The Commonwealth Bank has abandoned changes proposed last year to its executive bonuses, instead opting to focus the rewards for CEO Ian Narev and his leadership team on measures of the bank's financial performance.
Following strong objections from shareholders at its 2016 annual general meeting, CBA has ditched a plan to reward the company's leaders for "People and Community" targets that focused on achievements in inclusiveness, sustainability, diversity and culture.
The proposed executive remuneration which prompted the shareholder rebellion would have cut the important total shareholder return measurement (TSR) - from 75 per cent down to 50 per cent - in favour of more intangible cultural performance measures.
Following the concerns raised by shareholders, the board said the use of non-financial measures in executive remuneration was "excessive".
"The proposed introduction of the 'People and Community' measure would have reduced the weighting on relative TSR to 50 per cent," the bank said in a report on remuneration released on Friday.
CBA said it had listened to shareholders and that the FY18 long-term remuneration award for executives would include a 75 per cent emphasis on the key financial measurement of shareholder returns.
The bank's board said it recognised the "critical importance" of rebuilding customer trust and the bank's reputation within the broader community.
"This is a key factor in ensuring the company maintains its social licence to operate," the bank said.
CBA said the remaining 25 per cent of an executive bonus would be tested against non-financial measures that enhance the bank's trust and reputation, as well as instil employee pride as advocates of CBA values.
Following allegations by financial regulator AUSTRAC that the bank breached anti money-laundering and terrorism-financing laws, executives, including Mr Narev, had their short-term bonuses slashed.
CBA's annual report, released in August, revealed that Mr Narev's total remuneration in the 12 months to June 30 was $5.5 million, 55 per cent less than the $12.3 million he took home the year before.
The bank had been facing the possibility of a second "strike" on executive pay and a consequent board spill vote at this year's annual general meeting if it failed to deal with shareholder discontent over a perceived gap between executive performance and reward.
Nearly 49 per cent of votes at the 2016 meeting in Perth went against accepting the company's remuneration report, almost double the 25 per cent required for a so-called 'strike'.
The bank's 2017 annual general meeting will be held on November 16 in Sydney.
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