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CBA execs just lost millions of dollars in bonuses

Commonwealth Bank chief executive Ian Narev. Photo: Peter Parkes / AFP / Getty Images.

CEO Ian Narev and his senior management team have lost their short term bonuses over the money laundering scandal.

Board directors will also have their fees reduced by 20%. These fees range from $874,195 for the chair and about $300,000 for a non executive director.

Narev last year received received $1.4 million in short term incentives. His 11 senior executives shared almost $6.6 million.

The Commonwealth last week was taken to the Federal Court for alleged breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act involving combined cash deposits of $624.7 million.

The bank says the problem, which potentially could see Australia’s largest company facing massive fines, started with a simple software update with its ATMs.

The bank’s board of directors met Monday to consider financial results and the remuneration for senior executives for the 2017 financial year.

The board says it recognises the heightened public interest in executive remuneration, particularly concerning the civil penalty proceedings by Australia’s financial intelligence and regulatory agency, AUSTRAC.

The action follows an investigation into the use of intelligent deposit machines which, it is claimed, became the outlet of choice for criminal syndicates to shift offshore cash from drug deals.

“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,” says chairman of the Commonwealth Catherine Livingstone.

“The overriding consideration of the Board was the collective accountability of senior management for the overall reputation of the Group.”

Livingstone, who has only been chair of the Commonwealth since January this year, says Narev “retains the full confidence of the Board”.

At the weekend, Narev said he was focused on doing his job and has no intention of stepping down.

Livingstone says the decision on incentives will be disclosed in detail in the CBA annual report to be released next week.

“In reaching this conclusion the overriding consideration of the Board was the collective accountability of senior management for the overall reputation of the group,” she says.

“The board also recognised that it has shared accountability and therefore has decided to reduce Non-Executive Director fees by 20% in the current 2018 financial year.”

The CEO and senior executives get both short and long-term variable bonuses based on performance against key financial and non-financial measures.

Executives receive 50% of their short term incentive as cash following the bank’s year-end results. The remaining half is deferred for one year and earns interest at the CBA one year term deposit rate.

The Commonwealth is tomorrow due to release its annual results, widely expected to be a record cash profit of about $9.8 billion.

The pay details for Narev and his team, according to the 2016 annual report:

Source: 2016 CBA annual report.

Here is Livingstone’s full statement:

    Tuesday, 8 August 2017 (Sydney): 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 NonExecutive 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.

    Mr Narev retains the full confidence of the Board.

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