How Commonwealth Bank Structures Executive Bonuses: What Australian Employers Can Learn

Commonwealth Bank's executive bonus structure is a useful example of how a large Australian company links remuneration to business performance without relying solely on financial results. Its approach also demonstrates something that many smaller organisations overlook: a bonus plan needs to consider both what an executive achieves and how those results are delivered.

This article examines the Commonwealth Bank of Australia (ASX: CBA) executive remuneration framework using its published FY2025 mechanics, with FY2026 context where available. It then shows how a business can adapt the principles without introducing unnecessary complexity.

What does Commonwealth Bank's executive remuneration package include?

CBA's framework has four major elements:

CBA retained these four principal elements in its FY2026 remuneration framework. The precise financial example below uses FY2025 disclosures, rather than assuming that every FY2025 percentage necessarily applies unchanged to later awards.

Sources: CBA FY2025 Annual Report and CBA FY2026 Annual Report.

How did the CBA short-term bonus work in FY2025?

CBA's FY2025 STVR design provided executives with a target bonus opportunity equal to 75% of fixed remuneration and a maximum opportunity of 125% of the target bonus, approximately 93.75% of fixed remuneration.

For the CEO and business-unit Group Executives, the scorecard balanced financial measures with non-financial outcomes.

The non-financial category included customer, people and leadership, and strategy execution outcomes. Support-unit executives and the Chief Risk Officer had different weightings to reflect their roles.

This distinction is important. A CFO or risk executive should not automatically have the same performance measures as a sales leader, even if both participate in the same organisation-wide bonus framework.

What does that mean in actual dollars?

CBA reported FY2025 fixed remuneration of $2,850,000 for CEO Matt Comyn. Applying the disclosed FY2025 target STVR percentage produces the following illustrative opportunity calculation.

The published cash STVR received figure was $1,148,639; small differences between calculations using rounded disclosures and reported amounts can arise from the underlying award calculation. The other half was subject to deferral arrangements. The total cash bonus is therefore not the same as the full STVR award.

CBA disclosed that the FY2025 CEO outcome was 86% of maximum, equivalent to 107.5% of target. The risk and values assessments resulted in no additional adjustment to that outcome.

Source: CBA FY2025 remuneration report.

Which performance measures influenced the bonus?

The FY2025 CEO scorecard included two financial measures, Group net profit after tax (NPAT) and profit after capital charge (PACC), each weighted at 25%. These were accompanied by non-financial measures linked to customers, leadership and strategic execution.

The organisation did not simply take the final profit number and apply a bonus percentage. It compared outcomes with pre-established performance expectations, considered how the results were achieved, and applied board judgement through risk and values assessments.

That makes the plan more balanced than a bonus based only on revenue or profit, although it also requires governance and clear recordkeeping.

Why does Commonwealth Bank defer part of the bonus?

Under the FY2025 structure, 50% of an executive's STVR award was deferred into shares, vesting in equal portions after one and two years, subject to applicable conditions.

For a hypothetical $100,000 short-term incentive award, this means:

These figures illustrate the disclosed proportions, not the future market value of the shares.

Deferral can support longer-term accountability because the value of part of an executive's award remains exposed to later developments. The FY2025 framework also allowed adjustments for risk and reputation and included malus and clawback provisions where applicable.

In FY2026, CBA told shareholders that the board made three downward adjustments to executive leadership remuneration outcomes following risk and reputation considerations. This demonstrates that the risk overlay is more than a theoretical design feature.

Sources: CBA FY2025 remuneration report and CBA 2026 AGM discussion.

What can a smaller Australian business learn from CBA?

Most businesses do not need multiple equity plans or the same level of regulation as a major bank. They can, however, apply the underlying principles in a simpler annual incentive plan.

Imagine an Australian services company with a general manager earning $180,000 fixed remuneration and a target bonus opportunity of 20%. The target bonus is therefore $36,000.

The business could adopt the following scorecard:

Suppose the manager achieves 110% of target on operating profit, 100% on customer retention, 90% on people and leadership, and 100% on strategic delivery. Using a simple weighted performance calculation, the combined score is 102% of target.

Target bonus $36,000 × 102% = $36,720 before any applicable gateway, modifier or maximum cap.

This is an illustrative company-designed calculation, not CBA's actual methodology. The organisation should define its payout curve, minimum thresholds, maximum outcome and treatment of unusual events before the performance year begins.

How should risk affect a bonus outcome?

A positive financial result should not always produce an unrestricted bonus. An organisation may decide that serious safety breaches, misleading sales practices, material customer harm or significant compliance failures reduce or eliminate part of an otherwise earned incentive.

That does not require a complicated risk system. A smaller employer could document three levels of assessment: no material concerns, concerns requiring adjustment, and serious breaches requiring a zero outcome, with decisions made consistently and subject to employment and legal obligations.

The key is to explain the rules before employees participate, retain evidence for each decision, and avoid making arbitrary retrospective changes to contractual entitlements.

How much of the bonus should be paid in cash?

CBA's FY2025 framework deferred half of short-term executive awards, but that percentage is not a universal best-practice requirement for Australian employers.

For a small or medium-sized business, full cash payment may be appropriate when the bonus is relatively modest, measures are clear, and executives have limited influence over long-term risk. A partial deferral can be useful where an executive's decisions have consequences that emerge over several years.

These are design options, not recommendations to copy CBA's percentages.

Five mistakes to avoid when copying a large-company bonus plan

Using too many performance measures. An executive who has to track fifteen different metrics may not understand what matters most. Four or five carefully selected measures are often easier to administer.

Rewarding financial results without checking risk. Sales growth can be achieved through discounting, poor credit decisions or practices that create later problems. Balance financial outcomes with appropriate quality and control measures.

Confusing bonus opportunity with actual payment. A target bonus of 20% does not mean every employee receives 20%. Define threshold, target and maximum performance, along with the payout method.

Copying executive percentages without benchmarking the role. CBA's opportunities reflect its scale, regulation and executive market. A small Australian company should establish its own incentive opportunity using role scope, business affordability and relevant market data.

Forgetting the administration. Plan rules should explain eligibility, measurement periods, payment dates, employee exits, discretion, deferral and approval authorities. A simple plan with clear administration is more valuable than an impressive plan nobody can operate.

A bonus plan checklist for Australian employers

Before approving the next annual incentive plan, check the following:

• Target bonus opportunities have been defined for each eligible role.
• Threshold, target and maximum payouts are documented.
• Financial and non-financial performance measures are balanced.
• Employees can influence the outcomes used to assess them.
• Risk, conduct and compliance conditions are clearly specified.
• The organisation has modelled total bonus costs at target and maximum.
• Deferral and payment timing are clear.
• Plan rules are reviewed for relevant legal, tax and employment obligations.
• The approver and performance review process are documented.
• Employees receive a clear explanation of how their bonus is calculated.

The lesson from Commonwealth Bank

The most transferable part of CBA's framework is not the size of its executive bonuses. It is the discipline of combining measurable financial results, non-financial performance, risk accountability and longer-term alignment.

A smaller employer can achieve much of the same clarity with a four-measure scorecard, a simple payout formula, a defined maximum and a documented approval process. The objective is not to replicate a major bank's entire remuneration system, but to create a bonus plan that encourages sustainable performance and can be explained to every participant.

Need help reviewing your bonus or executive incentive plan? Contact Remunera for short-term incentive design, performance scorecards, market benchmarking and executive remuneration advice.

Reporting note: The detailed payout percentages and worked CBA example in this article relate to the financial year ended 30 June 2025. The 2026 annual report and AGM are referenced only for more recent context. Plan terms should be checked against the applicable reporting year before they are adopted or quoted as current.