The CEO of ‘millionaire factory’ Macquarie Bank just lifted the lid on its pay structure, which he argues is unique and designed to keep people long-term

Nicholas Moore Screenshot from webcast
  • Macquarie bank believes its system of paying it staff is unique.
  • Unlike the big four banks, its shares profit rather than gives bonuses.
  • And it makes every employee accountable for their actions.

Nicholas Moore today gave insight into how Macquarie Group, once widely referred to as the millionaire’s factory, pays its staff.

“Profit share is more powerful than bonus,” he told the financial services royal commission.

Moore, Australia’s highest paid chief executive, gets a base pay of around $800,000 but his share of profits pushed this to $18.9 million last year.

He stands down as CEO next week. He is being replaced by Shemara Wikramanayake, the Group Head of Macquarie Asset Management.

How bank CEOs and their senior executives are paid is an underlying theme of the royal commission hearings, looking at the key question of how financial incentives drive behaviour and sometimes create conflict with a duty to serve the interests of customers.

The big four banks have wound back short term bonuses following a series of scandals including the fee for no service issue where customers were charged for financial advice they didn’t get.

Macquarie last year posted a record full year net profit of $2.56 billion, the 49th year in a row of profitability.

Moore says the company’s senior leaders are paid relatively low but then get to share in profits with the shareholders.

The more senior the person, the more their pay is dependent on the underlying performance of the business.

“I believe our system is unique,” Moore told the royal commission hearing.

“I think the idea of profit share is more powerful than bonus.

“Bonuses often relate to revenue rather than bottom line outcomes.”

Part of the profit share is deferred for several years.

“Decisions being made today have consequences over many years and so making sure there is that alignment over a period of time, I think, is very important,” says Moore.

He says the profit share isn’t solely driven by finance.

“We say to every person in the business they’re accountable for the outcomes that they deliver, particularly for business managers,” he says.

“So every business manager is accountable for … financial outcomes, conduct outcomes, regulatory outcomes, client outcomes, all the outcomes.”

“Our philosophy is very much this partnership one. We want people joining the organisation effectively to be committing for a long period of time.”

Moore believes that consciousness of accountability is the greatest safeguard of the long-term health of the organisation and client outcomes.