ANZ will abolish individual bonuses for all staff outside its most senior managers in a move that chief executive Shayne Elliott argues will tip the bank's old system on its head.
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The move comes in response to findings by the banking royal commission that individual bonuses paid to bank staff were behind aggressive product mis-selling and poor outcomes for customers.
All banks have come under intense pressure to develop new remuneration models that get rid of individual sales incentives.
Under the existing ANZ system, staff are paid a significant element of their remuneration in bonuses. This will be replaced by a model, unveiled to staff on Tuesday, in which 80 per cent of employees will be paid an amount on top of their base pay in the form of a "group performance dividend".
Employees doing similar jobs will be paid the same bonus - a remuneration scheme that Mr Elliott says is far more transparent.
Mr Elliott said the changes would mean most ANZ staff who did a good job would receive a boost to their base pay this year.
Commissioner Kenneth Hayne drew a direct link between poor behaviour of bank staff and the structure of incentivised remuneration.
"In almost every case, the conduct in issue was driven not only by the relevant entity's pursuit of profit but also by individuals' pursuit of gain," Commissioner Hayne said in his final report.
In almost every case, the conduct in issue was driven not only by the relevant entity's pursuit of profit but also by individuals' pursuit of gain.
- Commissioner Kenneth Hayne
Mr Elliott said the change would vastly reduce the amount staff would earn from bonuses as part of what he described as "the most radical change in bank remuneration for decades".
"The royal commission rightly shone a light on the negative impact the overemphasis on individual bonuses within a bank can have on customers and the community," Mr Elliott said on Monday.
Customer-facing sales staff who have previously received large individual bonuses, determined by their manager and based on meeting or exceeding sales targets, will be rewarded by an increase in their base pay.
Under the new scheme, all employees within the same pay band will get the same share of the performance pool - the amount of which will be determined each year by the ANZ board.
ANZ did not outline the exact criteria the board would use to decide the group-wide performance dividend but Mr Elliott said that mainly they would not be financial and would include risk and customer satisfaction measures.
He said that if ANZ profits fell, the board might still deliver a performance bonus to all staff.
To be eligible for it, all that employees needed to do was "meet the hurdle of doing a decent job, behaving honestly and demonstrating appropriate values", he said.
"There is no differentiation between good and great when it comes to the bonus," he said. "If you are a great performer it will be reflected in the base pay."
The top 20 per cent of management will also participate in the group dividend but will be eligible for an additional bonus based on their individual performance.
- SMH/The Age
