CBA Cuts Executive Pay
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Thank god there’s the marriage equality brawl inside the Liberal Party otherwise the Commonwealth Bank’s blundering so far as its money laundering responsibilities are concerned might have been a really big story. So it was a ‘lucky’ CBA that this morning revealed an attempt to try and salve the wounds to its reputation The CEO loses his incentive payment for the year to June, along with other “group executives and non executive directors have their 217-18 pay cut by 20%.
In a statement to the ASX before stock market trading opened this morning, newish CBA Chair Catherine Livingstone revealed the outline of the punishments handed out to senior executives and the current non-executive directors of the board, saying the details would be published in the CBA’s annual report to be released next week (The bank reports its 2016-17 profit tomorrow). But the most important part of the statement wasn’ the punishments, it was the statement that CEO Ian Narev “retains the full confidence of the Board.”
"Yesterday the Commonwealth Bank of Australia Board met to consider the bank’s financial results and the remuneration for senior executives for the 2017 financial year. In determining the final 2017 financial year outcomes for remuneration, the Board gave consideration to risk and reputation matters impacting the Group.
"The remuneration outcomes will be disclosed in detail in the CBA Annual Report to be released next week. This year, the Board recognises heightened public interest in executive remuneration, particularly having regard to the civil penalty proceedings initiated last week by the Australian Transaction Reports and Analysis Centre (AUSTRAC). Therefore, in advance of the presentation of CBA’s financial results tomorrow, the Board advises that it has decided to reduce to zero the Short-Term Variable Remuneration outcomes for the CEO and Group Executives for the financial year ended 30 June 2017.
"In reaching this conclusion the overriding consideration of the Board was the collective accountability of senior management for the overall reputation of the Group. The Board also recognised that it has shared accountability and therefore has decided to reduce Non-Executive Director fees by 20 per cent in the current 2018 financial year.
"The remuneration arrangements for the CEO and Group Executives are made up of both fixed and at risk short and long-term variable remuneration. The ‘at risk’ components are based on performance against key financial and non-financial measures. Full details of the remuneration outcomes and the Board’s full consideration will be disclosed next week in the Annual Report.”
So that’s it - spend an hour or two in the naughty corner and then punishment time is over.
But looking at the 2015-16 annual report for guidance and it’s likely the top dozen executives including Mr Narev will have their short term incentives (STI) cut by more than $10 million. But what remains to be clarified which type of STI is to be cut - is it that for the 2016-17 financial year only, as Ms Livingstone suggests in her statement. The question comes to mind because there are two types of STI listed - that earned for the current financial year and that deferred. Half the 2015-16 STI was deferred to 2016-17. That is around $10 million or so - so will that be cut as well? After all it relates to part of 2015 when Austrac and the Australian Federal Police were having great difficulties getting assistance from the CBA on their money laundering investigations.
Total pay for the CEO and top executives was $44.8 million, according to the annual report, with $22.4 million aid to them in relation to “the 2016 performance year”. The remaining $22 million was payments deferred from earlier years. That means the ‘pay cut’ could be between 20% and 25%. But it will take a week to find out more accurate figures.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.