Exposed: Life as a senior exec in the financial sector

Exposed: Life as a senior executive in the financial sector.

senior executives talking

Ever wished you could be paid a lot and be held accountable for very little?

That seems to be life at the pointy end of a host of big financial institutions, according to a keynote address by Wayne Byrnes, Chairman of the Australian Prudential Regulation Authority (APRA).

Speaking at the Australian Financial Review Banking and Wealth Summit in Sydney on Wednesday. He said the “carrots are large and the sticks are brittle” when detailing APRA’s review of executives’ pay at 12 financial institutions.

"Not only are rewards generous, but there are seemingly few repercussions for poor outcomes," he said.

APRA’s review covered 280 senior roles across the banking, insurance and superannuation sectors between 2014 and 2016.

How often in recent years have we seen CEOs and industry leaders walk away with massive pay packets despite poor performances? It is an area the financial services royal commission will explore.

Mr Byrnes said: “There has been limited evidence of material financial consequences for senior executives when risk outcomes have been poor in their area of responsibility.”

He added that he had been “personally surprised” by a lack of accountability in developing sound risk practices.

So will the introduction of the Banking Executive Accountability Regime (BEAR), which is intended to ensure senior bankers are more accountable for their actions, make all the difference?

It should, Mr Byrnes said.

“It's not about heavy-handed punishment. It is not about heads on sticks on those things, but it's trying to make sure that when remuneration decisions are taken and variable compensation is decided on, that there's a holistic view of performance."

He said it was concerning that the review showed people in middle management more regularly bore the brunt of poor risk-taking than senior executives. 

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    COMMENTS

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    maelcolium
    5th Apr 2018
    11:38am
    Financial Executive salaries were obscene before the GFC, but since then with cheap money sloshing around the place their remunerations packages have skyrocketed. This happens because the Boards say they want to attract high profile players to enthuse shareholders. The truth is that Boards have a self interest in keeping their own remuneration high and so employ CEO's who will play their joint role in rorting the shareholders with dividends not based on profits, but on cash flows from the cheap money in the system. This will all go well until central banks start to move interest rates north and then watch these paper tigers crumble! It can't come soon enough and we can only wonder why central bank governors are so reluctant to increase rates when real inflation is so low. Are they part of the boondoggle as well?

    5th Apr 2018
    3:09pm
    Have no idea what this article is about
    So senior executives are well paid
    Duh !

    5th Apr 2018
    4:33pm
    Bring on a Royal Commission into the whole sector.
    Anonymous
    5th Apr 2018
    6:16pm
    Royal commission into what ?

    Now you want the government to legislate executive salaries as well?

    bloody communist loonies
    GeorgeM
    6th Apr 2018
    12:15am
    Finally, am hearing some sense - overpaid executives / CEOs with lack of accountability is a serious problem!

    But, Mr. Byrnes, the reasons for problems and the solutions are actually simple:

    A) Massive Outsourcing of IT Jobs to Overseas companies, primarily Indian companies. These companies have a low level of actual Quality of Delivery (although they all claim to have maximum Quality accreditations on paper). Australia followed the US style and destroyed the jobs of local, much smarter and hard-working / intelligent, Australians and produced these poor outcomes - led by the Banks!!! The only solution here is to REVERSE OUTSOURCING by TAXING ALL OUTSOURCED WORK following the lead from Trump to save Local Jobs. We need a serious push on this front from APRA & the Govt / Political Parties.

    B) Massive Bonuses to CEOs and other Senior Managers of Banks and other companies linked to Profits. They have driven the above cost-cutting approach and are responsible for the poor outcomes being delivered. Companies, including Banks, must have their CEOs, etc, not paid such large Bonuses - by limiting it to say 20% of Base Salary (Base Salary also should be limited to say $1 Million annually as suggested by Gerry Harvey) by meeting KPIs mainly focused on Customer Satisfaction and only a very small portion (say 5% of the 20%) based on Profits.