Macquarie heeds advice, cuts short-term executive bonuses

Macquarie won’t give executives lucrative short-term bonuses, but total pay still highlights why it’s dubbed the Millionaires’ Factory.

Macquarie Group CEO Shemara Wikramanayake will still be paid $14.9m, the annual report reveals. Picture: AAP

Macquarie Group will not fork out lucrative short-term bonuses for its key executives in 2020, heeding advice from the banking regulator during the COVID-19 crisis.

But the total pay balances for Macquarie’s executives still highlighted why the company is dubbed the Millionaires’ Factory.

The asset manager and investment bank’s annual report showed the total 2020 pay of chief executive Shemara Wikramanayake fell to $14.9m from $18m a year earlier.

This year’s pay includes a salary of $795,740, long-term benefits of $4.87m, and equity awards including shares of $6.9m.

The reduction in Ms Wikramanayake’s overall remuneration was due to the absence of a short-term bonus, which in 2019 amounted to $4.28m.

The 2020 decision on pay was the first time Macquarie has moved to retain 100 per cent of its profit share pool, which vests over a period of up to seven years. The move was suggested by the group’s executive committee.

In 2020, Macquarie is skewing pay to longer-term incentives and equity, including shares.

“Our approach is consistent with the expectations set out by the regulators, further aligns the interests of staff and shareholders and ensures we retain key people through this period of economic uncertainty,” the group’s board said in the annual report.

The Australian Prudential Regulation Authority had urged banks in light of the COVID-19 crisis to consider deferring dividend decisions or materially cutting payments. They also called on them to “appropriately limit executive cash bonuses, mindful of the current challenging environment”.

The 2020 in equity awards and shares balance of $6.9m for Ms Wikramanayake is up from almost $4.8m last year.

In 2019, Ms Wikramanayake was among the highest paid CEOs on the ASX.

Her 2020 pay was, though, eclipsed by that of head of the asset management arm Martin Stanley, whose total pay for 2020 ballooned to almost $19.2m. That was up from $5.4m a year earlier.

His pay spike was linked to a record result for the asset management unit which saw its annual net profit contribution rise 16 per cent to almost $2.2bn. That was despite higher credit and other impairment charges linked to COVID-19, and included a writedown of Macquarie’s investment in New-York listed Macquarie Infrastructure Corp.

Commodities and global markets boss Nicholas O’Kane was the third-highest paid Macquarie executive for 2020, with total pay of $13.9m. That was down from almost $18m in 2019.

On a different non-statutory measure of pay, Ms Wikramanayake’s awarded remuneration for 2020 that edged up to $18.1m from $17m.

Either way, her annual pay packet far exceeds those of the domestic big bank CEOs, but pales in comparison to the remuneration of US investment banking chiefs.

JPMorgan CEO Jamie Dimon’s salary for 2019 came in at US$31.5million, while Morgan Stanley CEO James Gorman earned $27 million for 2019.

Macquarie cut its final dividend on Friday as it reported a 8.4 per cent decline in annual profit to $2.73bn. But the full-year earnings were the second-highest Macquarie has ever posted after 2019’s $2.98bn record.

Former CEO Nicholas Moore, who stepped down in late 2018, formally retired in July 2019 after a period of providing advisory services to Macquarie.

The annual report said as a result of Mr Moore’s retirement his prior year share awards were accelerated, resulting in “accounting amortisation” of $10.4m in 2020.

Macquarie’s compensation ratio rose to 40.6 per cent for 2020, up from 38.3 per cent a year earlier. Total employee expenses rose 2 per cent.

Despite the big pay numbers for Macquarie executives, its model was highlighted during the 2018 Hayne royal commission as a good example of strong alignment between performance and pay outcomes.