Governance Institute Report: Australian Finance Executives Pay Drops 11pc In 2018

A new report released by the Governance Institute of Australia reveals that the pay of the finance executives dropped 11 per cent in 2018 as a result of banking Royal Commission. The figures announced by the Governance Institute are taken from a survey report on remuneration data that included 1,545 boards.

The Australian Commission established the Banking Royal Commission on 14th Dec 2017 to inquire into and report on misconduct in the superannuation, banking and financial services industry. Several Australian financial institutions were found to be engaged in financial misconduct, following which former High Court judge Kenneth Hayne submitted a final report (Hayne’s recommendations) to the Governor-General with 76 separate recommendations.

The figures reported in the Governance Institute’s report underlines the impact the banking royal commission had on remuneration across the financial services industry.

The Australian board and executive remuneration survey report (2019) incorporates the levels of remuneration relating to the different board positions. The report was produced by the Governance Institute of Australia in partnership with the McGuirk Management Consultants.

The pay of the finance executives has declined, but the rest of Chairmen and Directors (across all industries) saw an average remuneration increase of three and four per cent, respectively. The Chairmen’s pay improved by 3 per cent to $104,763, while directors’ pay increased by 4 per cent to $52,551.

A recently released Governance Institute’s Risk Management Survey showed that the Australian financial services industry is worried about the regulatory effects, brand damage, and liability effects arising out of the banking royal commission. The results of Risk Management Survey are clearly reflected in the remuneration survey report.

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In the Financial Services sector, the decline was greater for chief executives or managing directors in finance as their pay packets (excluding executive bonuses) plunged 14 per cent to $510,166. According to the Chief Executive Officer of the Governance Institute of Australia, Megan Motto, the results of survey report demonstrates the effects of the Banking Royal Commission on Australia’s financial institutions.

Let us have a look at the pay-cut in 2018 of the Chief Executive Officers of the major four banks of Australia – NAB, ANZ, CBA and WBC – in the table below:

The Australian Treasury released a discussion paper on Tuesday, under which the government stated that a collective payment of $236 million in the 2020 financial year in supervisory levies would be required from banks, insurers and super funds to fund the work of the prudential regulator.

The banks and super funds will pay $90.8 million and $82.3 million respectively, and most of the amount levied ($186.1 million) will go towards the funding of the Australian Prudential Regulation Authority (APRA). In the pre-election budget also, additional funding was given to APRA to better respond to the Hayne’s banking royal commission recommendations.

The stocks of the major four banks of Australia are currently trading higher on the Australian Securities Exchange (as at 3:25 PM AEST on 5th June 2019) following the announcement of rate cut by the Reserve Bank of Australia – NAB at AUD 26.640 (up by 0.8 per cent), ANZ at AUD 28.010 (advanced 0.901 per cent), WBC at AUD 27.675 (climbed 1.56 per cent) and CBA at AUD 79.390 (rose 1.237 per cent).


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