ANZ bank Australia Case

ANZ bank Australia Performance measures, remuneration and motivation

Subject Learning Outcomes (LOs) assessed (from Subject Outline)

1. Analyze the roles of cost and management in organizations through the analysis of accounting concepts and tools
2. Evaluate and apply financial and non-financial performance measures and tools used in assessing and rewarding individual and corporate performance
3. Describe how management control theory and concepts apply to organizational settings through the generation of accounting and organizational reports

A Marking Rubric is attached so you are aware of exactly how your submission will be marked. (anz internet banking)

Most of the second half of this subject focusses on how firms can measure performance and in turn, reward effort through bonus and incentive schemes, often using accounting concepts and tools (LO a) and LO b). It is important that firms have a clear understanding of what their overall corporate strategy is and set targets for performance in line with those goals and in line with the Mission and Vision Statement.

Background to task topic:

Every Australian Public Company must produce a ‘Remuneration Report’ detailing how their highest paid executives’ remuneration (pay) has been calculated. This includes details of fixed versus at-risk (or variable) remuneration and the methods used to make these awards. Each company must nominate Board Members to form a ‘Remuneration Committee’ (some companies may use different names for this committee) and generally the members consist of at least two non-executive members of the Company’s Board plus the Chairperson. (Each student should check the composition of the committee relevant to their allocated company and briefly report the details in their report in the company overview.)

The Committee’s role is to determine and approve the remuneration policy, the methods and amounts of executive compensation including the base salary and benefits.

The details of the remuneration scheme are published in the Remuneration Report within the Annual Report for the company and then voted on by shareholders at the annual general meeting. If more than 25% of shareholders ‘vote down’ (against) the remuneration plan, the Board must revise the plan and if this revised plan is still rejected by shareholders at the next General Meeting, the Board’s position in considered ‘untenable’ (unacceptable) to the shareholders and typically must offer their resignation.

 

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Key questions to be answered:

After a comparison has been completed, as a group, critically review both methods and analyze which methodology is believed to produce the following:

1. How the performance measurement measures may affect the ethical behavior and the culture of the organisation;
2. Which performance measures are likely to have the greatest motivational impacts on management behavior; and
3. An evaluation of the Financial and Non-Financial measures in achieving desirable outcomes, i.e. those ‘aligned’ with shareholder outcomes.

The following is a Report Format that should be adopted by each group. More details will be given in the Week 6 briefing.

Please note: The research conducted by examining the Annual Reports of the companies MUST also be matched to research of academic articles assessing the effectiveness of Executive Remuneration schemes and methods!

Word count:

The word count submit a report (excluding cover pages, references and appendices) of between 2000 and 3000 words.

NO MORE than 4000 words will be marked! (Appendices excluded from the word count.)

WHAT MATERIAL IS REQUIRED TO BE SUBMITTED?

1. Research of 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 or Executive Pay so you may wish to substitute this term in your searches.)

2. Research and discover the corporate goals of each of the company reviewed. (Review the Chairman and CEO’s Statements in the Annual Report and the Corporate Website for this information.)
3. Research and discover how the senior executive are having their performance assessed. This may be limited to only the TWO top earning Executives, usually the CEO and CFO.

NOTE – DO NOT REVIEW THE REMUNERATION OF THE BOARD OF

DIRECTORS ONLY THE EXECUTIVE TEAM/KEY MANAGEMENT PERSONNEL (KMP)

4. Research commentary on the company’s performance and you may include some of these materials provided they are fully referenced. E.g. Use screen grabs using the Windows ‘Snipper’ Tool may be used to capture these images. Only a FEW (no more than THREE!) should be entered into your report and these MUST be fully referenced.
5. Reflect and COMPARE the information given between the methods used by the Company and the methods identified by your research of the literature. Thoroughly report your findings and present your comparisons.
6. Your group should write up your findings AND conclude if your company is being truly transparent and if it is producing a ‘good’ result for the shareholders. In essence, you are concluding whether you believe their management control systems are working
7. Present your final analysis of the Company’s remuneration methods.
8. Conclude with your overall findings in relation to the three areas of focus given.

Submitting your written report

          The Report will require that you use Microsoft Word to format and complete the task.

This assessment task is marked progressively. There are THREE steps to submitting your assignment:

Your draft report will be briefly reviewed in class in Week 8 and your draft will be reviewed in class in Week 8. Please note that this is a “hurdle requirement” for final submission of your assignment. (That means, that you MUST show your draft AND Turnitin receipt with Turnitin Score in Week 8 to qualify to have your assignment submission marked after final submission on the due date.)

The Turnitin Score should be less than 30% as at DRAFT date (Week 8) and the final Turnitin Score should be below 20% in your final submission.

Final due time and date is  11.00am 17January 2019 (Week 9).

 

Video presentation (1/3 of assignment mark):

• Video presentations must be submitted by 1 pm Tuesday of Weeks 10. The video must be 7 minutes in duration and ALL group members must participate with either or both recorded images or voice-over parts. The video presentation will give all groups the ability to further demonstrate their understanding of the entities and the work you have done in researching these entities.
• These marks will be awarded by the tutor/assessor based on the criteria given in the rubric.
• Groups may use any application to produce the Video however it must be capable of being uploaded to a YouTube Channel (which will be established for the purpose). The link will be given in Moodle at the end of Week 8.
• Groups should NOT simply record themselves reading material. It is expected that multiple media sources are used and MUST be fully referenced. Please note Copyright provisions require full acknowledgement of all sources.

After the videos have been marked, the markers and assessors may interview, students on various aspects of both the video and report content. These questions may include but are not limited to research methods and sources, information within the report and knowledge gained about the organisation under review. All members should be able to demonstrate their contributions to the report and video at this time. Note that your Group Mark will be finalised AFTER the video AND the reports have been marked and taking into account your ability to demonstrate your understanding of the topic. 

Information to help guide your efforts:

How to layout your report

To help you understand how to go about evaluating the Remuneration Report, I have posted an academic article by Clarkson, P., Lammerts Van Bueren, A. and Walker, J. (2006) Chief executive officer remuneration disclosure quality: corporate responses to an evolving disclosure environment Accounting and Finance, 46, pp. 771-796. Please note that you do NOT have to summarise this article (or even read all of it), however please see Table 5 on page 785 to and review the 10 items this study looked at to review the openness of the reporting of the company.

YOU MAY FIND IT VERY USEFUL TO MAKE A TABLE USING THESE 1O POINTS AS A STARTING POINT TO REVIEW YOUR COMPANY’S REMUNERATION REPORT!

Headings and layout questions often arise and for this report, it is suggested the following headings would make the work more readable:

Executive summary – This is a ONE PAGE review of ALL the report. This should be a stand-alone document which could be read by the CEO (for example) to find out what the report was about AND what was found in conclusion.

Introduction – This is an introduction TO THE REPORT NOT an introduction to the specific company being studied. It introduces WHY the report exists, what it is examining (see the topic and tasks notes above for guidance) and how it is laid out. (Include a short summary of the aims and scope of the report in this section.)

Review of Topic and review of Literature 

NOTE – THIS SECTION WILL REPRESENT UP TO 22% OF YOUR TOTAL MARK!!!

Present a summary of the literature researched on the topic of executive performance evaluation and remuneration in public companies. Creating this section allows your group to develop your knowledge on the topic to enable a better-informed consideration of the individual company’s remuneration reports. Include a discussion on the effectiveness of control systems within companies focussing on management/executive performance and reward systems.

Company review and analysis (20% of the assignment mark) – This includes the investigative report on the assigned company – answering the questions about the remuneration report as required in the task requirements above.

Each group should decide which aspects of the Remuneration Policy they have matched to their research. This provides the group with the opportunity to related the academic articles and material to the policy of their company and it should also help organise the report in a professional and readable format.

 

For example, you may wish to use the following sub-headings:

1. Details for remuneration committee and its membership.
2. Allocation of Executive Remuneration (Proportions rather than amounts of Fixed pay versus variable or ‘at-risk’ pay, sometimes paid as STIs and LTIs)
3. Mix of performance measures used
4. (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.)
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?)

Comparison of remuneration methods used to the research content AND conclusion

(21% of assignment mark) – Ensure you consider how well the company’s approaches ‘worked’ in encouraging higher performance by the executive teams and consider if this translated to higher COMPANY PERFORMANCE. (Note it may be difficult to separate executive performance from overall company performance – say by considering the share price – as other market and industry factors may also influence share price.) This section should include a summary of your findings.

Conclusion: Here NO NEW IDEAS should be introduced. Only a conclusion of your findings and perhaps your group’s nomination of which company has the best remuneration system and what your group believes can be learned from the report and the method of remunerating manager’s in organizations. i.e. ‘Remind’ the reader, why you undertook the report (no – not because you HAD TO DO IT!) and the purpose of remuneration systems. It should LINK with the Introduction!

Bibliography – Full Harvard Anglia referencing should be undertaken for this report.