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BFCSA: Obscene $33 million payout to Banker CBA David Murray

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http://www.abc.net.au/lateline/stories/s783063.htm

Australian Broadcasting Corporation  LATELINE

 

 

TV PROGRAM TRANSCRIPT

LOCATION: abc.net.au > Lateline > Archives
URL: http://www.abc.net.au/lateline/s783063.htm

 Broadcast: 12/02/2003

 

Former bank exec pockets $33m payout

The Shareholders Association has labelled as obscene a $33 million payout to a former executive of the Commonwealth Bank's fund management arm, Colonial First State. The figure was revealed at the Commonwealth's half-yearly results today, where profits had been hurt by another disappointing Colonial performance. Commonwealth bought Colonial just three years ago and the new business has a $430 million write down.

 

Compere: Tony Jones
Reporter: Steve Letts

 

 

TONY JONES: The Shareholders Association has labelled as obscene a $33 million payout to a former executive of the Commonwealth Bank's fund management arm, Colonial First State.  The figure was revealed at the Commonwealth's half-yearly results today, where profits had been hurt by another disappointing Colonial performance.  Commonwealth bought Colonial just three years ago and the new business has a $430 million write down.

Finance correspondent, Steve Letts.

STEVE LETTS: Commonwealth Bank boss David Murray is no stranger to the controversy over lucrative executive pay deals.  His $7 million pay packet last year with its $4.5 million bonus furrowed more than the odd brow of his shareholders.  But that is modest compared to the almost $33 million paid to one recently departed executive of Colonial First State, the funds manager the Commonwealth snapped up three years ago.

DAVID MURRAY, CHIEF EXECUTIVE, COMMONWEALTH BANK: The terms of that contract were inherited with the merger but it is very substantial and worthy of disclosure.

JOHN CURRY, AUSTRALIAN SHAREHOLDER'S ASSOCIATION: We think it's an obscene amount of money.  It really is against anyone's reflection of what is a reasonable sum of money.

STEVE LETTS: The Shareholders Association's John Curry is angry that the $33million liability has been hidden from investors for the past three years.

JOHN CURRY: This is not the first time the Commonwealth have done that.  They paid $4.5 million to David Murray earlier this year when he finished his 10-year service contract.  That should have been disclosed year by year during the term of his employment.  It wasn't.  I would have thought the Commonwealth would have learnt from that lesson, but clearly they haven't.

IVOR RIES, ANALYST, E.L.& C. BAILLIEU: It's a big embarrassment for the banks.  It's a big embarrassment for this bank.  It's a big embarrassment for all the banks generally because in the last year most mum and dad investors have seen the value of their savings go down -- their super fund balances have gone down -- and here we are, an executive in charge of managing super funds, has taken away a big bonus.  So it is pretty embarrassing.  It probably leaves a bitter taste in the mouth of a lot of small investors.

STEVE LETTS: The bank's half-yearly report doesn't identify the recipient of the windfall, but industry speculation centres on Chris Cuff, who left his job as head of Colonial to take over the running of Kerry Packer's CPH Investments late last year.  Mr Cuff himself declined to comment.

IVOR RIES: If you look at the most senior executives that they acquired in the Colonial takeover, virtually all of them have gone.  It's embarrassing if you pay all that money to get all of those people and they leave anyway.

STEVE LETTS: It was a bad day all around for the Commonwealth Bank's funds management business.  It was a prime culprit in holding down the bank's profitability.  Earnings fell by 26 per cent compared to the same period the year before.  But even more disturbing was the incredible shrinking funds under management -- down about $11 billion, or 10 per cent of the total business.

IVOR RIES: All of the banks have gone out and bought very large funds management organisations but they do tend to lose a lot of that money after they buy them.  They haven't worked out how to keep the money yet.

STEVE LETTS: Investors, however, were either forgiving or resigned today.  The Commonwealth closed up 2 cents at $25.91...............read more   http://www.abc.net.au/lateline/stories/s783063.htm

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