New incentive plan for CEO of CBA

published  First Published: 21/10/2009
Article written by: Nigel Brookson
CBA's $7.8m incentive plan

COMMONWEALTH Bank chief executive Ralph Norris could get as much as $7.86 million of shares in the group as part of a revamped, long-term incentive scheme.
Part of the benefit, which has a maximum value of $4.49 million, has been framed under a new group leadership reward plan while the remainder, totalling $3.37 million, will replace an existing three-year scheme with a four-year scheme.
Depending on the price of the shares at the time, Mr Norris might not have to pay for some of the stock in question.
But to get to these levels, CBA's board said that he would have to turn in an extraordinary achievement between now and 2014 under the revised performance hurdles that are attached to the reward plan.
The scheme is more likely to produce a lower benefit of $4.93 million, which Mr Norris would receive in two chunks: shares worth $2.81 million, which would be equal to his fixed salary, and another parcel of stock valued at $2.12 million.
The first would become available to him in the financial year beginning July 2013 and the second 12 months earlier. That would be the equivalent of 75 per cent of his 2009 salary.
Details of the proposal were contained in the bank's notice of its annual meeting published yesterday. It comes a day after the Productivity Commission's recommendations to strengthen shareholder powers over executive pay.
Mr Norris, whose most recent salary package rose 6 per cent to $9.2 million, was the highest-ranking listed company executive to immediately throw his support behind shareholders having a greater say in the setting of remuneration deals. ''I don't think [salaries] should be capped but I think they should always be tied to performance and they should be tied to the risks the organisation is undertaking,'' he said this week.
CBA's board argued that the new incentive scheme for Mr Norris met the proposed guidelines and those of the banking watchdog, the Australian Prudential Regulation Authority.
The bank's shareholders will get to vote on his new shares plan at the annual meeting next month.
The board said that for Mr Norris to get all his new shares, the bank would have to raise its customer satisfaction level among the big four banks from fourth to first to meet just one of the hurdles.
Its value by market capitalisation would have to outperform in terms of total shareholder returns when compared with those of the ASX's largest 20 companies.
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