CBA said its board still has full confidence in Narev but short-term incentives for the CEO and other executives will be cut to zero to demonstrate “collective accountability” for what it has said was an IT error.
Narev was paid $1.43 million in short-term cash bonuses in the 2015/16 financial year, when CBA handed out a total of $8 million in short-term cash bonuses to the CEO and 11 executives.
Fees for CBA’s non-executive directors are also to be cut by 20 per cent in the 2017/18 financial year in recognition of the board’s shared accountability.
Remuneration packages for the 2016/17 financial year will be announced in next week’s annual report, while CBA is expected to report a near-$10 billion profit when it releases full-year results on Wednesday.
CBA chairman Catherine Livingstone said the board had considered “risk and reputation matters impacting the group” in its decision.
“The board recognises heightened public interest in executive remuneration, particularly having regard to the civil penalty proceedings initiated last week by the Australian Transaction Reports and Analysis Centre (AUSTRAC),” Livingstone said in a statement.
AUSTRAC alleges CBA failed to provide on-time reports of 53,506 cash transactions of $10,000 or more, totalling $625 million, that were made through its Intelligent Deposit Machines (IDMs) from November, 2012 to September, 2015.
CBA said on Monday that a coding error, generated during a software update to its IDMs in late 2012, was responsible for the required Threshold Transaction Reports (TTRs) not being produced.
The fault was fixed within a month of it being discovered in 2015.
Morningstar analyst David Ellis said CBA would be able to meet any financial penalty if found guilty of the AUSTRAC charges but risks to its reputation are more serious.
“Despite the seriousness of the allegations and the potential for significant court-imposed fines, we do not think a fine would impact significantly on future profits,” Ellis wrote in a note.
“Reputational damage is meaningful and could reduce customer activity across a broad range of products and services.”
CBA shares were down one per cent at $80.73 at 1200 AEST.
Its shares plunged four per cent on Friday, and Tuesday’s fall has erased a recovery made on Monday.
Commonwealth Bank is the only major lender to announce full-year results in August, and analysts expect its cash profit to rise about 3.7 per cent to $9.8 billion.
Lending margins could benefit from increased interest rates for investor and interest-only mortgages following March’s sector-wide intervention by the Australian Prudential Regulatory Authority.
The bank’s board received a first “strike” from shareholders angry about executive pay levels at its 2016 AGM and is now at risk of a second strike – and subsequent board spill vote – at this year’s meeting.
We value local independent journalism. We hope you do too.
InDaily provides valuable, local independent journalism in South Australia. As a news organisation it offers an alternative to The Advertiser, a different voice and a closer look at what is happening in our city and state for free. Any contribution to help fund our work is appreciated. Please click below to become an InDaily supporter.