APRA has completed its consultation in relation to proposed remuneration disclosure requirements under CPS 511 Remuneration.
From 1 January 2024, all APRA-regulated entities will be required to disclose specific and detailed information about the salary and variable remuneration (bonuses, STI and LTI) paid to their most senior executives.
The key points arising from the remuneration disclosure regime are:
- Significant APRA-regulated entities [1] (banks, insurers and superannuation RSEs) will be required to disclose specific details about the salary and variable remuneration of their CEO, senior managers, material risk takers, and executive directors on an aggregated basis.
- Disclosures must be made by entities on their website as a standalone document or as part of other disclosures (e.g. an entities Annual Report).
- Disclosures must be made within 6 months of the end of the financial year of the entity.
- The disclosures required go well beyond the information required for disclosure under the remuneration disclosure requirements for listed companies under the Corporations Act 2001 (Cth).
- Disclosures must include:
Banks with assets greater than $20b, general/life insurers with assets greater than $10b, private health insurers with assets greater than $3b, and superannuation RSEs with assets greater than $30b.
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INFORMATION REQUIRED TO BE DISCLOSED
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INDIVIDUAL
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Example
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Remuneration framework
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Qualitative detailed descriptions of the policy and procedural settings of the entity’s remuneration framework, including:
This obligation also applies to smaller APRA-regulated entities who have less assets than the ‘significant’ entity thresholds. |
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Remuneration outcomes
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Quantitative information concerning remuneration outcomes and variable remuneration awards made in respect of a financial year, even if awarded after the end of the financial year. This requires disclosures of the fixed remuneration, and variable remuneration of persons in the regulated ‘specified roles’. |
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Special awards
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Quantitative information concerning:
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Variable remuneration outcomes
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Quantitative information concerning:
Entities are also required to provide a qualitative description of the reasons for the downward adjustment of variable remuneration. |
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What this means for your business
APRA-regulated entities should:
- Remuneration approval decision-making processes – while APRA has increased the deadline for disclosure from 4 to 6 months following the end of an entity’s financial year, we anticipate this may still present practical challenges of ensuring quality remuneration decision-making (to the enhanced standard expected by CPS 511) AND disclosing the information required by the new remuneration disclosure regime. Entities should consider their remuneration approval decision-making timelines and processes to ensure they are able to meet CPS 511’s requirements.
- Information gathering systems and processes – the range of individuals caught by the remuneration disclosure regime goes well beyond the listed company ‘key management personnel’ group for the purpose of Corporations Act remuneration reporting. Entities will need to give thought to ensuring that they have remuneration information gathering systems and processes in place to ensure the information publicly reported is available and accurate.
- Unlisted and foreign headquartered entities – the remuneration disclosure requirements under CPS 511 will create the most significant compliance burden for unlisted and foreign headquartered entities. These entities will not have had the listed company experience of remuneration disclosure under the Corporations Act, and will need to implement the points above on an accelerated timeframe.
- External media scrutiny – entities should expect that their annual remuneration disclosure information will be pored over by the media. The information required for disclosure under CPS 511 (e.g. the quantum of variable remuneration downwardly adjusted and the reasons for that adjustment) goes substantially beyond the listed company remuneration disclosure requirements under the Corporations Act.
- Entities should expect that media will:
- Benchmark and compare remuneration outcomes between entities, particularly by making comparisons between remuneration outcomes and financial and non-financial performance; and
- Adversely comment on remuneration outcome decisions which may be perceived as inadequate – but without the critical (and often highly-confidential) information that informed Board decision-making.
- Entities should expect that media will:
- Mapping ‘specified roles’ in scope for disclosure – CPS 511’s remuneration disclosure regime only applies in respect of the CEO, Executive Directors, senior managers and material risk takers. Entities should ensure that they have correctly identified their senior managers and material risk takers (in particular) so that they can meet the disclosure requirements under CPS 511.
- Remuneration framework elements – the qualitative details required for disclosure about an entity’s remuneration framework require full transparency regarding the systems and processes required for implementation by CPS 511. Entities should ensure that their remuneration frameworks meet the standards expected by APRA.
We have extensive experience advising clients about their implementation of CPS 511. Please reach out to us if you have any questions in relation to the remuneration disclosure regime in CPS 511.
