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 TOP STORIESCBA's pay predicament10 September 2009By Simon Mortlock CBA’s compensation crackdown earlier this week looks likely to save low-level jobs, but the bank’s belt-tightening includes a management-level pay freeze which could restrict its ability to retain and recruit senior staff. The austerity measures begin at the top, with a 10 per cent pay cut for chief executive Ralph Norris, and a 5 per cent reduction for CBA’s executive team. The firm also says it won’t offshore jobs for the next three years and is attempting to avoid a major redundancy program by limiting wage growth to 1.5 per cent for the 70 per cent of its 40,000 staff who earn less than $100k a year. The Finance Sector Union has applauded the plans, saying they may have potentially prevented thousands of layoffs. But most eFinancialCareers readers will be more concerned about the way CBA is freezing the pay of its higher-earning employees. Those on $100k or more are now subject to 12-month salary-increase bans. This policy will probably make it even more difficult for CBA to recruit candidates from foreign investment banks, or to prevent its top talent from jumping ship. It’s ironic that firms like UBS and Merrill Lynch - which were savaged by the financial crisis - are now raising salaries in Australia to aid retention, while the comparatively cashed-up CBA has opted for a freeze. “CBA’s move just sends a wrong signal to the market. Recently the Big Four have been pretending that they can compete with the foreign firms on salaries, but this is a clear indication that really they can’t. Local banks are still missing out on good people because of their pay policies,” commented one headhunter, who asked not to be named. Warren Price, managing director of Select Personnel, agrees that Australian banks have generally taken a conservative approach to salaries over the last 12 months, but he warns that they will soon need to get more generous. “The common assumption that there's a huge pool of quality candidates available is incorrect. If present financial conditions continue to improve, we will see a salary spike after the first quarter of 2010 due to a supply shortage of talent,” adds Price. So come next year, an increasingly competitive job market may force CBA to stop being a salary scrooge.
COMMENTSJohnson, Public Sector, Thu 17 Sep 09I definitely disagree that CBA is a scrooge. There are still a lot of employees who are paid more than 100k at CBA and these pay are not justified. You can also see a lot of employees in the asset management and platform distribution being paid high however these pay are not justifiable. A good example are the BDM and account managers at CFS with high salaries that are not justified because they have not really created growth or even prevented outflows of funds in the past 3 years, which is not really good for share holders. There are still a lot of people oin the bank side who are paid high and not justifiable. A 10% cut on CBA's executive salaries are not enough. It is more morally sound to cut it by 50% like what Macquarie did. CBA's top executive is being paid more than a million. This is not good to shareholders particulary CBA is one of the last bank to set up a good risk management structure. They just started early this year, which means CBA have not been doing theire job prior the financial crisis when everyone there from top to bottom is being paid above industry. This not really moraly sound and it is not good for share holders. Add your comment »Johnson, Public Sector, Thu 17 Sep 09The comment on CBA is also true for NAB. These two banks pay their employee above industry average in the past. Since employees are paid a lot at NAB and CBA shareholders expected more from them however it was disappointing to see that these two banks were the last banks to put up an appropriate risk structure. These banks restructured on the wrong areas of the business in the past a lot of times. It does look like they do not know what they are doing and they do not have a long-term vision. So why are they paying their executives more than a million and mid executives (head of department) half a million. This is definitely not good for shareholders. Even their account managers/BDMs on the asset management and platform side are paid too much. Add your comment »rona, Public Sector, Fri 18 Sep 09Good comment from Johnson. Westpac and BT are also paying high salaries and wether they are justifiable is a big question. Add your comment »
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