The Board recommends the following ordinary resolution:
“That the total sum payable to the seven non-executive Directors by way of fees and superannuation be increased by $65,366 per annum. The directors may determine how this sum is to be apportioned among them and how and when it is to be paid. The said increased sum includes relevant taxes payable either by the Bank or Directors.’
Please note the proposed increase of $65,366 lifts total Director Remuneration to $680,400 per annum. This pool of funds is for aggregate non-executive Directors’ remuneration and is not the amount paid to individual Directors’. The sum represents an increase of 10.63%.
Subject to member approval and determination by the Board it is intended for Non-Executive Directors to be paid $81,000 p.a. (up from $75,770 or 6.90%), Committee Chairs’ to be paid $97,200 p.a. (a 20 percent loading on base remuneration and up from $83,779 or 16.02%) and the Board Chair to be paid $145,800 p.a. (an 80 percent loading on base remuneration and up from $136,387 or 6.90%).
It is an appropriate time for the remuneration of Bank Australia non-executive Directors to be adjusted commensurate with the changing responsibilities of the Directors and growth of the Bank. The organisation and its environment have changed substantially over the last decade.
Directors’ remuneration was last substantially increased in 2010 by approval of members.
Directors’ Responsibilities include:
- Ensuring a successful and viable organisation that meets its members’ needs and its fiduciary responsibilities
- Ensuring there is a strong and effective governance framework in place
- Setting the tone for the culture
- Effective oversight of the risk management framework
- Taking reasonable steps to prevent matters from arising that would adversely affect the prudential standing or prudential reputation
External Environment changes include:
- A faster and more sophisticated cyber security environment
- New and more demanding regulations including the Bank Executive Accountability Regime/Financial Accountability Regime
- Heightened expectations from regulators, governments and members
- Impacts on the Governance practices of Financial Institutions of the both the CBA Prudential Inquiry and the Financial Services Royal Commission
Bank Performance 2021:
- Record profit of $40.7m
- Record growth in new members, with membership now exceeding 176,000
- Record growth in member deposits to lift total deposits above $6.6bn
- Funded a record number of member loans ($1.95bn) to lift total loans above $6.3bn
- Total assets grew to $8.5bn
- Impact fund contribution of $1.6m
- Supported both members and staff through Covid-19 challenges
- 35th most trusted commercial brand (up from 42nd) in Australia, with industry leading customer satisfaction at 95.5%*
In short, the environment is more complex, the challenges more demanding, the scrutiny more intense and expectations and penalties are much higher for Bank Australia non-executive Directors. In the context of all those challenges, the Board has guided the Bank to deliver strong results.
Governance & Remuneration Committee
The Board has a Board Governance & Remuneration Committee and a Remuneration Policy that aligns remuneration and risk management.
Board remuneration is fixed and does not contain any variable performance based components to ensure alignment with prudent risk-raking. Remuneration is designed to encourage behaviour that supports;
- the Bank’s long-term financial soundness
- the risk management framework of the bank
The Governance & Remuneration Committee has sought and considered advice from independent sources in relation to remuneration of Boards of Directors within the finance industry generally and the customer owned banking sector specifically.
Maintaining competitive remuneration ensures the Bank is able to continue to attract talented Directors to undertake the corporate responsibilities of serving on the Board of a financial institution.
* Independent research published June/July 2021 by Roy Morgan