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Remuneration Report of Westpac Bank

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Westpac bank is one of the leading Australian banks that enhances their business procedures by providing all sorts of facilities for their employees, customers as well as the shareholders. Hence to determine all these aspects it is necessary to review their remuneration report.

Therefore, the paper will focus on the methods that are used for measuring the Executive performance and also the corporate goals of this bank. After determining both these aspects it is easier to demonstrate the performance rate of the senior’s executives especially the CFO and CEO of this bank. Hence after reviewing all these procedures a clarification regarding the remuneration committee and also its membership approach is determined and it will be briefly discussed in this paper.

Apart from this, the various performance measurement tools and a comparison between various methods will also be further briefly described in this context. Hence, with the help of this comparison and analysis, an idea of the remuneration report in accordance with the Westpac bank is thereby determined.                         

Table of Contents-

Introduction-

The primary aim of the paper is to highlight the remuneration system of the Westpac Bank of Australia. In order to determine it, the methods used for measuring the company performance and the executive performance will be discussed properly in this paper.

Besides this, the corporate goals and the performance of senior executives will also be determined that briefly provide an idea of the bank remuneration procedures. Furthermore, a comparison of the various methods used by the bank to enhance their performance level will also be further discussed in this context.          

Review of topic and review of the literature-

The academic literature review by using Academic Search Engines:-

Westpac Bank is one of the leading banks in Australia that provides all sorts of financial services to the people of this country. According to Deysel and Kruger, (2015), remuneration is the reward procedures for employment in the form of wage or salary as well as executive pay including benefits such as cash incentives, allowances, and monetary value for the noncash incentives.

Therefore in order to determine the remuneration prospects of this Westpac Bank, it is important to use a various academic search engine that help to measure the executive performance of this firm. Hence with the help of various academic search engine such as after reviewing several articles, journal, educational resources and scholarly literature the methods that are used for measuring the executive performance of Westpac Bank can be demonstrated properly.

In the words of Skovoroda and Bruce, (2017), the competitive nature of the banking sector forces this Westpac Bank to use various methods by which they easily measure their Executive Performance.

It is seen that various methods have been used for evaluating the Executive performance but the Westpac Bank uses only those methods that influence them to achieve the bank performance targets in the Australian market.

As proposed by Ruparelia and Njuguna, (2016), the methods that are used by the Westpac Bank in measuring their Executive performance are Assessment Centre method, Critical Incident Technique, 360-degree feedback, and Rating scale. With the help of the Assessment Centre method, the management team can easily measure the performance of the employees up top manager's level.

This method helps the employees to understand their capability and capacity of the individuals in accordance with the social settings. Therefore it involves situational exercises such as role play incident, in-basket role, and business game and following this the management team will easily measure the Executive Performance. As evaluated by Manzaneque, Merino and Banegas, (2016), the critical incident technique is used for determining the negative and positive reactions of the employees in relation to a certain condition.

Therefore, by following this technique the managers, as well as the management team, evaluate the Executive performance appraisal in the bank. In the rating scale, employees are rate according to their performance and thereby it helpful for the management team of Westpac Bank to measure their Executive performance. In other words, if some employees score is not meet then further training has given to them for their improvement.

As stated by Ahmed, (2015), by 360 feedback method the bank collects comments from all the staff members by providing them appropriate form, questionnaire or survey regarding the working procedure of other staff members present in the firm. Therefore, by following all these methods the Westpac Bank is successful in measuring the Executive Performance as a whole.                                                                              

Measurement of ethical behavior and culture of Westpac Bank:-

The performance measure help in determining the performance growth of every individual working in the Westpac Bank (Westpac.com.au, 2019). Therefore, after reviewing the Westpac bank performance appraisal procedure it is seen that the measuring process sometimes affects the ethical behavior and also the culture of the bank.

The feedback report obtained from the employees to the board of directors regarding the performance measure sometime possess a negative impact on the staff members and therefore they behave in an unethical manner so that they enhance their performance growth. Due to this reason, the whole organizational culture of the bank is affected and thereby the trustworthy, as well as an honest employee, become unable to do their work properly (Agyemang-Mintah, 2018).

Therefore, it is clear that by this performance measurement approach the whole organization culture, as well as the ethical behavior of the staffs present in the Westpac Bank, is affected. Hence proper strategies should be used by this Australian Bank to overcome these situations in the future.       

Corporate goals of Westpac Bank:-

The Westpac Bank is one of the leading Australian banks whose corporate goals is only to provide all sorts of financial support to the Australian people so that they are satisfied by the bank services (Westpac.com.au, 2019). Therefore, in order to determine the corporate goals of this bank, it is necessary to review both the Chairman and CEO’s statements in accordance with this bank.

From the Chairman statement, it is clear that managers can easily serve the interests of its employees, shareholders, and customers in a well-balanced manner both now and also in future as it is considered as a corporate goal of this bank. In addition, from the CEO statement, it is noticed that one of the corporate goals is to safeguard the long-term liquidity aspects of their customers and shareholders (Díaz Díaz, García-Ramos, and García-Olalla, 2017).

Therefore, to fulfill these corporate goals the bank has uses various strategies by which they easily maintain their financial performance and also satisfy their consumer needs from this Australian bank.                                      

Performance of Senior Executive of Westpac Bank:-

Performance accessed is considered as the authentic or alternative assessment or a form of testing which generally used to measure the performance of senior executives working in this bank. The CEO and CFO of this Westpac bank are Brian Hartzer and Peter king respectively (Biondi and Graeff, 2017). Therefore to measure the performance of these two senior executives performance access is necessary for this bank.

Hence, in order to determine the performance growth of both these senior executives the financial performance measure of these members is compared. In order to compare the performance measure extended response exercises or open-ended questions are asked to both of them regarding their working procedure (Westpac.com.au, 2019). The other Board of Directors related to this firm arrange these open-ended questionnaires for both these senior executives so that they easily determine their performance appraisal.

Therefore, by these open-ended questionnaires procedures, the directors of the bank except CEO and CFO easily make a report where the answers are written which become helpful for them to understand the growth of senior executives in comparison to both of CFO and CEO performance rate in a current year and previous years. Hence by following this way the Boards of Directors measure the performance rate of the senior executives present in this Westpac Bank.  

Performance measure use for motivational impacts on management behavior:-

Among all the performance measures the 360-degree feedback report is considered as the greatest motivational impacts on the management behavior. With the help of this feedback report, the management team will consider their positive and negative aspects over the bank and therefore is helpful for them to reduce their negative impacts (Birindelli et al., 2015).

In other words, the feedback report also helps the management to introduce a new strategy by which they change their behavior over employees and enhance their positive impact over the bank. Therefore, it is quite evident that the feedback report will motivate the management behavior and thereby they change their working procedure to enhance the bank performance growth in the respective Australian market.                     

Company review and analysis-

Remuneration committee and its membership:-

Westpac Bank remuneration strategy is designed in such a manner that they can easily retain and attract talented employees for their bank (Provasi and Riva, 2016). Therefore, the remuneration outcome determines the performance of this bank in the whole year and also the long term value for shareholders as wells customers respectively. Hence the remuneration committee consists of all the senior executive team members and also the non-executive directors of this Westpac Bank.

The senior executive team consists of the CEO of all fiscal group, CFO, Chief Information Officer, and the Chief Risk officer whereas the directors consist of all board of directors and the chairman respectively. Therefore, in order to get membership in the remuneration committee, the members have to be a Board of Directors or become in the senior executive team member and thereby place at a stable position in this bank (Mans-Kemp and Viviers, 2018). In other words, by focusing on individual long-term performance and strategic direction, one member is selected for this committee.                                      

Allocation of Executive Remuneration:-

In Westpac bank, the allocation of executive remuneration refers to the proportion instead of the amounts of fixed pay versus the variable or ‘at-risk-pay’ that generate sometimes in the form of LTIs and STIs respectively. Therefore, it is clear that the allocation of executive remuneration consists of five different elements and they are salary, long-term incentives, commission, bonus, and perquisites.

The executive or the members of the management team provides remuneration on salary and long-term incentives in accordance with their performance growth (Dickfos, 2016). In addition, if the risk related to this firm is reduced then the executive give remuneration on the basis of bonus, commissions, and perquisites.         

Performance measure tools:-

In order to measure the Financial Performance as well as the non- financial performance, various tools have been used by the Westpac Bank of Australia. Therefore to measure the financial performance, the tools that are used by the bank are ROE (Return on Equity) and EPS (Earning per Share). In addition, for measuring the non-financial performance balanced scorecard is used as a tool for this purposes.

The ROE tool is used for measuring the procedure by which management uses the shareholder's money (Słomka-Gołębiowska, 2016). In order to determine that the management team divide the net income amount with the shareholder's equity. The results thus produce gives information about the usage of shareholders money by the management. Besides this, it also uses EPS tool for measuring the performance of the bank and also its shares in the corresponding Australian market.

With the help of EPS tool, the bank calculated their average number of shares in the market and thereby introduce some strategies that eventually help them to increase their marketer share in Australia. Hence it is clear that with the help of these tools the Westpac bank management team easily measure the financial performance of this organization. In other words, to calculate the non-financial measures the bank uses balanced scorecard so that they easily track the procedures by which the employees reached their short as well as long-term goals.

With the help of this balanced scorecard, the management team collects quantifiable information from all executives including the board of directors, managers and also the other staff members related to this bank (Swanepoel and Smit, 2016). The information thereby helps the management team to measure the performance growth of all these individuals in terms of non-financial aspects. Besides this, to capture the image of all these measures the management team uses screen grabs through the Windows “Sniper” tool so that they easily get all information related to both financial and no-financial matter of this bank.                                                  

Company performance versus executive pay:-

The company performance or the total shareholder value and the executive pay are considered to be one of the vital components in today's banking sector. Therefore, in accordance with that, the role of company performance and executive pay in relation to this Westpac bank shows that both these concepts are quite different from one another (Yeoh, 2015).

After reviewing the bank information it is seen that sometimes the increment of executive pay causes an adverse impact on the company performance rate and that negatively affect the bank financial growth in the Australian market. In addition, the executive pay is only for the board of directors and the remuneration committee and therefore it provides a narrative impact on the employees working procedure. Hence it is also considered as the reason for which the bank performance is affected by this executive pay in the Australian market.               

Evaluation of Financial and Non-Financial measures:-

After reviewing the Westpac bank annual report it is analyzed that both the financial and non-financial measures help this firm to maximize their shareholder's value as well as the outcomes in this Australian market.

Therefore, to achieve desired outcomes of their shareholder's value the firm uses three types of financial and non-financial measures and they are accounting measures, market measures and the combination of measures (Smit and Zyl, 2016). Accounting measures is a financial measuring tool that generally useful for measuring the operating profit, return on investment or the residual income of this Australian bank.

In other words, financial measures are also done by liquidity and profitability performance measurements. Liquidity refers to the ability by which this bank meet all its financial obligations in an effective manner and as per the stipulated time. Therefore to measure it both the liquid and non-liquid assets of the firm should be determined.

In addition, for measuring the profitability performance, the bank has to determine its return on assets, return on equity and also the cost to income ratio. After determining all these the bank will determine their profitability performance rate in the respective year.

Besides this, to determine the achievable desirable outcomes of their shareholders the non-financial metrics such as the market measures and the combinations of measures are useful for this firm (Wells, 2015). With the help of market measures, the bank will determine the shareholder returns and the stock prices of their bank in this Australian market.

In other words, by a combination of measures, the bank is able to measures both customer satisfaction rate as well as the market share respectively. Hence after reviewing all these financial and non-financial measures, it is quite evident that both these measures are useful for the firm in achieving the desirable shareholder outcomes.                                                         

Comparison of remuneration methods used to the research content-

After reviewing the company performance it is seen that the Westpac bank uses varieties methods for measuring the executive performance and also the company performance respectively.

Therefore a comparison between both this method help this bank to easily innovate their services to satisfy their customers and also to enhance their performance in the chosen Australian market. In accordance with the executive performance measurement, the firm uses the assessment center method so that they understand the capability and capacity of their employees in terms of social context.

In other words, the ROE methods of performance measures are used for determining the usage of shareholders money by the management (Wells, 2015). Therefore both these context are totally different from each other as one determine the performance measures and others determine the financial rate.

Besides this, another comparison is that, with the help of 360 feedback report and rating scale the management team enable to measure the employee performance rate in accordance with the working procedure. On the other hand, by following the balanced scorecard the management team collect quantifiable information about all executives included in this bank (Odewale and Kamardin, 2015).

Therefore among both these methods, it is clear that one method is used for collecting feedback from staffs while the other is used for collecting information from the executives. Hence, it is quite evident that the methods used by the company and also the methods described in the research literature possess different characteristics and thereby they are comparable to one another.                                               

Westpac Bank remuneration methods:-

From the report, it is clear that the remuneration report of this Westpac bank is designed in such a manner that it reflects the performance of the employees working in this firm for the respective year. In other words, it also demonstrates the long term value of the bank for their Australian customers as well as shareholders in accordance to sound management, reflecting accountability and governance principles (Zalewska, 2016).

Therefore, to maintain the remuneration method the company uses various methods and measures by which they provide good results for their shareholders. Hence, from this fact it is clear that by following the various financial and non-financial metrics the bank is able to manage their management control procedures and thereby enhance their performance growth.                        

Conclusion-

After analyzing the Westpac bank remuneration system it is seen that the firm focuses on the measuring procedure of executive and the company performance in the respective Australian market. In order to enhance their remuneration procedure, the bank uses various methods to achieve their corporate goals and to increase their performance rate in this respective market. Besides this, it is seen that CFO and CEO play a vital role in enhancing the performance level as the remuneration procedure of this firm.               

References-

Agyemang-Mintah, P., 2018. Remuneration committee governance and firm performance in UK financial firms. Innovations13(1-1), pp.176-190.

Ahmed, A., 2015. Exploring the Corporate Governance in Lloyd’s and the Co-operative Bank: the Role of the Board. Journal of Business and Management Sciences3(1), pp.6-19.

Biondi, Y. and Graeff, I., 2017, December. Rethinking bank shareholder equity: The case of Deutsche Bank. In Accounting Forum (Vol. 41, No. 4, pp. 318-335). Elsevier.

Birindelli, G., Ferretti, P., Intonti, M. and Iannuzzi, A.P., 2015. On the drivers of corporate social responsibility in banks: evidence from an ethical rating model. Journal of Management & Governance19(2), pp.303-340.

Deysel, B. and Kruger, J., 2015. The relationship between South African CEO compensation and company performance in the banking industry. Southern African Business Review19(1), pp.137-169.

Díaz Díaz, B., García-Ramos, R. and García-Olalla, M., 2017. Shareholder wealth responses to European legislation on bank executive compensation. Journal of Economic Policy Reform20(3), pp.271-291.

Dickfos, J., 2016. The Costs and Benefits of Regulating the Market for Corporate Insolvency Practitioner Remuneration. International Insolvency Review25(1), pp.56-71.

Mans-Kemp, N. and Viviers, S., 2018. Executive performance evaluation and remuneration: Disclosure and practices of selected listed South African companies (2002− 2015). South African Journal of Accounting Research, pp.1-20.

Manzaneque, M., Merino, E. and Banegas, R., 2016. Directors’ Remuneration in Spain. In The Theory and Practice of Directors’ Remuneration: New Challenges and Opportunities (pp. 157-183). Emerald Group Publishing Limited.

Odewale, R.W. and Kamardin, H., 2015. Directors’ Remuneration Disclosure Transparency in Nigeria and the Influence of Block Share Ownership. International Journal of Business and Social Research5(8), pp.65-78.

Provasi, R. and Riva, P., 2016. The European Approach to Regulation of Director’s Remuneration. In The Theory and Practice of Directors’ Remuneration: New Challenges and Opportunities (pp. 225-253). Emerald Group Publishing Limited.

Ruparelia, R. and Njuguna, A., 2016. The relationship between Board Remuneration and Financial Performance in the Kenyan Financial Services Industry. International Journal of Financial Research7(2), p.247.

Skovoroda, R. and Bruce, A., 2017. Shifting the goalposts? Analyzing changes to performance peer groups used to determine the remuneration of FTSE 100 CEOs. British Journal of Management28(2), pp.265-279.\

Słomka-Gołębiowska, A., 2016. The Effect of Remuneration Committee Independence on the Pay-Performance Relationship: Evidence from the Banking Industry in Poland. Eastern European Economics54(1), pp.71-89.

Smit, A.M. and Zyl, J., 2016. Investigating the extent of sustainability reporting in the banking industry. Banks and Bank Systems11(4), pp.71-81.

Swanepoel, E. and Smit, A.M., 2016. The impact of executive remuneration on risk-taking in the banking industry. Investment Management and Financial Innovations13(3), pp.110-117.

Wells, P.J., 2015. Executive remuneration: regulatory reforms in UK company law. International Journal of Law and Management57(4), pp.300-339.

Westpac.com.au. (2019). 2018 AGM | Westpac. [online] Available at: https://www.westpac.com.au/about-westpac/investor-centre/events-and-presentations/latest-agm/  [Accessed 8 Jan. 2019].

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