A Report on Executive Remuneration and Performance at ANZ Limited

This report provides a detailed analysis of ANZ Limited's executive remuneration policies, focusing on the criteria for short-term and long-term incentives, and the relationship between executive pay and company performance. It assesses the company's performance using financial ratios like Return on Equity, Return on Investment, and Earnings Per Share, examining changes in executive remuneration reporting from 2016 to 2017. The report also explores academic literature on measuring executive performance and the corporate goals of ANZ Limited, drawing from annual reports and corporate websites. The research investigates whether executive compensation aligns with shareholder value and overall company success, considering factors such as share price fluctuations and strategic changes. This document is available for students on Desklib, a platform providing study tools and resources.

1144 FINANCE

Executive Criteria
The report is based on the ANZ Limited with respect to the remuneration that is being provided
to the Executives and directors of the company. There have been instances that the shareholder
value has declined but still the remuneration to the directors and executives has increased. There
is inclusion of the criteria for providing the Short-term incentive and long term incentive that are
being provided to the executives of the company as in this case the performances as well as some
qualitative factors are key components for the calculation of the incentives. There is assessment
of the performance of the company through the various tools and techniques such as the return
on equity, Return on investment, EPS etc. There is analysis of the remuneration with respect to
the share price of the company and whether there is inverse relation between them. There is also
measurement of the ways through which the performance is measured along with the goals and
objectives of the organisation which is to provide the maximum value to the shareholders. The
research is also being conducted on the basis of the different articles along with the comparison
of the performance.

Table of Contents
Executive Criteria..........................................................................................................................2
Introduction....................................................................................................................................5
LO (a) LO (b).................................................................................................................................6
1...................................................................................................................................................6
2...................................................................................................................................................7
3...................................................................................................................................................8
4...................................................................................................................................................9
5.................................................................................................................................................10
LO ( C)..........................................................................................................................................11
1.................................................................................................................................................11
2.................................................................................................................................................12
3.................................................................................................................................................13
4.................................................................................................................................................14
5.................................................................................................................................................17
6.................................................................................................................................................18
7.................................................................................................................................................19
8.................................................................................................................................................20
9.................................................................................................................................................21

Summary of the findings.............................................................................................................22
References.....................................................................................................................................23

Introduction
There is the inclusion of the detailed remuneration policies that are being followed by the ANZ
limited. The Components of the remuneration policy are also stated in the report for determining
how the calculation is being done for the executives. The criteria and eligibility for the short-
term incentive and long-term incentives are also being included in the report. The performance
measures quantitative as well as qualitative are provided to understand the remuneration
provided by the committee. The changes in the remuneration policy of the company are also
being stated and the factors that have led the company to reconsider the remuneration of the
executives. The calculations of different ratios are also being conducted for the measurement of
the performance along with the relation between the remuneration paid to the employees and the
performance. There is the inclusion of detailed process of the remuneration that is being
provided to the directors and executives of the company.

LO (a) LO (b)
1. Details for remuneration committee and its membership.
The remuneration of the directors and executive is based on the performance of the company.
The performance is measured on the basis of the targets and long-term goals that are achieved by
the organization annually. The remuneration report covers the Non-executive directors, Non-
Executive Director (Former) as well as the Chief executive officer (CEO) and Disclosed
Executives – Current (ANZ, 2018). Remuneration provided is based on the fixed and variable
framework designed by the board in which the variable is based on the performance that is
achieved. The performance is assessed by the board of members of the company. It can be seen
that the performance of the company increased with the adoption of the strategies leading to
better and efficient capitalization. There was also the effective management of the cost which
resulted in the better portfolio and returns. The achievement of the performance individually as
well as a whole group led to the changes in the remuneration of the Directors and executives.
The average remuneration was about 96% for the year 2017. The non-achievement of the target
to provide the return to the shareholder led to the cancellation of the rights that were provided in
the year 2013 after the testing in the year 2016 (ANZ, 2018).

2. Allocation of Executive Remuneration (Fixed pay/STIs/LTIs)
The Executive remuneration is kept motivated in order to retain them. The consumers are being
supported by the effective and efficient performance of the company. There is a specific reward
for the performance and the efficiency of the executives. The components of the remuneration
are fixed and variable. The Variable incentive that is being provided can be in terms of Cash,
Deferred Shares and Performance rights. There is the inclusion of the remuneration that is being
awarded in the year and the actually received. The Targets provided to the executives are such
that can be achieved based on which there is a measurement of the performance. The risk is
considered for the calculation of the remuneration that is being provided to the executives also
aligning with the behavior done as per the norms of the company (ANZ, 2018). The company
also look forward to the requirement of the shareholders as well as the Total Shareholder return
and the economic profit that is being earned by the company. The objectives that are being
provided by the company are determined by the group performance for the determination of the
revenue. There is weight provided for the distribution of the remuneration which includes the
Risk, Financial and discipline, Customer and people and reputation. The Year 2017 showed a
good result which shows future prospect as good and achievable.
The company has an arrangement for the short-term incentives that are being provided to the
executives. The eligibility is based on the participation taken by the executives. The amount
exceeding the AUD 100,000 half of it is received as the deferred shares to the executives. The
deferred shares received by the executives are provided evenly over the next 2 years from the
date of granting them. The Long-term incentives are provided to the selected Executives only
and granted as 100% grant shares and condition having to be deferred evenly for the three years
from the grant date (ANZ, 2018).

3. This could be used to consider the use of or weightings of Financial Performance
measures such as EPS/ROI/ROE versus non-financial measures such as balanced
scorecards etc.)
The financial performance can be determined with the help of the techniques such as the
calculation of the ratios whereas qualitative measures such as the achievement of the goals and
strategies determined by the targets provided.
The results determined through the ratios calculated of the company are as follows:-
Ratio Calculation
Particular Amount (2017) Amount (2016)
Net Profit 6,421 5,720
Total Investment 2,248 4,272
Current assets 5112 5021
Current Liabilities 8350 8865
Shareholders equity 59,075 57,927
Net Income 14,872 15,095
EPS Ratio 220.1 197.4
Return on Investment 286 134
Return on Earnings 0.25 0.26
Current Ratio 0.61 0.57
Net Profit Ratio %s 43.18 37.89
It can be determined with the help of the ratios that the performances of the company have
become better. There is an increase in the net profit ratio of the company from 37.89 in the year
2016 to 43.18 in the year 2017. The Return on investment of the company has also increased
from 134 to 286 along with an increase in EPS from 134 to 286. It can be determined that the
company has performed in an effective way. The current ratio of the company has increased
which is still an acceptable position as the Ideal ratio is 2:1.
The company is also focused on the qualitative aspect such as the achievement of the targets.
The average variable remuneration accounted for 96% of the overall target which is very much
satisfactory. Also, The company looks forward to the behavior that is being conducted with the
customers through which the performance can be determined.

4. Report any changes in Executive Remuneration Reporting – 2016 versus 2017
The change in the remuneration is based on the performance that is being achieved by the
company. For the current year, there are no changes in the fixed remuneration of the CEO’s as
well as Disclosed Executive. The new appointments which are made have less than the prior
incumbent. There are some disclosed executives of whom there is no change in the remuneration
since the Year 2014 (ANZ, 2018). The remuneration provided is based on the strategy and goals
of the organization. In 2016 there was a review of the remuneration of the CEO and disclosed
Executives based on various factors such as the market price, market condition, and shareholder
feedback and advisors etc. so that the goals can be achieved of the organization. It was decided
that there should be changes in the variable framework of remuneration for the disclosed
executives as well as the delivery of this remuneration. There was a change of variable
remuneration to 200% of their fixed remuneration and result in an increase in risk from 63% to
67% (ANZ, 2018). In case of the Disclosed executives, there is only single VR Framework
which consists of a mix the short term as well as the long-term rewards and shares deferred for
over four years after the rights tested after three years.

5. Company performance (Total Shareholder Value) versus executive pay. (This could
compare the change in company share price AND dividends or Earnings per Share versus
executive pay – e.g. Company share price is going up and pay is coming down – or visa-
versa?)
The executives are paid strictly on the basis of the performance and the goals that are being
achieved. There is a scheme of the fixed and variable remuneration. It can be seen that the pay is
based on the profit and other factors that are being achieved by the company. The better is the
performance better is the remuneration made to the executives and the other members. The
incentive is also tested after the 3 years and then the deferred is made after the 4 years equally.
There was cancellation of the incentive that was declared during the year 2017 which were tested
in the year 2016 (ANZ, 2018). There was fluctuation in the share price of the company in the last
few years which has led to some strategic changes for the better performance of the company. It
can be stated that it is not so that the share prices are increasing and the pay is coming down. The
growth of the company has also led to changes in the remuneration policy of the company of
variable component to 200% which shows the company concern over the remuneration along
with the achievement of the shareholder value (ANZ, 2018). The company is focused on creating
value for the shareholders and provide efficient returns in alignment with the remuneration.

LO ( C)
1. Research the Academic Literature using EBSCOHOST and/or other Academic Search
Engines and discover academic articles discussing methods of measuring Executive
Performance. (Note in the USA, remuneration is referred to as Executive Compensation so
you may wish to substitute this term in your searches.)
There are various ways to determine the performance of the board members of the company
which can be identified as the conducting of surveys and other questionnaires. The other ways
through which it can be measured are collecting comments, tracking of goals, and completion of
the directives. The performance of the Executive management can be measured with the help of
the results of targets that were provided to them. It can be measured with reporting and attending
of the programs. The measurement of the goals and objectives must also be achieved by the
executives Fedpartnership, 2013. There must be the achievement of the qualitative aspect also
such as the customer relationship and management. The quantitative performance can be
measured with the help of the calculation of the ratios such as the current ratio and return on
equity etc. The value to the shareholder as well as the return provided is also the parameter for
the measurement of the ratios. There was a rise in the profitability of the company and an
increase in the earning per share of the company Fedpartnership, 2013.

2. Research and discover the corporate goals of each of the companies reviewed. (Review
the Chairman and CEO’s Statements in the Annual Report and the Corporate Website for
this information.)
The goals of the organization are to be updated with respect to the technological changes that
arrive as there have been many and regular changes in it. There has been an increase in the
profitability as well as growth in the retail as well as commercial business in Australia and New
Zealand which is a good prospect for the company. The other objective of the company is to
build the trust of the community by being more transparent and establishing the committee which
was lost due to mistakes that were done. The company is looking forward to achieving the goals
and objectives so that they are able to provide value to the shareholders (ANZ, 2018). The goal
was to change as per the requirement of the factors that can affect the business of the company.
There was selling of the investment that was not fruitful. There is reshaping of the business by
the company for the better returns. The company is focussed to make the process simpler and
fairer along with the innovation in the services provided. They are also looking forward to
creating a culture that can support the strategy of the company and facilitate the achievement of
goals that are being established.