$\text{'}$Dr Henry said the new single bonus system would continue to use return on equity

$($ROE$)$ as part of financial metrics that would also include meeting cash earnings targets and the capital plan. The scorecard for determining bonuses would also be based on assessing various risk metrics, customer objectives including net promoter scores and product simplification, and strategic objectives, including milestones on the business transformation plan. There are also people objectives relating to staff engagement and diversity.

$...$ The recommendations of the Hayne royal commission are expected to contain calls for banks to pull back on remuneration incentives that drive bankers towards

purely financial outcomes.$\text{'}$

Required:

NAB have acknowledged that using ONLY financial performance measures alone are insufficient to truly measure their executive's performance. Discuss and analyse the following in relation to corporate remuneration and measures of performance:

a$)$ The PURPOSES of Remuneration Policies;

b$)$ The LIMITATIONS of using ONLY Financial Measures of Performance; and

c$)$ The BENEFITS $($Advantages$)$ of including NON$-$FINANCIAL Performance Measures in

a corporate Remuneration Policy.

a$)$ Purposes should include mention of GOAL CONGRUENCE or ALIGNMENT $($Mgt effort and

performance$)$ with Shareholder interest.

Alignment with STRATEGY PLUS Other alternatives may include valid purposes given, e$.$g

Offer transparency to market and specifically shareholders

Provide a full explanation as to how executive performance will be rewarded

b$)$ Limitations should include $-$ one dimension and lack of link to strategy and other include:

poor predictor of future performance, too much focus on short term rather than sustainable performance and goal achievement of company.

c$)$ Benefits should be freely listed, including links to strategy, ability of Board to REDUCE

payments if brand, reputation, customer dissatisfaction and other factors show ineffectiveness of management;

Students MAY also 'bring forward' other aspects of the BSC from Part I and this is acceptable

$-$ such things as 'scalability' $($to all levels of managers$),$ targets are MORE ACTIONABLE, MORE TIMELY etc.$)$