Labor calls for audit of NBN Co executive bonuses

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Labor calls for audit of NBN Co executive bonuses

Queries relationship between payouts and financial performance.

Labor is urging the Australian National Audit Office (ANAO) to scrutinise millions of dollars in at-risk payments made to NBN Co executives last financial year.

NBN Co made almost $78 million in at-risk payments - what Labor terms “bonuses” - to 3800 staff last financial year.

The breakdown on payments was secured by Labor using parliamentary processes back in May.

Labor has now written to the ANAO seeking “an audit of NBN Co executive bonuses for the 2019-2020 financial year and the legitimacy of the underlying targets to which the bonuses were linked.”

A copy of the letter was sighted by iTnews. Its existence was first reported by the Australian Financial Review.

“In response to recent questioning by Labor Senators on May 26, the ANAO advised that it does not have a specific role in auditing the appropriateness of performance targets to which NBN executive bonuses are linked and had undertaken no prior activities in this area,” Shadow communications minister Michelle Rowland and senator Kimberley Kitching wrote.

“We welcome the subsequent step to list the governance of bonuses as a potential ANAO audit item for 2021-22, and urge the ANAO to commit to this audit and examine NBNCo’s prior executive bonus decisions.”

The “potential” audit, as listed on the ANAO website, would “assess the effectiveness of governance arrangements for executive remuneration in selected government business enterprises (GBEs).”

Rowland and Kitching argued that “if senior executives and boards of GBEs do not believe the appropriateness and specific substance of performance targets will ever be subject to independent audit scrutiny, there is a risk taxpayers will fund unreasonable and excessive bonuses in exchange for average performance.”

They pointed to the cost blowouts and delayed revenue targets by NBN Co, and questioned what impact these occurrences should have had on the at-risk component of executives’ pay.

“In the case of NBNCo, the entity might have an incentive to set and surpass artificially low targets to create the impression that an over-budget project is beating performance metrics,” Rowland and Kitching wrote.

“There is a recurring pattern of revenue targets being repeatedly revised down to levels which are highly unlikely to be missed, and then being surpassed. Meanwhile medium-term forecasts are missed by sizable margins.

“If taxpayer-funded bonuses are ... being linked to artificially low targets, this arguably becomes a matter pertaining to the use of public resources.”

Labor said there appeared to be “inconsistent approaches” taken to at-risk or bonus payments across different GBEs.

NBN Co chair Ziggy Switkowski has previously defended the payments, arguing the NBN withstood a “real-time stress test” during the pandemic that was worthy of financial reward for those involved.

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