Chairman's letter to the Australian Financial Review
28 February 2003
I refer to the pernicious and insulting comment by your journalist Adam Shand in "New spin, same old tactic'' (AFR, February 26, page 54), falsely accusing David Murray, the chief executive officer of the Commonwealth Bank, of seeking to divert attention from a fall in the bank's interim profit due to a reduction in the assessed value of the bank's funds management and life insurance businesses by referring to the payments made to Chris Cuffe during the year.
Let me put the record straight. A meeting of the remuneration committee of the board, which I chaired, was held on the day prior to the February board meeting of the bank. At that meeting, management reported on the negotiated outcome of the arrangements in relation to Cuffe's resignation, which had taken place since the committee's previous meeting.
Your readers would be well aware of the urging from media commentators and others in recent times that substantial payments should be reported ahead of the time prescribed in legislation, namely in the annual report for the year in which the payment is made. This debate has chiefly concerned termination and bonus payments for senior executives. In Cuffe's case, only a small percentage of the payment related to his termination of employment.
Despite this, I felt that given the agitation for earlier disclosures, the amount of the payments in the year and the fact that all payments had been crystallised with Cuffe's resignation prior to the interim report, we should give consideration to disclosing the amount at the time of the interim report and not wait until the annual report in September. I proposed that this should be brought forward for consideration at the board meeting the next day, and my colleagues on the committee unanimously agreed.
The board took the view that it was in the interests of the company and the shareholders to accept the position proposed by the remuneration committee and make reference to the payments in the directors' report for the half year.
The fact that attention was drawn to this item has been incorrectly interpreted by some in the media as Murray seeking to malign Cuffe. I can assure you that this is a totally false accusation.
The reason for what we did was much more simple and straightforward. We believed that if we did not specifically refer to the item other than in the directors' report, we would be vehemently accused of hiding it deep in the report, on page 46.
Chairman, Commonwealth Bank