts paid by BSSA
in Euros, converted at December 31, 2009 at the exchange rate of 1.43445:
$18,726 (13,054.52 € health insurance); $3,473 (2,421.48 € life
insurance); $803 (560.04 € employees pension plan); $3,460 (2,412.27 €
social security); and $37,238 (25,960 € defined contribution plan for
executive officers).
|
(20)
|
Mr.
Alvarez’s base salary was increased to $208,000, effective on January 1,
2008. The amount of $208,000 was paid by the Corporation and
the amount of $25,087 was paid by BSSA (the amount paid was 17,997.95 €,
converted at December 31, 2008 at the exchange rate of
1.3939).
|
(21)
|
Includes:
$580 (disability insurance premiums); $159,000 (tax gross-ups); and the
following perquisites: Housing - $72,000; School payments - $2,893;
Utilities - $8,298; Currency changes - $28,141; Car Allowance - $18,000 ;
Vacations - $24,222; Expenses: $1,367; $2,541 (estimated value for
personal use of Club Memberships at 50% of memberships’ payments); and the
following amounts paid by BSSA in Euros, converted at December 31, 2008 at
the exchange rate of 1.3939: $21,446 (15,385.31 € health insurance);
$3,138 (2,251.32 € life insurance); $781 (560.04 € employees pension
plan); and $512,389 (367,593.60 € defined contribution plan for executive
officers).
|
(22)
|
Mr.
Alvarez’s base salary was increased to $200,000, effective on February 15,
2007.
|
(23)
|
Includes:
$20,556 (health insurance premiums); $580 (disability insurance premiums);
$3,091 (life insurance); $100,654 (tax gross-ups); and the following
perquisites: Housing - $72,000; School payments - $19,154; Utilities -
$6,115; Currency changes - $6,446; Car Allowance - $18,000 and Vacations -
$19,260.
|
(24)
|
The
maximum potential value of the performance-based award, assuming the
highest level of performance achievement under the I11 Plan formula, is
$73,731.
|
(25)
|
Includes:
$4,500 (Santander Securities Corporation’s contributions to the employees’
savings plan); $9,000 (2009 Santander Securities Corporation’s profit
sharing under Santander Securities Corporation’s deferred arrangement
profit sharing plan); $6,665 (health insurance premiums); $625 (disability
insurance premiums); $1,728 (life insurance); and $1,439 (other
expenses).
|
(26)
|
Includes:
$4,000 (Santander Securities Corporation’s contributions to the employees’
savings plan); $9,000 (2007 Santander Securities Corporation’s profit
sharing under Santander Securities Corporation’s deferred arrangement
profit sharing plan); $5,654 (health insurance premiums); $580 (disability
insurance premiums); $867 (life
insurance).
|
(27)
|
Mr.
Rodríguez’s base salary was increased effective on January 1,
2007.
|
(28)
|
Includes:
$4,000 (Santander Securities Corporation’s contributions to the employees’
savings plan); $9,000 (2007 Santander Securities Corporation’s profit
sharing under Santander Securities Corporation’s deferred arrangement
profit sharing plan); $4,327 (health insurance premiums); $580 (disability
insurance premiums); $867 (life
insurance).
|
(29)
|
Mr.
Muñoz’s base salary was increased from $325,000 to $334,750, effective on
May 4, 2009.
|
(30)
|
The
maximum potential value of the performance-based award, assuming the
highest level of performance achievement under the I11 Plan formula, is
$73,731.
|
(31)
|
Includes:
$837 (disability insurance premiums); $844 (life insurance) $2,168 (other
expenses); $1,718 (estimated perquisite value for use of company car at
50% of company car costs and expenses for 2009); and $313 (estimated value
for personal use of Club Memberships at 50% of memberships’
payments).
|
GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
|
|
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards
|
|
|
All Other
Stock
Awards:
Number of
Shares of
|
|
|
All Other
Option
Awards:
Number of
Securities
|
|
|
Exercise or
Base Price of
|
|
|
Grant Date
Fair Value of
Stock and
|
|
NEO
|
|
Plan
Name
|
|
|
Grant
Date
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(1)
(#)
|
|
|
Target
(2)
(#)
|
|
|
Maximum
(3)
(#)
|
|
|
Stock or
Units
(#)
|
|
|
Underlying
Options
(#)
|
|
|
Options
Awards
($/Sh)
|
|
|
Option
Awards
(4)
($)
|
|
Juan
S. Moreno
President
and CEO
|
|
I11
|
|
|
2-26-09
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
25,216
|
|
|
|
32,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
185,919
|
|
Roberto
Jara
Executive
Vice President and Chief Accounting Officer
|
|
I11
|
|
|
2-26-09
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
2,364
|
|
|
|
3,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,430
|
|
José Alvarez
(7)
Executive
Vice President and Director of Operations and Information
Technology
|
|
I11
|
|
|
2-26-09
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
7,880
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,100
|
|
James
Rodríguez
President of
Santander Securities
Corporation
|
|
I11
|
|
|
2-26-09
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
7,880
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,100
|
|
Justo
Muñoz
Executive
Vice President
Chief
Credit Officer
|
|
I11
|
|
|
2-26-09
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
7,880
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,100
|
|
(1)
|
Under
the I11 Plan, the actual number of shares of BSSA shares to be received
will depend on the sum of BSSA’s rankings related to the total return on
BSSA shares when compared to a group of 21 international financial
institutions and the increase in earnings per share of BSSA when compared
to a group of 21 international financial institutions. The NEOs
will not receive any shares of BSSA if BSSA is in or below the 12
th
position in both rankings when compared to said group of financial
institutions. Please see the “Performance Shares Plan”
description in the CD&A.
|
(2)
|
For
the I11 Plan, the amount in the “Target” column is the number of shares to
be received by the NEOs based on the probable outcome of the performance
conditions (rather than the maximum potential value of the award), using
the I11 formula assuming that BSSA will keep the same rankings it has as
of December 31, 2009. Please see the “Performance Shares Plan”
description in the CD&A.
|
(3)
|
For
the I11 Plan, the amount shown in the “Maximum” column represents the
maximum number of shares to be received by the NEOs using the formula
described under “Performance Shares Plan” description in the CD&A and
assuming BSSA meets the highest
rankings.
|
(4)
|
Represents
the grant date fair value computed in accordance with FAS123R, based upon
the probable outcome of the performance condition (rather than the maximum
potential value of the awards). For the I11Plan, the value of
the BSSA shares at grant date was €5.14. The exchange rate used
for December 2009 was 1.43445.
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Plan
Name
(1)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)
|
|
|
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
(2)
(#)
|
|
|
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
(3)
($)
|
|
Juan S. Moren
o
(4)
President
and CEO
|
|
I10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,500
|
|
|
|
517,860
|
|
|
|
I11
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,216
|
|
|
|
414,551
|
|
Roberto Jara
(5
)
|
|
I10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,800
|
|
|
|
29,592
|
|
Executive
Vice President and Chief Accounting Officer
|
|
I11
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,364
|
|
|
|
38,864
|
|
José
Alvarez
|
|
I10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
164,400
|
|
Executive
Vice President and Director of Operations and Information
Technology
|
|
I11
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,880
|
|
|
|
129,547
|
|
James
Rodríguez
|
|
I10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
164,400
|
|
President
of Santander Securities Corporation
|
|
I11
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,880
|
|
|
|
129,547
|
|
Justo
Muñoz
|
|
I10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,000
|
|
|
|
65,760
|
|
Executive
Vice President
Chief
Credit Officer
|
|
I11
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,880
|
|
|
|
129,547
|
|
(1)
|
The
shares under the I10 and I11 Plans will be vested on June 30, 2010 and
June 30, 2011, respectively, provided that certain conditions are
met.
|
(2)
|
The
estimated number of BSSA shares to be obtained by each NEO was computed
based on the I10 and I11 Plans formula using the BSSA’s rankings as of
December 31, 2009, based on the probable outcome of the performance
conditions (rather than the maximum potential value of the
award). The I10 and I11 Plans’ formula is described in the
“Performance Shares Plan” description in the
CD&A.
|
(3)
|
The
estimated market value of the shares under the I10 and I11 Plans was
computed based on the I10 and I11 Plans’ formula and using BSSA’s ranking
as of December 31, 2009, multiplied by the market value of the BSSA shares
as of December 31, 2009, which was
$16.44.
|
(4)
|
Mr.
Moreno received his rights under the I10 directly from
BSSA.
|
(5)
|
Mr.
Jara received his rights under the I10 directly from Banco Santander
Chile.
|
OPTION EXERCISES AND STOCK VESTED
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized on
Exercise
($)
|
|
|
Number of Shares
Acquired on Vesting
(#)
(1)
|
|
|
Value Realized on
Vesting
($)
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juan
S. Moreno
President
and CEO
|
|
|
-
|
|
|
|
-
|
|
|
|
19,066
|
(3)
|
|
$
|
229,014
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roberto
Jara
Executive
Vice President and Chief Accounting Officer
|
|
|
-
|
|
|
|
-
|
|
|
|
1,090
|
(5)
|
|
|
13,093
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
José
Alvarez
Executive
Vice President and Director of Operations and Information
Technology
|
|
|
-
|
|
|
|
-
|
|
|
|
5,902
|
(7)
|
|
|
68,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
Rodríguez
President
of Santander Securities Corporation
|
|
|
-
|
|
|
|
-
|
|
|
|
5,902
|
(8)
|
|
|
68,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Justo
Muñoz
Executive
Vice President
Chief
Credit Officer
|
|
|
-
|
|
|
|
-
|
|
|
|
2,724
|
(9)
|
|
|
31,626
|
|
|
(1)
|
The
number of shares awarded is determined using the formula described under
the I09 Plan.
|
|
(2)
|
The
value disclosed is the aggregate dollar value realized upon vesting,
following the description of the I09 Plan. The vesting date is
July 6, 2009, except for Mr. Moreno and Mr. Jara, and the market value
upon vesting is 8.49€. The exchange rate used for conversion is
1.36749 (exchange rate at July 6,
2009).
|
|
(3)
|
Mr.
Moreno’s shares were granted to him by BSSA. The actual number
of shares received by Mr. Moreno is 16,000, net of Spain’s applicable
tax. The tax applicable to Mr. Moreno is 24% over the taxable
base. In order to determine the taxable base, the compensation
expense is adjusted by the period of services rendered in Spain that
approximates 72.37%, net of a tax exemption of 12,000 €, in conformity
with Spain’s tax authorities
|
|
(4)
|
Calculated
using the market value of 8.49€ upon Mr. Moreno’s vesting date of July 1,
2009. The value realized on vesting was 161,870.34
€. The exchange rate used for conversion from Euros is
1.4148.
|
|
(5)
|
Mr.
Jara’s shares were granted to him by Banco Santander Chile. The
actual number of shares received by Mr. Jara is 708, net of Chile’s
applicable tax of 35%. The market value upon vesting was
8.49€. Mr. Jara’s vesting date is July 1,
2009.
|
|
(6)
|
The
value realized on vesting was 9,254.10€. The exchange
rate used for conversion from Euros is 1.
4148.
|
|
(7)
|
The
actual number of shares received by Mr. Álvarez is 5,558.82, net of
Spain’s applicable tax of 18% of the difference between the coverage cost
of 5.7474€ and the market value upon vesting, which is
8.49€.
|
|
(8)
|
The
actual number of shares received by Mr. Rodríguez is 5,558.82, net of
Spain’s applicable tax of 18% of the difference between the coverage cost
of 5.7474€ and the market value upon vesting, which is
8.49€.
|
|
(9)
|
The
actual number of shares received by Mr. Muñoz is 2,565.61, net of Spain’s
applicable tax of 18% of the difference between the coverage cost of
5.7474€ and the market value upon vesting, which is
8.49€.
|
Deferred Compensation Table
(1)
|
|
NEO
|
|
Executive
contributions in
fiscal year 2009
|
|
|
Registrant
contributions in
fiscal year 2009
|
|
|
Aggregate earnings
in fiscal year 2009
|
|
|
Aggregate
withdrawals
/distributions in
fiscal year 2009
|
|
|
Aggregate balance
as of December 31,
2009
|
|
James
Rodríguez
|
|
$
|
0
|
|
|
$
|
2,093
|
(2)
|
|
$
|
2,093
|
|
|
$
|
121,695
|
(3)
|
|
$
|
0
|
|
(1)
|
In
addition to the plans described above under the caption of “The Elements
of Compensation”, for the year 2007 Mr. Rodríguez participated in
Santander Securities Corporation’s optional deferred compensation plan,
under which he had the option to voluntarily defer receipt of not less
than $10,000 and up to 100% of his compensation in excess of $100,000, for
a maximum deferral period of two years and one business
day. The plan credits interest on a tax-deferred basis,
compounded annually at a 7% annual rate. After the two-year
anniversary of each year’s contribution, the NEO receives a lump sum
payment. For fiscal year 2008, no contributions were made by
Mr. Rodríguez. The distribution of the aggregate balance of the
plan was paid in the first quarter of 2009. As of January 2009,
the plan is no longer in effect.
|
(2)
|
Represents
interest income earned during 2009 of
$2,093.
|
(3)
|
Composed
of principal plus interests earned until distribution date. The
aggregate balance amount has been adjusted to correct an overstatement of
$570 reported in previous years due to the calculation of interests using
a twelve months period rather than the eleven months applicable
period.
|
Employee
Agreements, Termination of Employment and Change in Control
Arrangements
Mr. Juan
S. Moreno, Mr. James Rodríguez and Mr. Justo Muñoz, have each entered into
employment agreements. Mr. Jose Alvarez and Mr. Roberto Jara are
under the Expatriated Program as set forth in their corresponding letters of
conditions.
Mr.
Moreno’s agreement with the Corporation for his employment as President and
Chief Executive Officer and Chief Executive Officer of the Bank, was executed on
October 27, 2008, with effective date as of October 22, 2008 and expiration date
of October 21, 2011. Under the terms of the agreement,
Mr. Moreno is entitled to receive an annual base salary of $775,000 for the
first year of employment. On February 16, 2010, the Compensation
Committee approved an increase in the base annual salary of Mr. Moreno from
$775,000 to $850,000, effective on January 1, 2010. Under the
agreement, Mr. Moreno is also entitled to incentive compensation in accordance
with our compensation program for expatriated officers, which is administered by
the Compensation Committee. Under our compensation program, Mr.
Moreno is also eligible to participate in the Corporation’s Performance Bonus
Incentive Plan, and may receive certain perquisites such as housing, vehicle,
moving expenses, life and health care insurance, school tuition, utilities,
vacations, tax gross-ups and other related expenses as determined by the
Compensation Committee. We may terminate Mr. Moreno’s employment for
“cause” or other than for “cause.” If we terminate Mr. Moreno’s
employment other than for “cause”, Mr. Moreno will be entitled to receive a
severance payment in the amount required under applicable Puerto Rico
law. In addition, Mr. Moreno may be entitled to receive additional
severance and pension benefits from BSSA, or its affiliates (collectively,
“Santander Group”), for prior years of service with Santander Group, following
the termination of his employment. Any such additional benefits would
be payable by Santander Group and not by us. Mr. Moreno’s agreement
also contains certain confidentiality and arbitration provisions.
On April 25, 2005, Santander Securities
Corporation entered into an employment agreement with Mr.
Rodríguez. Under the agreement, Mr. Rodríguez is entitled to receive
an annual base salary starting at $200,000 yearly, and an incentive compensation
to be determined in accordance with the Performance Bonus Plan, which is
administered by the Compensation Committee, based on the performance of Mr.
Rodríguez and the net revenues of Santander Securities
Corporation. Mr. Rodríguez is also a participant in the benefit plans
established by the Bank and benefits of the Christmas Bonus. In
addition, Mr. Rodríguez received a loan in the amount of $300,000 for a term of
five (5) years, at an annual interest rate equal to the one-year LIBOR plus 200
basis points, to be paid down during the continuous employment of Mr. Rodríguez
in an annual amount of $60,000.
Mr. Muñoz entered into an employment
agreement with the Bank effective on May 1, 2007. Under the
agreement, Mr. Muñoz is entitled, in addition to base salary starting at
$250,000, to participate in the Corporation’s Performance Bonus Incentive Plan,
corporate car, clubs memberships, medical plan, life insurance, retirement plan,
401k plan and others applicable to all regular Bank employees, subject to the
policy of each plan. Mr. Muñoz’s base salary was increased effective
on May 4, 2009. Upon termination for just cause he is entitled to
receive the salary accrued up to the date of his dismissal and the balance of
his vacation pay. If without cause, the Bank shall pay exclusively
the indemnification established by applicable Puerto Rico law.
On May
19, 2004, Mr. Alvarez entered into a letter of condition under which he was
assigned to the Corporation for an initial period of three years, under the
Expatriated Program of BSSA. The employment agreement was effective
on
August 1,
2004. The letter entitles Mr. Alvarez to receive a base annual salary
and incentive compensation in accordance with our Performance Bonus Plan,
administered by the Compensation Committee. Mr. Alvarez participates
in the disability benefit plan established by the Bank and health and life
insurances benefits under BSSA’s health and life insurance plans. Mr. Alvarez is
also entitled to use a corporate car, a corporate credit card and certain club
memberships, all in accordance with human resources policies and procedures, and
certain additional perquisites due to his relocation to Puerto Rico, such as
housing, school, vacations, and related moving expenses. Mr.
Alvarez’s current salary is $214,240 per letter dated August 20, 2009 increasing
his salary.
On
September 16, 2008, Mr. Jara entered into a letter of condition under which he
was assigned to Puerto Rico under the Expatriated Program of BSSA for an initial
term of three-years, subject to early termination upon three-months’ prior
notice to Mr. Jara. On November 25, 2008, he was appointed as
Executive Vice President and Chief Accounting Officer, subject to the approval
of his non-immigrant visa petition. Mr. Jara’s visa was approved with
a valid date as of December 1, 2008. As Executive Vice President and
Chief Accounting Officer, Mr. Jara is entitled to receive an annual base
salary of $422,022. Mr. Jara has the benefit of an exchange rate
guarantee with respect to 60% of his base salary to protect Mr. Jara from
fluctuations in the value of the U.S. Dollar relative to the Chilean
Peso. Mr. Jara is also entitled to a one-time relocation bonus
of $200,000, and to annual retention bonuses of $120,000 payable in
January 2010 and 2011. Mr. Jara is also eligible to receive
incentive compensation in accordance with our compensation program for
expatriated officers, which is administered by the Compensation Committee. Under
the Corporation’s compensation program, Mr. Jara will receive certain
perquisites such as housing, utilities, vacations, tax gross-ups and other
related expenses, as determined by the Compensation Committee.
Report
of the Compensation and Nomination Committee
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with management for 2009.
Based on the review and discussions, the Compensation Committee recommended to
the Board of Directors, and the Board of Directors has approved, that the
Compensation Discussion and Analysis be included in this proxy statement for its
2010 Annual Meeting of Stockholders.
This
report is submitted by the Compensation Committee of the Corporation’s Board of
Directors.
Submitted
by
Mr.
Víctor Arbulu
Mr.
Gonzalo de Las Heras
Mr. Jesús
M. Zabalza
The
foregoing “Report of the Compensation and Nomination Committee” shall not be
deemed to be “filed” with the SEC or subject to the liabilities of Section 18 of
the Exchange Act, and notwithstanding anything to the contrary set forth in any
of the Corporation’s previous filings under the Securities Act or the Exchange
Act, that incorporate future filings, including this Form, in whole or in part,
the foregoing “Report of the Compensation and Nomination Committee” shall not be
incorporated by reference into any such filings.
TRANSACTIONS
WITH RELATED PARTIES
Transactions
between us, our subsidiaries and/or affiliates, directors and management or
persons related to management are regulated by the Code of Business Conduct and
Professional Ethics (“Code of Business Conduct”). The Code of
Business Conduct requires impartiality and objectivity in adopting decisions
that involve personnel of the Corporation and its subsidiaries and/or
affiliates. The Management’s Compliance Committee and the Chief
Compliance Officer are in charge of monitoring our compliance with the Code of
Business Conduct. A complete copy of the Code is available on the
Company’s website at
www.santandernet.com
.
Our Board
has adopted the Insiders Transaction Policy (the “Regulation O Policy”) in
writing which applies to extensions of credit to insiders, defined to include
directors, executive officers, principal shareholders (shares owned or
controlled by a member of an individual’s immediate family are considered to be
held by the individual), and related interests of any of
them. Related interest refers to a company that is controlled by that
person, or a political campaign committee that is controlled by that person or
the funds or services which will benefit that person. All extensions
of credit shall be on substantially the same terms and conditions (including
interest rate and collateral requirements) as those prevailing at the time for
comparable transactions available to any other client of the Bank, shall be
within the lending
limits
established in Regulation O adopted by the Federal Reserve Board, codified in 12
CFR Part 215, and shall be approved by our Board. All transactions
that met the parameters of the Regulation O Policy were reviewed and approved by
our Board as required by the Regulation O Policy.
In
addition, the Bank has adopted the Transactions with Affiliates Policy (the
“Regulation W Policy”) in writing. The Regulation W Policy adopted by
the Bank applies to transactions between the Bank and an affiliate covered under
Sections 23A and 23B of the Federal Reserve Act (the “Act”) and Regulation W
adopted by the Federal Reserve Board, codified in 12 CFR Part 223 (“Regulation
W”), and applies to transactions in which the Bank accepts securities issued by
an affiliate as collateral; transactions in which the Bank purchases a security
issued by an affiliate; transactions by the Bank with any person in which the
proceeds or benefits are transferred to an affiliate; transactions by the Bank
in which an affiliate is acting as an agent or broker; transactions by the Bank
in which an affiliate receives a fee for its services to the Bank or a third
party; transactions by the Bank in which an affiliate has an interest in the
customer or counterparty; transactions in which the Bank purchases, as principal
or fiduciary, a security for which an affiliate is a principal underwriter
during the existence of the underwriting or selling syndicate; loans and other
extensions of credit by the Bank to its affiliates; and other transactions by
the Bank in which an affiliate is involved. The standard to be
applied under the Regulation W Policy is that all affiliate transactions must be
conducted at arm's length and in accordance with applicable laws and
regulations. The Bank may not engage in any affiliate transaction
unless the affiliate transaction is on terms and conditions that are consistent
with safe and sound banking practices. The Legal and the Compliance
Departments assure compliance with the Regulation W Policy, and the Audit
Committee is responsible for the review and approval of the
transactions. The transactions between affiliates reported hereunder
that require Audit Committee approval were reviewed and approved by the Audit
Committee as required by the Regulation W Policy.
The Bank
has entered into loan transactions with our directors and executive officers and
the immediate family members of the directors and executive officers, and
proposes to continue such transactions in the ordinary course of its business,
on substantially the same terms, including interest rates and collateral, as
those prevailing for comparable loan transactions with other persons not related
to us. The extensions of credit have not involved and do not currently involve
more than normal risks of collectibility or present other unfavorable
features. In the ordinary course of business, our affiliates maintain
deposit accounts with the Bank, and also we engage in typical transactions
related to our business as a financial institution, such as loans, swaps,
options and certificates of deposit, with our affiliates. Said
transactions are on market terms.
During
2009, we made payments in the ordinary course of business to the law firm of
O’Neill & Borges, of which Ms. Rosa González, sister of Mr. José González
who is a director of the Corporation, is a partner. The fees paid to
O’Neill & Borges for fiscal year 2009 amounted to approximately $392,036 for
legal services rendered to the Corporation, including its
subsidiaries. The engagement of such law firm was approved by our
Board.
In
addition, the Bank has entered from time to time into loan sale transactions
with its affiliate CREFISA, Inc., a subsidiary of BSSA. During 2009, the
Bank sold loans to CREFISA, Inc. for an aggregate sales price of $142
million. These loan sale transactions were made at net book
value. The loan sale transactions were consistent with applicable
banking laws and regulations, and were approved by the Audit
Committee.
The
Corporation and its subsidiaries have entered, in the ordinary course of
business, into information technology development, licensing and services
agreements and other related services with the following affiliates and
subsidiaries of BSSA: ISBAN CHILE, S.A. (“ISBAN Chile”), ISBAN MEXICO, S.A. de
C.V. (“ISBAN Mexico”) and ALTEC Puerto Rico, a division of CREFISA, Inc. (“ALTEC
Puerto Rico”); PRODUBAN SERVICIOS INFORMÁTICOS GENERALES, S.L. (“PRODUBAN
Mexico”); PRODUBAN SERVICIOS INFORMÁTICOS GENERALES, S.L. (“PRODUBAN Spain”);
and INGENIERIA DE SOFTWARE BANCARIO, S.L. (“ISBAN Spain”). During
2009, the Corporation and its subsidiaries made the following payments for
services rendered by the abovementioned companies during 2009: $1,014,812 to
ISBAN Chile, $1,733,909 to ISBAN Mexico, $8,993,500 to ALTEC Puerto Rico; and
$5,209,434 to PRODUBAN Mexico; $689,661 to PRODUBAN Spain; $136,098 to ISBAN
Spain. These transactions are subject to usual trade
terms.
The Bank
has entered into a lease with ALTEC Puerto Rico, and with Santander Overseas
Bank, Inc. (“Santander Overseas”), under which each of these affiliates paid a
rental of $411,090 and $144,911, respectively to the Bank during
2009. This transaction is considered to be on market
terms.
During
2009, the Bank received payments in excess of $120,000 pursuant to Master
Management and Services Agreements with Santander Overseas and CREFISA, Inc.,
which are affiliates of the Corporation, indirectly owned by
BSSA, to
provide general services which generally include but are not limited to: (i)
services relating to personnel and human resources management, including, but
not limited to salaries processing, completing tax returns and tax reporting for
employees; (ii) consulting assistance and support relating to compliance and
legal functions, (iii) services relating to operations, including, but not
limited to fund transfers and general supervisory and managerial services, which
may include collections, management of loans and letters of credit; (iv)
reconciliation services for bank accounts, accounts payable, accounts
receivable; (v) services relating to the structuring and funding of financial
transactions; (vi) services relating to risk analysis, including, but not
limited to analysis and approval of customer credit and preparation and
presentation of cases; (vii) services relating to market risk; (viii) services
related to accounting and information technology; (ix) auditing services; (x)
record keeping; (xi) cash management services; and (xii) general organizational
services. The amounts paid by Santander Overseas and CREFISA to the
Bank for fiscal year 2009 were $3,416,781 and $484,171
respectively. The foregoing transactions are on market
terms.
On
September 24, 2009, the Corporation and Santander Financial Services, Inc.
entered into a collateralized loan agreement with the Bank. Under the
loan agreement, the Bank advanced $190 million and $440 million to the
Corporation and Santander Financial, respectively. The loans are
collateralized by a certificate of deposit in the amount of $630 million opened
by BSSA at the Bank and provided as security for the Loans pursuant to the terms
of a Security Agreement, Pledge and Assignment between the Bank and
BSSA. The Corporation and Santander Financial Services, Inc. have
agreed to pay an annual fee of 0.10% net of taxes, deductions and withholdings
to BSSA in connection with its agreement to collateralize the loans with the
deposit
In the
ordinary course of business, the Bank has also engaged in the administration of
loans portfolios with Crefisa, Inc. under which the Bank was paid the commission
of $2,197,336 for 2009. The commission is considered to be on market
terms.
On
September 1, 2009, the Bank entered into an Advisory and Technical Services
Agreement with Santander Overseas to assist the later in the sale, assignment
and transfer of certain credit facilities. These services included,
among others, the structuring and consummation of the transaction, the review of
all of the documents executed, and the valuation of the credit
facilities. Under this agreement, the Bank was paid a commission of
$2,908,247 in 2009 by Santander Overseas. The compensation is
considered to be on market terms.
PROPOSALS
OF SECURITY HOLDERS TO BE PRESENTED AT THE 2011 ANNUAL MEETING OF
STOCKHOLDERS
Stockholders’
proposals intended to be presented at the 2011 annual meeting of Stockholders
must be received by the Secretary of the Corporation, at its principal executive
offices, Santander BanCorp., B-7 Tabonuco Street, Suite 1800, Guaynabo, Puerto
Rico, 00968, not later than November 26, 2010, for inclusion in our proxy
statement and form of proxy relating to the 2011 annual meeting of
stockholders. If a stockholder who otherwise desires to bring a
proposal before the 2011 annual meeting of stockholders does not notify us of
its intent to do so on or before
February 8, 2011, then
the proposal will be untimely and the proxies will be able to vote on the
proposal at their discretion.
CORPORATE
GOVERNANCE GUIDELINES
We have
adopted a Code of Business Conduct within the meaning of Item 406(b) of
Regulation S-K of the Securities Exchange Act of 1934, as
amended. This Code applies to the directors, the President and CEO,
the CAO, and other executive officers of the Corporation and its subsidiaries in
order to achieve a conduct that reflects the Corporation’s ethical
principles. Our Code of Business Conduct was amended during 2005 to
expressly apply to the directors of the Corporation, as required by the NYSE’s
Corporate Governance Rule 303A.10. We have posted a copy of the Code
of Business Conduct, as amended, on its website at
www.santandernet.com
. The
Corporation also adopted Corporate Governance Guidelines which are available on
the Investor Relations website at
www.santandernet.com
, as required by
the NYSE’s Corporate Governance Rule 303A.09. Copies of the Code of
Business Conduct and the Corporate Governance Guidelines may be obtained free of
charge from the Corporation’s website at the abovementioned internet
address. Investors may request a print copy by writing to Rafael
Bonilla, Esq., P.O. Box 362589, San Juan, P.R. 00936-2589.
DISCLOSURE
OF AUDIT FEES
The
following is a description of the fees paid or accrued by us and our
subsidiaries for the audits and other services provided by D&T for 2009 and
2008, respectively.
Audit
Fees
The aggregate “Audit Fees” paid or
accrued by the Corporation for professional services rendered by D&T in
connection with the audits of the Corporation’s annual consolidated financial
statements for the fiscal years ended December 31, 2009 and 2008, the
audit of the effectiveness of the Corporation’s internal controls over financial
reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, as
amended, as of December 31, 2009 and 2008, and for the reviews of the
consolidated financial statements included in the Corporation’s quarterly
reports on Form 10-Q, were approximately $1,736,000, and $2,282,743,
respectively.
Audit-Related
Fees
The
aggregate fees billed by D&T to the Corporation for the years ended
December 31, 2009 and 2008 for audit-related services were approximately
$65,845 and $127,000, respectively. These fees relate to consulting
services performed in connection with financial accounting and reporting
standards.
Tax
Fees
D&T
does not provide tax services to the Corporation.
All
Other Fees
There are
no other fees.
In
considering the nature of the services provided by D&T, the Audit Committee
determined that such services are compatible with the provision of independent
audit services. The Audit Committee discussed these services with
D&T and the Corporation’s management to determine that they are permitted
under the rules and regulations concerning auditor independence promulgated by
the SEC to implement the Sarbanes-Oxley Act of 2002, as amended, as well as the
provisions of the American Institute of Certified Public
Accountants.
Pre-Approval
Policy and Procedures
All
auditing services and non-audit services must be pre-approved by the Audit
Committee. Pre-approval is waived for non-audit services
if: (1) the aggregate dollar value of such services does not exceed
$10,000; (2) such services were not recognized by the Corporation at the time of
the engagement to be non-audit services; and (3) such services are promptly
brought to the attention of and approved by the Audit Committee prior to the
completion of the audit. All audit and non-audit services were
pre-approved by the Audit Committee. The Chairman must update the
Audit Committee at the next regularly scheduled meeting of any services that
were granted specific pre-approval.
REPORT
OF THE AUDIT COMMITTEE
The role
of the Audit Committee is to assist the Corporation’s Board of Directors in its
oversight of the Corporation’s financial reporting process and the Corporation’s
internal and external audit processes. As set forth in the Charter,
management of the Corporation is responsible for the preparation, presentation
and integrity of the Corporation’s financial statements, and for maintaining
appropriate accounting and financial reporting principles and policies and
internal controls and procedures designed to achieve compliance with accounting
standards and applicable laws and regulations. The Internal Audit
Department is responsible for examining and evaluating the adequacy and
effectiveness of the Corporation’s internal control systems. The
independent registered public accounting firm of the Corporation is responsible
for auditing the Corporation’s financial statements and expressing an opinion as
to their conformity with accounting principles generally accepted in the United
States of America and the effectiveness of the Corporation’s internal controls
over financial reporting. Moreover, as set forth in the
Charter, the Audit Committee relies on and makes no independent verification of
the financial and other information presented to it or representations made by
management or the independent registered public
accountants. Accordingly, the Audit Committee’s oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles and policies, and
internal controls and procedures, designed to achieve compliance with accounting
standards and applicable laws and regulations.
In the
performance of its oversight function, the Audit Committee has reviewed and
discussed with management and the independent registered public accountants the
audited consolidated financial statements of the Corporation for the fiscal year
ended December 31, 2009, management’s assessment of the effectiveness of the
Corporation’s internal controls and the independent registered public accounting
firm’s report on internal controls over financial reporting. The
Audit Committee has also discussed with the independent registered public
accountants, the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees), as currently modified or
supplemented. The Audit Committee has obtained a report from the
independent registered public accountants that addresses certain matters related
to quality, quality control, and independence, as required by the NYSE listing
standards. Finally, the Audit Committee has received the written
disclosures and the letter from D&T required by applicable requirements of
the Public Company Accounting Oversight Board regarding the independent
accountant’s communication with the Audit Committee concerning independence, has
considered whether the provision of non-audit services by the independent
registered public accounting firm to the Corporation is compatible with
maintaining their independence, and has discussed with the independent
registered public accounting firm its independence from the Corporation and its
management. These considerations and discussion, however, do not
assure that the audit of the Corporation’s financial statements has been carried
in accordance with the standards of the Public Company Accounting Oversight
Board, that the financial statements are presented in accordance with Generally
Accepted Accounting Principles or that the Corporation’s independent registered
public accounting firm are in fact “independent.”
Based on
the Audit Committee’s review of the audited financial statements, management’s
assessment of the effectiveness of internal controls over financial reporting
and the independent registered public accounting firm’s report, and the
discussions referred to above with management and the independent registered
public accounting firm, and subject to the limitations on the role and
responsibilities of the Audit Committee set forth in the Charter, the Audit
Committee recommended to the Board of Directors that the Corporation’s audited
financial statements be included in the Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2009 for filing with the SEC.
Submitted
by:
Mr.
Víctor Arbulu
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Director
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Mr.
Stephen A. Ferriss
|
Director
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Mr.
Roberto H. Valentín
|
Director
|
PROPOSAL
2: INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Subject
to ratification by the stockholders at the meeting, the Audit Committee has
appointed D&T to audit the Corporation’s consolidated financial statements
for the fiscal year ending December 31, 2010, and the effectiveness of the
Corporation’s internal controls over financial reporting as of December 31,
2010. D&T audited the Corporation’s consolidated financial
statements for the fiscal years ended December 31, 2007, 2008 and 2009, and the
effectiveness of the Corporation’s internal controls over financial reporting as
of December 31, 2007, 2008 and 2009. Representatives of D&T will
be present at the Meeting and have the opportunity to make a statement if they
so desire, and will also be available to respond to appropriate
questions.
If the
stockholders do not ratify the appointment of D&T, the selection of our
independent registered public accountants will be reconsidered by the Audit
Committee.
The Board
recommends that you vote
FOR
ratification of the
appointment of D&T as our independent registered public accounting firm for
2010.
The vote
in favor of the majority of the shares of Common Stock eligible to be voted at
the meeting is required for the approval of this Proposal Two.
INTERNET
AVAILABILITY
Important Notice Regarding Internet
Availability of Proxy Materials for the Annual Meeting to be held on April 26,
2010:
This proxy statement, the notice of annual meeting and the
Corporation’s Annual Report to Shareholders are available at
http://bnymellon.mobular.net/bnymellon/sbp
.
ANNUAL
REPORT AND OTHER MATTERS
Enclosed with this Proxy Statement is
the Corporation’s Annual Report to Stockholders, which includes the Annual
Report on Form 10-K, the Corporation’s consolidated financial statements and
management’s assessment of the effectiveness of the Corporation’s internal
controls over financial reporting for the year ended December 31,
2009. The Corporation’s consolidated financial statements for the
year ended December 31, 2009 and the effectiveness of the Corporation’s internal
control over financial reporting as of December 31, 2009 have been duly
certified by D&T as the independent registered public accountants of the
Corporation. The Annual Report to Stockholders is not a part of these
proxy solicitation materials.
To avoid
delays in ballot taking and counting, and in order to assure that your Proxy is
voted in accordance with your wishes, compliance with the following instructions
is respectfully requested: upon signing a Proxy as attorney,
executor, administrator, trustee, guardian, authorized officer of a corporation,
or on behalf of a minor, please give full title; if shares are in the name of
more than one record holder, all should sign.
Whether
or not you plan to attend the Meeting, it is very important that your shares be
represented and voted in the Meeting. Accordingly, you are urged to
properly complete, sign, date and return your Proxy Card.
San
Juan, Puerto Rico, March 26, 2009.
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By
Order of the Board of Directors
|
|
|
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|
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Rafael
Bonilla, Esq.
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Secretary
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Santander (NYSE:SBP)
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