Baird says NAB will revamp pay to improve culture


“We have to respond,” Mr Baird replied.

“There’s community concern clearly, but more importantly, from a cultural point of view, we’ve seen that it’s led to poor outcomes.

“So the industry is going through that, but again, the challenge is can you do more, and various organisations have announced individual actions. We’re certainly looking at it holistically, the things that we can do that not just send a signal but in reality help the overall culture.”

Asked if the bank would consider whether there was a rationale for short-term bonuses at all, Mr Baird said there were “many different trends”and in the United Kingdom pay had become much more “fixed,” but he would not pre-empt NAB’s final decision.

Mr Baird is seen as a potential contender to be the long-term chief executive of NAB, alongside Medibank Private chief Craig Drummond, Royal Bank of Scotland chief Ross McEwan, and other NAB executives Angela Mentis and Anthony Healy.

A roundtable at the summit also heard banks should look at their pay structures at all levels of the organisation and that the Hayne royal commission’s final report was an “opportunity lost” in that area.

Former APRA senior executive Fahmi Hosain told the AFR Banking & Wealth Summit organisations needed to look at their remuneration structures ‘in totality’.Credit:Peter Braig.

“This in-between section between the top-level management and the frontline staff is really missing right now from debate at the regulatory level as well as industry level,” former Australian Prudential Regulation Authority senior executive Fahmi Hosain said.

Professor Elizabeth Sheedy from Macquarie University said the material on remuneration “was probably one of the weakest sections of the [royal commission] report”.

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Mr Hosain and the Financial Sector Union’s David Taylor agreed the Hayne report did not consider incentives for middle managers.

“It almost looks like it’s been forgotten. There are two chapters [in the report]: executive remuneration and frontline staff,” Mr Taylor said.

“There’s a lot of people in between those two groups [who] drive the culture, set the standards, set the expectations … What is expected of those things remains unclear.”

Banks have in recent years been under pressure to remove staff incentives that critics say led to a sales culture. In the wash-up from the royal commission, the chief executives of the big four banks all took pay cuts, and banks have cut the use of sales targets for many frontline roles.

Westpac this month axed bonuses for its 2300 tellers in favour of 100 per cent fixed wages.

Mr Hosain, who was head of governance, culture and remuneration at APRA until 2017, said there was “no silver bullet” when it came to remuneration and solving the issue would be a process of trial and error.

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“Companies need to trial different approaches to what they’re doing,” Mr Hosain said.

“It’s not just purely through the remuneration lens – it’s through the cultural, mismanagement and accountability lens. Once you get all of those lenses together, you can actually understand how remuneration is working in practice.”

He said APRA had traditionally focused on the executive level and Hayne had been limited in scope, so consequently “a number of steps need to go beyond the royal commission report”.

“Remuneration committees [need] to be able to say ‘it’s not just the executives we’re going to look at, it’s not just the material discounts’,” he said.

“We have to ensure, if they’re going to oversee [remuneration] properly, there is a consistency of remuneration structure all the way through the organisation.”

Mr Hosain said Westpac’s removal of variable rewards for tellers was a positive step, “but if their managers two lines above have bonuses in place, what’s going to happen? That architecture needs to be viewed in totality”.

Natassia is a journalist for The Sydney Morning Herald.

Clancy Yeates is a business reporter.

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