APRA chairman Wayne Byers has responded to detractors of its proposed CPS 511 remuneration requirements during a recent speech to the Australian Banking Association.
The main elements of the proposed regulation include increased oversight of employee remuneration by the board, prescribed remuneration deferral periods for significant financial institutions and a limitation where only 50% of the metrics used to assess variable remuneration can be financial. (See HERE) .
It appears that Mr Byers is aware that these proposals have not been well received by, well, almost everybody. The speech appeared to indicate that APRA is not prepared to back away from its prescriptions.
“Various stakeholders – managers, directors, investors, shareholders – have each found something to seriously dislike. We have had no shortage of feedback,” he said, before going on the offensive considered by some to be reminiscent of a Monty Python scene (see HERE) .
“My challenge to those engaging in the debate is to provide us with an alternative to our proposals that isn’t just the status quo, because outcomes from the status quo have been found unacceptable,” he said.
“There are two broad ways change can be achieved: more prescription by APRA, or a material change in industry practice, particularly in the use of discretion by boards when considering remuneration outcomes.
“The most efficient approach would undoubtedly be the latter, but the evidence suggests that will be very difficult, if not impossible, without some form of regulatory backing.”
A good example is our proposed new remuneration requirements. Whereas our current standards contain no quantitative requirements about the way remuneration arrangements work, the draft new standards include specific limits, such as a maximum cap on the use of financial metrics within variable remuneration and specified minimum deferral periods. More generally, they have a more prescriptive tone throughout, reflecting the conclusions from our own review of remuneration practices published in 2018, and the subsequent recommendations of the Royal Commission.”
Read Mr Byers’ full speech HERE .© Guerdon Associates 2023 Back to all articles