Super funds keep it simple on exec remuneration

Executive remuneration structures are much simpler in the superannuation industry than those which apply to the banks and insurance companies, according to the Australian Prudential Regulation Authority (APRA).

The regulator this week issued an information paper on executive remuneration highly critical of the approach of many of the big financial institutions but pointed to “some noticeable differences for RSE Licensees [superannuation funds]”.

“As a general observation, the remuneration structures within RSE Licensees in the sample were simpler in structure,” the APRA paper said. Short Term Incentives (STIs) were in the form of cash rather than shares, with a maximum deferral period of two years.”

Further, APRA said no RSE Licensee in its survey sample incorporated a Long Term Incentive (LTI) component into its remuneration structure.

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“Where STI arrangements were in place for RSE Licensees, the ratio of performance-based remuneration to fixed remuneration (for senior executives other than the Chief Investment Officer (CIO)) was significantly lower - at 10 per cent to 30 per cent - than seen at institutions from the other industries in the sample,” it said.

However the regulator said that staff working within investment teams, including chief investment officers, tended to have remuneration structures that included larger proportions of performance-based remuneration.

“Finally the application of malus at superannuation entities was observed to be less prevalent than in the other industries. Similarly, buy-outs, sign-on payments and guaranteed bonuses in the superannuation industry were also less frequently observed.”