Bankers’ pay slashed after royal commission revelations

Top bankers at the big four have suffered a sharp drop in pay as heightened scrutiny from the royal commission takes its toll.

The ranks of senior bankers at the big four have swollen over the past four years.

Top bankers at the big four have suffered a sharp drop in pay as heightened scrutiny from the royal commission, a mounting compliance burden and shareholder rage take their toll on ­bonuses and incentives.

The average pay, including bonuses, of the 254 top bankers at the four largest banks dropped almost $300,000 last year to an average of $1.2 million each, the lowest level in at least six years.

Average pay of “senior managers” and “material risk takers” — a group determined by banks’ submissions to the regulator — dropped $500,000 to $1.5m at ANZ, $280,000 to $1.8m at Westpac, $230,000 to $800,000 at Commonwealth, and $184,000 to $1.4m at National Australia Bank, according to analysis by The Australian.

Tim Nice and Emma Grogan, remuneration experts at KPMG and PwC respectively, said the royal commission and the start of the Banking Executive Accountability Regime — which from July 1 required a minimum of 40 per cent of executives’ bonuses to be deferred for at least four years — had dulled boards’ willingness to pay maximum bonuses.

“Boards have a clear message that they need to show restraint; there’ll be fewer free passes than in the past,” said Mr Nice, noting a community perception that ­bonuses had been paid regardless of performance.

“We have not observed ­reduction in fixed pay for incumbents, but new hires, especially those internally promoted, have come in at substantially lower fixed salaries than predecessors,” Ms Grogan said.

The ranks of senior bankers at the big four have swollen from 209 in 2015, when average pay was $1.56m, to 254 last year.

“The heavy push on risk and compliance is creating more mouths to feed from the same pot,” one ­remuneration expert said.

“It’s a community perception issue as well; it’s clearly not great PR to be seen to be paying significant bonuses post revelations of the royal commission,” said Jon Michel, director of Jon Michel Executive Search.

Amid widespread anger at misconduct identified at the royal commission, shareholders delivered non-binding “strikes” against remuneration reports at Westpac, NAB and ANZ last year; Commonwealth escaped censure after it slashed short-term bonuses to zero.

Ms Grogan said the complexity of banks’ bonus schemes for senior staff had become “ridiculous”.

“We struggle on many occasions to understand, so who knows how retail shareholders do,” she said.

“There’s a massive need to simplify, but the challenge is the few organisations that have tried, such as QBE, AMP and NAB, have also been the ones wrapped up with big no votes.’’ Before his resignation last month, NAB chairman Ken Henry had slashed the number of bonus pools to one.

Following similar moves in the US and Britain, Labor has a policy to force top-100 companies to disclose the ratio between executives and junior employees.

Pay at Macquarie bank, which emerged relatively unscathed from the royal commission, was unchanged at an ­average of $4.3m a year for its top 39 bankers.

Ms Grogan said banker pay could bounce back once memories of the commission had faded. “It’s absolutely possible because the actual packages haven’t changed, it’s just the short-term bonuses haven’t been reached this year,” she added.

Additional reporting: Elias Visontay, Catherine Priestley