The good and the bad in the ANZ pay overhaul

  • By Christine St Anne

Although the move by ANZ to shift away from bonuses is a positive step, there are a number of issues that still need to be tackled if bank pay is to be truly aligned with good culture and proper conduct. 

On Tuesday, ANZ announced that it would replace individual bonuses for the bulk of its staff with an incentive based on the overall performance of the group. 

Only a small number of executives – who come under the BEAR regime - will receive bonuses as per those regulatory requirements. 

The incentive staff will receive will be in the form of a ‘group performance dividend’  - based on the bank’s performance from a risk, financial, customer, people and reputation perspective. 

Macquarie University’s Applied Finance Centre Association Elizabeth Sheedy sees a number of positives but also drawbacks form ANZ’s approach. 

“The disadvantage in removing bonuses is that it may not drive staff motivation and a ‘free rider’ problem emerges,” Sheedy said.

This ‘free rider’ problem is inherent in large businesses where non-performing staff benefit from those that work hard and effectively. 

For Sheedy, however, the advantage of moving away from bonuses will drive a better culture that is “more collaborative and less self-interested”. 

Indeed, the university’s research has shown that bonuses does lead to a culture of self-interest.

“That can be very conducive to misconduct. I do think it is an interesting move and there could be some benefits that flow from this approach.” 

However, Sheedy does have some reservations particularly around how measures will be applied to some of the aspects of the ‘group performance dividend’. 

“For example, how will the bank measure the customer or culture elements? Those will remain big issues.” 

In terms of motivating staff, Sheedy sees workplaces that provide a clear career paths and a meaningful work environment as potential drivers.

“People can be motivated by just working in a positive work environment where they feel valued and where they feel they are doing interesting work. Managers need to be able to make people think more about their professional values rather than being obsesses with bonuses.”

Her research consistently highlights that a bonus culture attracts the wrong people. 

“The danger here is that you attract a cohort of people that are self-interested and only motivated by money.”