Retail franchise dictates Norris' bonus

The board of Commonwealth Bank propose to tie payment of an $11.6 million bonus to its managing director, Ralph Norris, to the relative ranking of the bank on customer satisfaction measures.

CBA wrote in the explanatory memorandum prepare for the bank's annual meeting later this month that payment of any bonus to Norris, in the form of shares, would be subject to two hurdles.

The first hurdle is that CBA's growth in net profit must exceed the average growth in profit of ANZ, National, St George and Westpac.

The second hurdle is novel. To receive full payment of a bonus Norris must see that the bank  "achieves a remarkable improvement in its customer satisfaction performance, moving up four places to be ranked first" according to the bank's notice to shareholders.

"This outcome would represent an extraordinary achievement", the bank wrote "and is expected to result in significant benefits for shareholders through increased profitability and share value."

If CBA ranks second in customer satisfaction measures Norris would qualify for 75 per cent of the bonus; 50 per cent if ranked third and 30 per cent if ranked fourth. The bank currently ranks last in measures of customer satisfaction according to surveys by Roy Morgan Research.

Norris' bonus will be worked out as a percentage (currently 2.2 per cent) of the growth
in the bank's net profit less the cost of capital over the three year performance period. The maximum value of this bonus pool is $34 million and Norris's share of this bonus pool is capped at 34 per cent.