Who on earth thought the Commonwealth Bank of Australia's CEO was worth a ludicrous $12 million a year? CBA chair Catherine Livingston obviously did, along with the board.
Who thinks Ian Narev is worth $12M a year?
That said, after the latest scandal involving the CBA, Ian Narev has had his income for the current year cut to $10 million.
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And at the bank's annual general meeting next week, the CBA's remuneration submission will be tabled and shareholders can have their say on whether Mr Narev is worth even the $10 million a year he will receive.
My guess is that many smaller shareholders will not see real value in this salary, while representatives of larger shareholders, also receiving very high incomes, will support the current remuneration structure at the CBA. I also expect the latter to carry the day.
I don't think Ian Narev is worth $10 million a year. Certainly, he has delivered six years of profit growth, along with a steadily rising share price and very attractive dividends for shareholders.
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But at what cost?
There have been numerous scandals and there is growing evidence that the battle for short-term profit growth may damage the long-term future of the bank.
That said, I think the more important question here is not what Ian Narev is worth, but what is ethically right to pay him. Put simply, is it ethically reasonable to pay any business executive $12 million a year, especially when that business is working over-time to minimise income growth of middle management and staff?
Is it ethically sound to pay Ian Narev even $10 million a year - when the bank has allegedly broken so many laws, and caused so many people pain through its superannuation and insurance divisions? Is It ethical to pay Ian Narev even half this amount, given the culture of ‘profit at any cost’ that he seems to have established at the CBA?
For too long now, big business has told us that high salaries and bonuses paid to the likes of Ian Narev are necessary to attract the best people. I have met a lot of these people and can say with absolute confidence that there are few that are special in any way.
In the case of Ian Narev, I would simply ask the board of the CBA, ‘is Ian Narev REALLY the best you can do?’ Is a man incapable of developing a culture that builds profits in the short term while sacrificing reputation in the long term, while burning innocent superannuants along the way, really the best you can do?
The problem here may lie with the board. They too are paid well for their questionable contribution. Chairman Catherine Livingston is paid nearly a million dollars and boards members are paid in excess of $300,000 per annum each. Some are past public company CEOs themselves. Therefore, they have a vested interest in perpetuating the myth that executives like Ian Narev are worth the money paid.
There is another perspective that also needs to be considered here.
How ethical is it to pay Ian Narev $10 million per annum, and the CEO of the CSIRO a few hundred thousand dollars a year? How ethical is it to pay a senior executive $10 million per annum and a school teacher less than $100,000? How ethical is it to pay a CEO $10 million and the Prime Minister $500,000?
The top end of town will tell us that this is not about ethics, but the market. The market drives the income of senior executives and the other people I have noted. Of course, they would say that. They have a very clear vested interest in saying that. They also have a vested interest in doing whatever they can to ensure that their workforces earn as little as possible.
I find it interesting that so many in our community are still fooled by the ‘market’ argument. I am surprised that our community has not become more irritated about the behaviour of these executives and the boards that appoint them.
Remember, these are the same executives and boards that tell the Federal Government that it is spending too much on pensions and unemployment benefits. This is the same group that tells the Fair Work Commission that business cannot afford to pay higher wages. This is the same team of greedy individuals that screws suppliers, no matter how much hardship it creates for the low-paid workers they employ.
If people want to suggest that I am indulging is class warfare, then so be it!
They can call it whatever they want. At this point, words mean little. What matters most in my view is ethical behaviour.. I don't believe that the board of the CBA iscting ethically in offering Ian Narev $12 million in the first place, and Ian Narev is not acting ethically in accepting it while working cap his own employees' incomes.
Paying Ian Narev is unethical self-interest at its worst.
Suggesting he is worth the money he is paid is a well-orchestrated con!