Banking sector execs have seen their average salaries plunge by $300,000 following damning allegations of misconduct and profiteering out of the financial services royal commission.
The new details were revealed by The Australian newspaper with analysis by economics editor Adam Creighton, which looked at the pay of hundreds of senior management staff from ANZ, CBA, NAB and Westpac.
It found that last year, the average pay of top management across the major banks fell to $1.2 million dollars from the year before.
While that number might still appear extraordinarily high to the average person, in banking world, it’s the lowest average in six years.
“It’s a combination of reasons,” Creighton told Your Money Live.
“It’s the royal commission and the heightened scrutiny on bonuses. And I think boards in general are more reluctant to award the maximum bonus than they used to be – because it’s just embarrassing.”
After a series of scandals were unveiled in the financial services royal commission there has been a bigger focus on the salaries of bank top brass.
Last year investors demanded that bank CEOs forfeit their bonuses, a point undertaken to various degrees by the major banks.
While the pay cuts go some way toward soothing shareholder outrage, Creighton believes the situation will be short-lived thanks to the nature of CEO remuneration.
He said part of the underlying problem is the complex structure of corporate pay at the top level.
“Twenty-five years ago there was just this salary pay. You know, the chief executive of the Commonwealth Bank was paid a million dollars. But now he’s paid something like $3 million. And then there’s this whole system of extremely intricate so-called incentive and bonus plans.”
He said the explanations for meeting these various financial and non-financial criteria can run for pages and “become so complex that it becomes an industry unto itself.”
While salaries fell last year largely because none of the short-term bonuses were approved, he said there will be a salary bounce-back because the fixed salaries have remained the same.
“There’d have to be a more systematic change to the legislative environment for pay in banking to change significantly.”
Watch the full interview above.