The summary of the employment terms of the Bank of Queensland’s new CEO confirm the current trend for financial institution CEO remuneration structures in accordance with the APRA standards:
Short Term Incentive (STI)
The STI has a range of 0 – 160% of the base annual remuneration and will be based on the executive’s achievement of performance objectives set annually by the Board.
Consideration of an STI award will be subject to performance thresholds which are currently a Net Profit After Tax target and risk objectives set by the Board.
50% of an STI award will be paid as Deferred Award Rights (DARs). These award rights will vest over two years (50% each year) and will provide incentive to ensure short term performance leads to sustainable performance for the Bank.
Long Term Incentive
The long term incentive involves the granting of Performance Award Rights (PARs) which vest after three years. These award rights are subject to a vesting condition based on a comparison of BOQ’s TSR (Total Shareholder Return) over three years against a Comparator Group. If BOQ’s TSR is better than 50% of the Competitor Group then half of the allocated PARs will vest. This vesting percentage will increase on a straight line basis until the performance of BOQ’s TSR is above the 75th percentile. At this point 100% of the PARs will vest.
If the executive leaves for a reason other than summary dismissal, the vesting of PARs will not be accelerated and they will vest in accordance with their terms if the vesting condition is satisfied over the three year period.
On a “fundamental change”, the executive can terminate and receive payment of 12 months remuneration plus partial STI if awarded by the Board.
There is no accelerated vesting of DARs and PARs. For termination by BOQ or for a fundamental change, the DARs and PARs continue after termination and vesting is subject to their terms.
Fundamental Change is: removal of the executive as a director by shareholders, the executive being required to report to someone other than the Board, the executive not being the most senior executive in BOQ or in a new holding entity or the executive’s positions are redundant.
Shareholder Approval
Grants of award rights are subject to the approval of shareholders. If approval is not given, BOQ will either satisfy the entitlements by arranging for the acquisition of shares on market when DARs or PARs would have been exercised, or in cash.
