Commonwealth Bank Statement – One off payment to CEO
26 September 2002
The Bank’s 2002 Annual Report disclosed that for the year ended 30 June 2002, CEO Mr David Murray received a special payment of $4.65m in accordance with a contract made with Mr Murray on his appointment as CEO on 21 June 1992. The contract provided for the one off payment to be made upon satisfactory completion of 10 years’ service as CEO (or pro rata for earlier termination of appointment after the completion of five years service).
At the time of Mr Murray’s appointment, the Bank was 70% owned by the Commonwealth Government, the CEO’s remuneration was set below that of other major bank CEOs and the Government’s majority ownership did not permit any form of longer-term reward through equity.
The Board also recognised Mr Murray’s relatively young age (42) when structuring the payment so that it would accrue progressively and Mr Murray’s services would be retained through a challenging period for the Bank.
Since Mr Murray’s appointment, the Bank’s performance has seen the share price increase from $7.16 to around $32, its market capitalisation increase from $6 billion to $41 billion and earnings per share increase from 51.5 cents per share to $2.10.
This exceptional performance was recognised in the Oliver Wyman Shareholder Performance Index (covering the world’s largest 400 quoted financial services companies) where the Commonwealth Bank achieved the highest (volatility adjusted) returns to shareholders over the five years ending 31 December 2001.
Mr Murray entered a new contract of employment effective 2 July 2001. The new contract does not have a similar provision in relation to service post 21 June 2002.