Banking
More Asia-Pacific bankers rely on performance-based salaries
(China Daily)
Updated: 2009-11-09 07:46
As the crackdown on bank bonuses gains momentum globally, a recent survey reported that Asian bankers might be taking home less pay in a system that relies more on performance-based remuneration.
The survey, jointly conducted by the magazine The Asian Banker and the consulting firm Hay Group, showed that while the compensation of Asia-Pacific bank CEOs has dipped since the last time the survey was conducted in 2007, banks are increasing their reliance on performance-based pay.
"Asia-Pacific banks are justifiably proud that they have remained profitable and have contained the fallout from the global financial crisis, primarily because they are attached to growing economies that need not take excessive risks to see profits," said Emmanuel Daniel, president and CEO of The Asian Banker.
"Their top executives appear to be reasonably compensated, and the risk culture has not pushed them to seek growth into questionable activities. But the growing emphasis on performance-based metrics may eventually lead into questionable practices if proper safeguards are not put in place," Daniel said.
Sylvano Damanik, head of executive rewards research for the Hay Group in Asia, said the issue of determining performance risks and factoring in time horizons will add complexity to the discussion and design of executive compensation programs for Asia-Pacific banks.
Asian banks, which have largely been shielded from the global financial storm, are considering how to reform their remuneration systems to create a balance between giving the right incentives and avoiding excessive risk-taking.
Hong Kong, for example, planned by the end of this year to launch guidelines designed to link bonus pay to the creation of long-term value by the end of the year. The proposal calls for limiting the use of guaranteed minimum bonuses and linking pay to performance over several years.
Of the nine Australian banks in the survey's salary ranking, seven are in the top 10, including the top four spots. ANZ's Mike Smith is the region's best-paid chief bank executive with total pay of nearly $9 million.
The CEOs of Commonwealth Bank of Australia, Westpac Banking Corp and NAB each earn about $6 million.
"A number of the major banks in the Pacific have been or are currently led by overseas executives, so the executive talent market for banks here can certainly be viewed as global in nature," said Trevor Warden, who heads executive reward research in the Pacific for the Hay Group.
Generally, good governance of remuneration in the Australian banking sector has led to executive remuneration packages being fairly well balanced and not acting as leverage for the banks to take on more risk, he said.
But in Asia, big doesn't necessarily mean best paid. The president of China's State-owned ICBC, the most profitable bank in the world in 2008, received a relatively modest $225,000 in total remuneration.
The CEO of Malaysia's largest bank, the State-owned Maybank, earned 5 percent of his three best-paid counterparts at privately run banks, and less than 10 percent of the pay of his predecessor.
The top five bank CEOs in the ranking for performance-based remuneration as a percentage of total remuneration are all new appointees, indicating that performance is a major negotiating issue when it comes to succession.
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Performance has moved up in scale in most of the charts for established and new CEOs alike, especially in the top half.
Banks in Southeast Asia seem to have caught the performance-based bug, too, especially Malaysia's Maybank. Its CEO in 2007, Amirsham Aziz, was given 52.1 percent of his pay based on his performance. New CEO Abdul Wahid Omar counts on it for 80.3 percent of his reward - the largest jump in the listing.
Executives at Japanese and South Korean banks were absent from the ranking due to the opaqueness of the reporting on their compensation, the report said.
