APRA not ‘locked in’ on executive pay plan

Mr Byres on Wednesday made it clear APRA was still committed to non-financial targets being used in executive pay, but there was room to move around the precise details.

“We are not locked in to the specific 50 per cent proposal, and certainly recognise there are trade-offs involved, so will be looking at other options,” Mr Byres said at a Women in Banking and Finance function in Sydney.

“These could include, for example, a higher limit, a narrower definition of ‘financial metrics’, or an alternative way to use non-financial metrics.”

“Whatever we do, however, the challenge is to find an alternative that gives sufficient comfort that a ‘profit alone’ approach will not re-emerge in another guise,” he said.

Proxy advisers, governance experts, and directors have all criticised the APRA proposals on pay, with claims they are too prescriptive and discretion from boards would be preferable.

However, Mr Byres quoted royal commissioner Kenneth Hayne, who wrote “from the executive suite to the front line, staff were measured and rewarded with reference to profits and sales.”

Mr Byres said the cap was one way of dealing with this, but APRA’s consultation with industry had not generated “as many alternative ideas as we might have hoped.”

Another contentious part of APRA’s proposed changes on executive pay is its plan to require chief executives to wait up to seven years until they could access shares granted to them as a bonus.

Mr Byres said a key concern was that its deferral times were “too long for some individuals” and might not reflect their accountability.


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