## 4.2 An independent remuneration review has been undertaken 

The BRC has access, as required, to Macquarie's senior management and has retained an independent consultant, Pay Governance, for the use of the Board to obtain advice on the appropriateness of Macquarie’s remuneration system, objectives and program and other employment conditions. 

The BRC, on behalf of the Non-Executive Directors of Macquarie, commissioned an independent review of executive remuneration from a USA office of Pay Governance (the Pay Governance Review). The only services that Pay Governance provides to Macquarie are executive compensation consulting to the BRC. This year, the Pay Governance Review considered the overall approach to remuneration, peer organisations’ overall approach to remuneration, the extent of alignment with shareholder interests and a comparison of individual remuneration for senior executives where relevant peer information was available. In addition, the BRC independently analysed global remuneration trends and data. The cost of the Pay Governance Review was $US135,000. 

Pay Governance has confirmed that its analyses and observations have been made free from undue influence by Macquarie’s Executive KMP. The Board is satisfied that the remuneration review conducted by Pay Governance was made free from undue influence by the Executive KMP for the following reasons: 

GLYPH<150> the agreement for services was executed by the Chairman of the BRC, and agreed to by the Global Head of Human Resources under delegated authority on behalf of Macquarie 

GLYPH<150> the Pay Governance Review was provided by Pay Governance directly to the BRC Pay Governance attended one BRC meeting to present their findings 

GLYPH<150> Pay Governance held meetings with the BRC Chairman in relation to the Pay Governance Review, no senior executives had separate, direct contact with Pay Governance. 

Pay Governance’s findings were that: 

GLYPH<150> Macquarie has used essentially the same remuneration system since Macquarie’s founding, which has incrementally evolved by adopting many emerging best practices in response to the changing market and regulatory environment 

GLYPH<150> the objectives on which Macquarie’s remuneration system are built are similar to those cited by other leading global investment banks, including the need to drive shareholder returns over the short and longer term, align the interests of staff and shareholders, the importance of attracting and retaining the right talent, and structuring and delivering remuneration to not encourage excessive risks 

GLYPH<150> Macquarie’s remuneration system has a paramount goal to encourage management to drive shareholder returns over the short and longer-term, whilst factoring in risk 

GLYPH<150> Macquarie’s remuneration components support its remuneration objectives and principles and are very much in line with practices at peer global investment banks, including that: 

GLYPH<150> for senior executives, fixed remuneration is modest (although meaningful) relative to total compensation, the bulk of which is delivered through variable means (annual and long-term incentives) 

GLYPH<150> the annual profit share is based on profit and return on equity, which are recognised by most peers as necessary to drive performance and therefore returns to shareholders, and takes risk management into account 

GLYPH<150> individual profit share awards to executives are highly differentiated to take into account individual contribution and results a significant portion of profit share is invested in both Macquarie equity and notionally in Macquarie-managed funds and withheld for several years 

GLYPH<150> executives must maintain a meaningful equity stake in Macquarie equity-based compensation (in the form of Macquarie shares and PSUs for Executive Committee) is used as a long-term incentive for executives 

GLYPH<150> Macquarie imposes a long vesting period on the portion of profit share deferred Macquarie’s total compensation as a percentage of revenue is in the lower half of its global banking peers. 

