Banking royal commission: CBA chair pressed on pay, memory

Catherine Livingstone admits most CBA executives shouldn’t have got a 2016 bonus, as her version of events was questioned.

CBA chair Catherine Livingstone was put under pressure over her version of events at bank board meetings. Pic: Hollie Adams

Commonwealth Bank chairman Catherine Livingstone has admitted most of the lender’s top executives should not have received a 2016 bonus, as her version of events was questioned and she was grilled over the board’s limited knowledge of a spate of compliance failings.

On the third day of the Hayne royal commission’s policy round, Ms Livingstone’s accountability and memory came under further scrutiny after she reaffirmed that she had raised concerns about alarming audit reports in 2016.

But Ms Livingstone’s version of events was seriously questioned by counsel assisting the commission Rowena Orr QC, who said her recollection was not supported by the board meeting’s minutes.

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Ms Livingstone was unclear yesterday about which board meeting she raised the failed audits at, but attempted to clarify her position today.

“It was at the October board meeting that I challenged management in relation to the AML/CTF reports, and the details in the regulator report and sought an understanding of Austrac’s perspective... I did not receive satisfactory answer to my challenge, because it did not accord with my understanding of Austrac,” she said, referring to the financial intelligence agency which took action against CBA for alleged breaches of anti-money laundering legislation.

Ms Orr tendered a document of the board minutes and said: “There is no reference” to Ms Livingstone raising the matter.

But Ms Livingstone said board minutes were not a verbatim account of the meetings.

“It’s not possible for the minutes to record every single question in a board meeting,” she said.

Ms Orr reminded Ms Livingstone of CBA’s statutory obligations around the keeping of accurate board minutes.

“CBA has a statutory obligation under the Corporations Act to keep minute books,” she said.

Rowena Orr questioned Catherine Livingstone’s version of events.

On the pay received by CBA executives for 2016, Ms Livingstone came under intense questioning and conceded the 2016 outcomes were “patently inadequate” given all the compliance issues the bank was grappling with.

Most of those issues, including charging fees for not providing services, selling consumers junk insurance and compliance breaches of its anti-money laundering obligations, were not yet public.

CBA’s dated medical definitions within its life insurance unit had been aired through media reports.

Ms Orr took further issue with CBA’s remuneration report in that year and a report to the board by head of risk David Cohen, asking: “Despite all of those (compliance) issues, we see that Mr Cohen did not believe that there were any risk issues or risk behaviours that would suggest the short-term incentive awards should be modified in any way?

“You were part of that decision,” Ms Orr said of Ms Livingstone’s role as a non executive director.

Ms Livingstone argued that she had only attended two board meetings prior to these remuneration decisions being made.

But after further questioning, she admitted that most of CBA’s 12 executives should not have received a bonus that year.

“The processes and the remuneration outcomes for 2016 was patently inadequate,” she said.

“There are individuals here for whom the level of award was not appropriate, in light of the risk matters which as you pointed out were on foot in the group at the time.”

Ms Livingstone did, however, defend the use of bonus payments as part of total banker remuneration.

“It also enables us to discriminate between executives who might be at the same fixed remuneration but have different levels performance,” she said, adding that CBA continued to assess its position.

“We are struggling with this, we are currently looking at our remuneration framework as we evolve it still further.”

Part of this involved CBA “consulting widely” and assessing models offshore.

On not taking her concerns about the compliance audits further before becoming chairman in 2017 further, Ms Livingstone said: “My judgment as a director at that time was further questioning of that detail would serve little purpose at that time, because it would simply elicit further unsatisfactory answers.”