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BFCSA: David Murray justifies a CBA $7 million pay out 2003 after sacking 1000 workers and LAF FRAUD in full swing. "Yes I am worth it"

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13 FEBRUARY 2003   CBA chief defends massive payout TO 7.30 REPORT

Reporter: Kerry O'Brien

KERRY O'BRIEN: And I'm joined now by Commonwealth Bank chief executive David Murray.

David Murray, I have to say thanks for fronting up.  

How many workers have you sacked in your ten years at the top of the Commonwealth Bank?

DAVID MURRAY, CE COMMONWEALTH BANK: We've reduced our workforce by a considerable number with changes in the banking industry, a very considerable number.

KERRY O'BRIEN: The union says 17,000, would that be about right?

DAVID MURRAY: Well, it may be right, but everybody knows what sort of changes we've gone through to make the bank more competitive, and I understand how people would make that linkage because I understand why this sum of money is incomprehensible to a lot of people.

KERRY O'BRIEN: And you'd understand why they'd also make the linkage with the number of branches you've closed -- again, the union says it's something like 850 under your stewardship?

DAVID MURRAY: Well, it's easy to make these linkages when people are shocked and angry about it, but we made a disclosure in advance of the normal time we would make it in order that we could give our shareholder the context in which this payment were made and I think if that context is understood people wouldn't be so quick to make these linkages.

KERRY O'BRIEN: It's true, though, isn't it, that you paid Chris Cuffe nearly $30 million of the $33 million in July last year?

DAVID MURRAY: Yes, that's the way the contract works, and so it was in this financial year that the largest payment was made.

KERRY O'BRIEN: So eight or nine months ago, nearly, you paid out nearly $30 million but you've just disclosed it today?

DAVID MURRAY: Yes, that's correct.

And the general practice of companies is to disclose remuneration in their accounts in the period when the payments are made.

Now, I think there is scope to make that more transparent in the market generally, and I think that's a matter that we would be prepared to discuss with the governance council of the ASX.

KERRY O'BRIEN: Did you think about perhaps making it more transparent at the time, as you were writing a cheque for $30 million or $29.5 million I think it was?

DAVID MURRAY: Well, the board of the bank did examine this question at the appropriate time in dealing with the accounts, and as I said, we brought forward by six months the timing and we were giving guidance to our shareholders about the context and that's more than a lot of companies have done.

KERRY O'BRIEN: Now, you've made the point a number of times today and yesterday that this is a contract you inherited.


KERRY O'BRIEN: But you entered -- Mr Cuffe says you entered into contracts with him again in 2000 and again last year.

Did you seek to reduce his salary and bonuses in those contracts?

DAVID MURRAY: Let me explain the option that was available to us at the time of the merger, this goes right back to the merger.

We could have on the basis that we disliked the contract -- we could have unilaterally opted out of the contract.

Had we done that, we would have paid him $29.5 million and we would not have then had his services to lead that business.

That would have been a completely flawed business decision.

KERRY O'BRIEN: But when you renegotiated with him in 2000 and again last year, did you seek to reduce his salary and bonuses?

DAVID MURRAY: We had our position in the negotiations, but it takes two to negotiate.

KERRY O'BRIEN: Does that mean you didn't or you couldn't?

DAVID MURRAY: We couldn't.

KERRY O'BRIEN: So you -- 

DAVID MURRAY: And the way the contract works, we had an option to pay out -- to avoid it altogether by paying out $29.5 million and lose his services and lose the value.

He's a very skilful businessman, Chris Cuffe -- 

KERRY O'BRIEN: Is he worth $33 million?

DAVID MURRAY: Well, the point in which we're in agreement is that that sum of money rolled up in bonuses over a very long period of time -- 

KERRY O'BRIEN: What's very long?  10 years?

DAVID MURRAY: Well, it really goes back to -- as his statement points out -- 

KERRY O'BRIEN: Less than 10 years really.

DAVID MURRAY: It goes to the contracts that he had, but of course there was another contract that was made in January, 2000, which had the effect of triggering with merger this liability for us contingently of $29.5 million.

KERRY O'BRIEN: You yourself took a bonus of $4.5 million last year.

I think you called it a 10-year service payment.  Was that a kind of long service leave equivalent?

DAVID MURRAY: Our chairman, John Ralph, explained this in detail to our last annual meeting and the point he made was that that was a payment for completing 10 years of my contract, which had to be completed satisfactorily.

If we divide that by 10 and then look at the payment of chief executives in banks, that brings me in line or just below it.

It's a different form -- 

KERRY O'BRIEN: Do you pay your employees for completing 10 years of service?  Do you give them a hand-out?

DAVID MURRAY: That, as the chairman at the time pointed out, that has to be looked at in the context of my appointment at the time, at which time the Government was a majority shareholder in the bank.

KERRY O'BRIEN: But it's also based presumably on your performance and you delivering satisfactory profits?

DAVID MURRAY: That's right.

KERRY O'BRIEN: So having halved your interim profit yesterday are you going to go for a salary cut now?

DAVID MURRAY: Well, there's been a lot of commentary that I earnt $7 million last year.

That was made up of a one-off payment and an annual salary and bonus that's disclosed in the accounts in my name.

KERRY O'BRIEN: But did you receive a total of 7 million last year?

DAVID MURRAY: Yes, I did, but there's no implication that I'm paid $7 million today.

KERRY O'BRIEN: No, but last year, the same year that you paid Mr Cuffe nearly $30 million, and you yourself received $7 million, as I understand it you sacked 1,000 workers.

Can you understand why banks have an image problem?

DAVID MURRAY: I can understand it completely, but to be balanced about this, we have to understand the option available to the bank at the time and the responsibility we have to make decisions in the best interests of our shareholders, which we did, and that has been vindicated by the value that Chris Cuffe continued to build in that business in the time since the merger.

KERRY O'BRIEN: It does sound like you're justifying the pay.

I wonder whether you're concerned that the Howard Government is increasingly feeling the heat of public outrage about these kinds of payouts, that they may be forced to act if you and others, other corporate leaders, don't?

DAVID MURRAY: As I said, I completely understand that people would find this unable to be comprehended in terms of the size of the payment.

But as I indicated, it rolled up in terms of the calculations over a number of years.

KERRY O'BRIEN: And I assume that you'll claim this 33 million to reduce your tax bill?

DAVID MURRAY: Well, we also pay tax on the income, so we have -- we can claim a deduction, yes.

KERRY O'BRIEN: David Murray, thanks for talking with us.

Thank you.


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