Executives should be paid properly for the job they are expected to do, and rewarded for an outstanding job, says former chair of Australia’s antitrust regulator, Graeme Samuel.

 At CMSF on Thursday, Samuel said executives and others within an organisation should be rewarded if their performance is beyond what is expected of them but he is completely against bonuses should be part of the package.

At the conference, the former ACCC chair was discussing the role of remuneration structures in driving the greed and misconduct which emerged as a key theme of the banking royal commission.

“Corporate culture, like any organisational issue, starts from the top – the tone is set by the chair, the chief executive, the board of directors and senior management.

“They are all involved in setting the tone of the organisation, setting its vision, setting the values and importantly ensuring those values are subscribed to by everyone in the organisation from the top right through to bottom.”

He said culture fails where those governing the organisation don’t sincerely believe in the values they have set out in writing.

“They {executives} talk about vision statements; they might talk about values but it’s not part of their DNA…. and that message then starts to flow through the organisation.”

A clear sign is when remuneration structures don’t reflect the correct values of the organisation.

“Those at the top will protest certain values such as the customer must always be put first but then they will endorse or sanction activities that clearly don’t put the customer first or members of a superannuation fund.as the case may be, “he argues.

In his view, the tone must start from the top. Critically there must be a very visible chair, a very visible board, a very visible chief executive and a very visible senior management.

“All of them must insist that the values of the organisation are subscribed to and those who don’t belong in the organisation.”

After overseeing the prudential regulator’s recent Commonwealth Bank enquiry Samuel said he would target corporate governance, culture and remuneration in assessing companies.

“The remuneration structures of organisations and businesses can so often incentivize the wrong sort of behaviour or the wrong culture,” he warns.

He pointed out that the royal commission revealed situations where employees were paid for behaviours that were labelled as misconduct by Commissioner Kenneth Hayne and the community generally.

Samuel also argued that the push for cultural change is best done internally and with limited involvement from external consultants.

“You don’t need to spend millions on hiring consultants – a chief executive who understands the company values doesn’t need an outsider.”

 

 

Elizabeth Fry has been a financial journalist for more than 25 years and has written for a number of publications, including CFO, The Financial Times and The Australian Financial Review.