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ANZ announces remuneration reforms

Shayne Elliott
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The major bank has announced changes to its remuneration structure as part of its response to the banking royal commission’s final recommendations.

ANZ has announced that it will implement group-wide reforms to its remuneration structure, which will take effect from 1 October 2019.

The bank revealed that it will replace individual bonuses for the “vast majority” of employees with an incentive based on the overall performance of the group – referred to as a “group performance dividend”.

The dividend will be based on the bank’s performance from a risk, financial, customer, people and reputation perspective.

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The changes will not apply to ANZ’s executive committee, with remuneration arrangements for senior executives structured in accordance with regulatory requirements.

The major bank added that a “small percentage” of people in mostly senior roles who have an “increased ability to impact on ANZ’s performance” will continue to have a portion of “at risk” pay that will be determined by business unit and individual performance, comprising of a “smaller proportion of total compensation with appropriate deferrals in place”.

ANZ stated that it has also strengthened its accountability frameworks to ensure there are “appropriate consequences for people not meeting standards of behaviour or performance”, with conduct and performance requirements continuing to apply to all employees to be eligible for variable remuneration.

The lender noted that while the changes will not impact the spend on total compensation, the mix between fixed and variable remuneration will change.

The remuneration reforms draw on a package of initiatives announced by ANZ in February in its initial response to the banking royal commission’s recommendations, which it claimed would “lead to better outcomes for customers, shareholders and the community”.

Commenting on the reforms, ANZ CEO Shayne Elliott said: “The [banking] royal commission rightly shone a light on the negative impact the over-emphasis on individual bonuses within a bank can have on customers and the community.

“We are taking action to rebalance the way we pay people so that variable remuneration is a smaller part of our people’s take-home pay, with these reduced bonuses to be determined by the overall performance of the bank.

“We remain committed to reinforcing a high-performance culture and believe these changes will improve collaboration across the group while also giving employees greater clarity, ultimately benefiting customers, shareholders and the broader community.”

ANZ, along with the broader banking sector, has also been asked to issue responses to the Australian Prudential Regulation Authority’s (APRA) proposed changes to senior executive remuneration.  

APRA’s newly proposed standard seeks to “align remuneration frameworks with the long-term interests of entities and their stakeholders”, which it said include customers and shareholders.

The standard would introduce heightened requirements on entities’ remuneration and accountability arrangements and has come in response to evidence identified during the banking royal commission, which found that existing arrangements have contributed to poor consumer outcomes.

APRA stated that its proposals address recommendations 5.1 and 5.3 of commissioner Kenneth Hayne in the royal commission’s final report.   

The prudential regulator claimed that its package of measures is “materially more prescriptive” than its existing remuneration requirements

[Related: APRA to crack down on remuneration]

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