This morning, Commonwealth Bank of Australia (ASX: CBA) announced the appointment of Matt Comyn as its new CEO, to replace the outgoing Ian Narev.
Narev spent six years with Commonwealth Bank, during which time the bank’s share price increased around 50% and paid out billions in dividends to shareholders, totalling a 120% return.
“Under Ian’s leadership, CBA has become a more inclusive and innovative organisation, and an employer of choice for gender and social diversity,” Chair Catherine Livingstone said. “It has also achieved and sustained industry-leading customer satisfaction ratings, through continued investment in its people and its technology advantage.”
Unfortunately, during Narev’s tenure, Commonwealth Bank allegedly breached money laundering rules, had poor cultural practices and was embroiled in many instances of low-quality financial advice.
In August 2017, Commonwealth Bank’s board cut the short-term bonuses of its executives in response to accusations of money laundering. “In reaching this conclusion, the overriding consideration of the board was the collective accountability of senior management for the overall reputation of the group,” Ms Livingstone said at the time.
Speaking on the appointment of Mr Comyn, Ms Livingstone said he was an outstanding candidate and came to the bank’s attention following a global search.
“The Board is delighted that Matt Comyn has accepted the offer to lead the Commonwealth Bank,” she said. “We believe he was the outstanding candidate, best placed to lead the bank at an important time in its history.”
Ms Livingstone noted the recently heightened activity from regulators such as APRA, ASIC and the Government. “The Board’s main priorities in selecting the new CEO were to identify the candidate who will maintain the momentum in the business, and address the regulatory and reputational challenges and recognise evolving community expectations.”
The recently announced Royal Commission into the financial services sector and banking system is expected to focus some attention on the culture and risk practices of Commonwealth Bank, Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ). Collectively, the ‘Big Four’ banks dominate household lending and play a major role in the delivery of financial advice throughout Australia.
Last week, the financial services regulator, ASIC, revealed that a large amount of financial advice given through Big Bank financial planning offices did not meet regulatory standards and put some clients in a worse financial position. Also last week, ASIC said Commonwealth Bank would be fined $1.9 million to compensate 3,500 clients for advice given to them by five former advisers.
“By virtue of the position CBA holds in the community we need to equally demonstrate the highest levels of integrity and operational standards to earn stronger levels of trust within the community and regulators,” Mr Comyn said.
Mr Comyn has more than 20 years in banking and joined Commonwealth Bank in 1999. Since then, he has played a big role in growing the bank’s digital offering. He was director of its share broking arm, CommSec, from 2006 to 2010. Since 2012 he has been Group Executive of Retail Banking Services.
“CBA is both a significant Australian institution and a world class bank, with a proud history that has delivered great outcomes for its customers, shareholders and people for decades, and is well positioned to build on that success for many years to come,” Comyn added.
With a base salary of $2.2 million per year, plus $2.2 million in short-term incentives and $3.96 million of long-term incentives to be earned over time, Comyn’s total pay packet stands at $8.36 million. The long-term incentive is subject to shareholder approval during the 2018 annual meeting.
While lofty pay packets are nothing new to banking executives and ASX 200 companies, CBA is facing mounting pressure to justify how much it pays its board and senior executives. Former CEO Ian Narev made more than $12 million from Commonwealth Bank in 2016, according to Fairfax Media, before shareholder pressure pushed his pay packet down.
The Australian Shareholder Association’s Sonja Davie was quoted by Perthnow in November as saying, “chief executive Ian Narev’s pay dropped to about 60 times the average wage, from about 100 times last year.”
With some economists tipping house price growth to slow, regulation on the banks to increase, and shareholder scrutiny consistently on the rise, Mr Comyn has his work cut out.
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