NBN Co says network 'stress test' during Covid grounds for $78m in bonuses

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NBN Co says network 'stress test' during Covid grounds for $78m in bonuses

Chair lauds "extraordinary" performance.

NBN Co chair Dr Ziggy Switkowski has defended the payment of almost $78 million in bonuses to staff last financial year, arguing the network survived a major “real-time stress test” that was worthy of reward.

Appearing before senate estimates on Friday last week, Switkowski - who chairs the company’s remuneration committee - said the network and the team building and operating it had delivered an “extraordinary outcome” for Australian internet users during the pandemic.

“The view that NBN Co took through the committee and the board was the public interest was best served by our building and managing a first-rate network, having consumers confident in its performance, making sure the network was resilient, and ensuring that it was affordable, even as people began to work from home and home-schooling kicked in,” Switkowski said of the decision taken to award bonuses.

“That’s what drove us.”

Switkowski said it was one thing to build the network but another to properly stress test it.

“The thing is [to] test it, as the Covid environment did, in terms of the stresses on the network and the dependence that the community quickly developed on having reliable access to a ubiquitous network was unusual,” he said.

“In many ways it was a kind of real-time stress test of the network just as the build was completed. 

“That was an extraordinary outcome and to this day is an extraordinary situation where NBN facilities and network has continued to deliver to expectations.”

Switkowski did not view this as business-as-usual, nor as simply NBN Co meeting its core obligations as a network builder and operator, and therefore argued that bonuses for doing so were justified.

“The public interest, in my view, was always that the network be built, available, reliable, resilient and could be counted upon,” he said.

“I don’t think it’s appropriate to say, ‘Well that doesn’t matter, we were in a Covid environment and therefore everybody should have some modification to their bonuses’. 

“Some people may take that view. I did not.”

Switkowski also said that the bonus structure had been in place at the company for some time, and was an accepted part of its remuneration structure.

“We drafted a remuneration framework seven years ago that, as part of the remuneration for NBN employees, [comprises of] a base rate and an at-risk component which varied depending on performance, and that model has persisted to this day,” Switkowski said.

“It’s a very normal model. It produces plausible outcomes, and I certainly took the view that given the performance of NBN, given the criticality of its contribution during Covid, given the contracts we have with our employees, that that would lead to the bonuses that we eventually paid.”

Labor blasted the awarding of sizable bonuses during Covid as “excessive, unreasonable and lacking in justification” when the total amount was revealed in late answers to questions on notice filed last month.

Communications Minister Paul Fletcher also reportedly put NBN Co “on notice” over the payments.

However, Switkowski said the Minister had previously been informed of the amounts that the NBN remuneration committee had signed off on.

He said that NBN Co’s shareholder ministers had contacted the company “at or before mid-July” last year to “draw our attention to the circumstances of the nation’s economy [during Covid] and to advise that we need to be prudent in the disposition of these short-term incentives.”

“[That] would have been before we drafted the remuneration report and included the amounts that were proposed, so it would have been at or before mid-July,” Switkowski said.

“The normal practice is I would call the communications minister and broadly outline where the remuneration committee was landing in terms of incentives and bonuses and at-risk pay.

“Once the remuneration committee and board have approved the allocation of short-term incentives, I inform the minister, which is what I did.”

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