Document ID: chunk:federal_register_of_legislation:F2023L01348:front:0:p10
Version: federal_register_of_legislation:F2023L01348
Segment Type: other
Provision Reference: 
Character Range: 25565–28632

significant misstatement of criteria on which the variable remuneration determination was based; and
(e)          significant adverse outcomes for customers, beneficiaries or counterparties.
38.         An APRA-regulated entity must take reasonable steps to appropriately adjust variable remuneration downwards when, as a minimum, any of the criteria specified in paragraph 37 are satisfied. The total downward-adjustment to variable remuneration must be proportionate to the severity of the risk and conduct outcome.
39.         In circumstances involving a person under investigation for criteria specified in paragraph 37, variable remuneration must not vest until the investigation is closed.
40.         An APRA-regulated entity must take appropriate steps to assess and mitigate conflicts of interest in the design of its remuneration arrangements, including conflicts that may arise from service contracts.

Deferral
41.         An APRA-regulated entity must defer variable remuneration as follows:
(a)          for a Chief Executive Officer (CEO), at least 60 per cent of the CEO's total variable remuneration must be deferred over a minimum deferral period of six years, vesting no faster than on a pro-rata basis and only after four years;
(b)          for a senior manager and executive director other than a CEO, at least 40 per cent of that person's total variable remuneration must be deferred over a minimum deferral period of five years, vesting no faster than on a pro-rata basis and only after four years; and
(c)          for a highly-paid material risk-taker who is not a senior manager, at least 40 per cent of that person's total variable remuneration must be deferred over a minimum deferral period of four years, vesting no faster than on a pro-rata basis and only after two years.
42.         The deferral period must include the period over which performance is assessed. The deferral period must also include any required service, retention and holding periods.
43.         Paragraph 41 does not apply in respect of any person with deferred variable remuneration of less than AUD $50,000 in a financial year of the APRA-regulated entity.

Remuneration outcomes
44.         An APRA-regulated entity must:
(a)          align variable remuneration outcomes with performance and risk outcomes; and
(b)          reflect the appropriate application of variable remuneration adjustment tools in variable remuneration outcomes, as specified in paragraph 33(c) of this Prudential Standard.
45.         An APRA-regulated entity may only pay or vest variable remuneration to a person if payment or vesting:
(a)          supports the entity's compliance with paragraph 21 of this Prudential Standard;
(b)          is justified on the basis of the effectiveness of risk management of the entity and the relevant business unit; and
(c)          is justified on the basis of the performance of the person, the relevant business unit and the entity.
46.         An APRA-regulated entity's variable remuneration outcomes must link to and be supported by the