Finance Sector Union of Australia
FINANCE SECTOR UNION RESPONSE TO BANKING ROYAL COMMISSION REPORT
4 February 2019
Despite a central finding of the Royal Commission Report being that remuneration systems used by the banks were a major cause of their misconduct, the Royal Commission has failed to make recommendations to deal with the issue.
The section of the Report dealing with remuneration examines executive remuneration, and the remuneration of front-line workers. Most bank employees are neither of these. The failure to examine the impact of pay structures for these workers’ remuneration is staggering.
In terms of dealing with non-executive pay, the Report is a failure. It makes only two recommendations, neither of which involves a change to the law:
· that entities review pay systems of front line staff on an annual basis, and
· that entities implement the recommendations of the Sedgwick Review (noting that all banks agreed to doing this nearly two years ago).
In terms of executive remuneration, the Report does no more than say that APRA should properly do its job. Despite mountains of examples from overseas, the Report does not propose any concrete action to rein in obscene executive pay. The Report’s examination of remuneration is remarkable. It does an excellent job of analysis why and how bad remuneration structures lead to misconduct and bad consumer outcomes. It then does nothing concrete to fix the problem.
As noted by FSU National Secretary Julia Angrisano
“The Report is right to identify that remuneration structures and targets are a central cause of misconduct. The Finance Sector Union of Australia (FSU) has been saying this for years. It is incredibly disappointing that having done this, the Report failed to make recommendations on how to fix it.
“Today’s report has failed to address the issue of conflicted remuneration, or the myriad other issues that bad pay structures cause.
“Throughout this Commission, the FSU has consistently called for the elimination of pay models that forced workers to put sales targets before customers. The Commission recognizes that they must go. It is now up to APRA to force Banks to fix these problems.
“The FSU believes that the only system of remuneration in the financial services sector should be one in which workers are paid for their skills and experience rather than the current model that relies on targets and bonuses.”
“Commissioner Hayne’s finding that bad pay models lead to bad culture and bad customer outcomes is both significant and obvious. His failure to make recommendations that would eliminate these bad models is disappointing in the extreme.
“Commissioner Hayne’s recommendations that Bank’s implement Sedgewick do not go far enough. While we continue to permit Branch managers, Senior staff and executives to be paid on the basis of sales targets and bank profits, the corrupting influence of conflicted pay will remain.”
“The recommendation to eliminate grandfathered commissions and some of the loopholes around financial advice is welcomed. We now need to extend this work across other parts of the sector, including mortgage broking.”
“The Government’s decision to delay the implementation of the elimination of grandfathering until 2021 shows that they are not serious in implementing the very modest recommendations made.
“We cannot let the banks cheat our members out of pay under the guise of making the required changes around pay models. We call on all finance sector employers to commit to ensure that their hard-working staff are not worse off as a result of the changes recommended by the Hayne Royal Commission.
“The self-regulated Sedgwick model to address pay issues has failed. Banks have just re-badged sales targets as something else and continued on. The Commission report provides a green light for banks to continue their bad practices.
“We’ve seen how banks do everything possible to slow reform. Implementation of the Sedgwick reforms from 2017 has been glacial. This is their deliberate tactic, and it treats Australians with contempt. The recommendation that Banks now implement Sedgewick fully (without any reference to a legal obligation or a time frame to do it) is inadequate.”