It’s just not enough
YESTERDAY’S move by the Commonwealth Bank board to slash the bonuses paid to CEO Ian Narev and the entire senior executive management group – and indeed, their own board fees – was appropriate, proportionate and timely. It was also not enough.
There has to be a “second leg” – specific, harsher, penalties applied to the pay of the key line executives who had direct responsibility for the areas caught in the Austrac debacle. This was of course primarily – but importantly, not exclusively – centred on the so- called “intelligent” ATMs.
The two key executives most directly in the firing line – that word is not used loosely – are Matt Comyn, the head of the retail bank and touted as a potential successor to Narev ( bluntly, categorically, no longer), and David Whiteing, the chief information officer.
A third top exec, chief risk officer David Cohen, should also arguably incur a similar additional penalty. In all cases that would – should – be done by eliminating their long- term bonuses for at least one year.
And of course there’s Narev. The “bouncing buck” of responsibility goes from desk to desk up the senior executive group, but finally lands, and stays, on his desk.
As such, he has to take a specific haircut as well. As I suggested yester- day, it would be best if he actually volunteered the penalty.
I am presuming that the board, led by the chairman Catherine Livingstone, not only fully understands this, but indeed has actually acted, and it is intended this will be disclosed in the formal remuneration report next week.
One would also have to presume that there is no way in the world that Narev will get through today’s formal profit briefings without being asked specifically about this. Again, I would presume he would have the appropriate answer.
Read properly, this is all implicit in what was said and not said in Livingstone’s statement yesterday.
Yesterday’s across- the- board cut was about collective responsibility for the brand damage and indeed, quite simply, shared bad corporate behaviour. As Livingstone specifically stated: the “overriding consideration of the board was the collective accountability of senior management for the overall reputation of the group”. The board also shared accountability.
There was no reference to specific individual responsibility for behaviour and events, which quite simply, one way or the other, are going to cost the CBA at least tens of millions of dollars and quite possibly hundreds of millions.
There has to be an individual executive accountability, obviously not just at the level of senior executive management.
It would have been ludicrously inappropriate and functionally inept to ( try to) postpone this group accountability until all the judgments and conclusions were in.
Indeed, it was more sensible for Livingstone to make yesterday’s statement ahead of and separate from today’s profit report, instead of as I wrote yesterday, with it.
All much the same applies to any more direct executive accounting.
There can and will be reasonable arguments over the extent of CBA’s culpability and over individual executive failure or just responsibility – and so the extent of the Austrac penalties – but there can be absolutely no doubt CBA is done for all money on the basic failings which were ones of absolute liability.
So, specific executive pay penalties should be imposed now. Doing so is also a matter of basic fairness to all the other executives, who have copped the shared responsibility but had no part in the issues that caused the debacle.
What might be termed the “third leg” of accountability – any actual specific executive sackings – can and should be played out on a more considered basis.
This becomes even more important in the context of Narev’s future as CEO.
Now, CBA is being done for all money entirely on its own. None of the other three big banks have been pinged – so far – by Austrac.
Just maybe that’s because they limited cash deposits to sums less than the $ 10,000 Austrac reporting threshold, while CBA tempted both fate and technology by allowing individual deposits up to $ 20,000.
Livingstone closed her statement yesterday with the crisp statement that Narev “retains the full confidence of the board”.
It was important to make that clear. It was also entirely appropriate. The suggestions that Narev should be sacked were and are hyperbolic media ( and or) hysteria.
Nothing that has surfaced – and not just in relation to this but the other matters of controversy around CBA – constitutes either individually or even collectively a CEO sacking offence.
The primary ( but not only) responsibility of a CEO is corporate success. We are going to see evidence of that, in spades, today when CBA unveils a profit of around $ 10 billion.
Yes, profit is not the only metric for judging a CEO, but it is certainly the starting metric. And to state this is to accept that banks are particularly complex. How was the profit achieved?
There is no basis for a board to sack Narev.
That said, he’s been CEO for seven years. He’s not going to be CEO for another seven. That suggests his continued tenure will be somewhere between one and four or so years.
There is one ticklish issue: Narev is slated to become chairman of the Australian Bankers’ Association at the end of the year.
That is arguably no longer either sensible or functional, both because of CBA’s failings and the way the rest of the industry is increasingly blaming it for banking’s bad image, seemingly all tumbling inexorably towards a ( completely unnecessary, politically cynical, stupid and potentially harmful) royal commission.
If Narev can’t be chairman of the ABA, how long can he stay CEO of the CBA?