Who didn’t want a ‘royal comm’ into the finance industry?
One would think that a person that spent most of their life in and around the money trade, with so many friends and connections in the game, that they would be privy to the lurks, perks and scuttlebutt in such an industry—wouldn’t one? Malcolm Turnbull and ScoMo were steadfast in their opposition to a royal comm into the finance industry. Nothing to see, checks and balances in place and working well, said the waffler. Well … didn’t that turn out to be BS? One would think that Malcolm had spent his life in a single pursuit—perving on himself in a mirror.
Commonwealth Bank executives have taken a collective $100 million pay cut for their part in a series of financial scandals that have savaged the bank’s reputation. The bank’s Annual Report details the impact of the board’s decision to withhold bonuses over the past two years and said, “most senior leaders within the organisation [are] being held most accountable” for the failures of compliance and conduct.
CBA executives hit with $100 million pay cut in wake of bank scandals
The bulk of the cuts — $60 million — were made in 2017 when executive short term bonuses were cut to zero and non-executive directors had their fees cut by 20 per cent.
The chair of the bank’s remuneration committee, Sir David Higgins, said the most senior executives — including former executives — have been held accountable.
“Executives have been directly impacted by the AUSTRAC settlement and the findings of the Australian Prudential Regulation Authority’s (APRA) Prudential Inquiry Report into CBA,” Sir David said.
“The Board has also exercised its discretion to adjust downwards individual executive remuneration outcomes, having regard to other risk and reputation matters.”
$1.1bn in penalties and compliance costs
The AUSTRAC settlement for breaching money laundering and terrorism funding laws cost the bank $700 million and led to the bank’s first fall in profit since the GFC.
The APRA inquiry earlier this year found there was a “widespread sense of complacency”, and “lack of accountability” led to multiple regulatory breaches at the bank.
CBA CEO Ian Narev has unwittingly highlighted the farce that is the executive bonus, writes Ian Verrender.
The impact of those breaches were an ugly blot on the bank’s 2018 full year results, showing up as a $1.1 billion charge for penalties and legal costs.
In March this year incoming chief executive Matt Comyn offered to forgo his 2018 short term bonuses, while his predecessor Ian Narev also agreed not to receive his 2018 short term bonus.
Mr Comyn forfeited $1.9 million in bonuses in 2017 and $653,000 in 2018.
The value of Mr Narev’s forfeited long-term reward rights in his final year hit $13.9 million.
Overall, around 400 current and former Executive General Managers and General Mangers were held accountable.
Mr Comyn will receive 17 per cent less in his first year in charge ($8.4 million), than Mr Narev did on his way out ($10.1 million).
CBA CEO target remuneration on appointment
Ian Narvev’s remuneration totalled $10.07 million, 17% higher than Matt Comyn’s $8.36 million
New pay policies
The annual report sheeted home the highest level of accountability for the damning APRA report to Mr Narev, while two other senior executives, former chief financial officer David Craig and former chief risk officer, Alden Toevs, also forfeited all their unvested long-term bonuses.
A toothless bear?
Do the BEAR bank executive remuneration reforms really have bite if APRA is such a reluctant corporate cop?
“We have also further improved our performance review and remuneration policies and practices to ensure greater accountability for risk and customer outcomes,” CBA chair Catherine Livingstone said.
“We have reported to APRA on the extent to which the findings of the report have been reflected in remuneration consequences for current and past executives.”
APRA assumed the role of policing executive remuneration under the Bank Executive Accountability Regime (BEAR)legislation which came into force in July, but doesn’t grow any teeth until late 2019 when existing executive employment contracts will have largely rolled over.
For her role in the saga, Ms Livingstone saw her director’s fee cut from a potential of more than $1 million to $755,000 last year.
It was a step up from the $572,000 she received in 2017.