Commonwealth Bank will continue to use sales targets as a key incentive for branch staff bonuses, sparking union criticism it is persisting with a conflicted pay model that promotes a sales culture.
The move comes as the bank's chief executive, Ian Narev, has dismissed suggestions CBA has suffered reputational damage as a result of the scandal that involves misselling of financial services products and in some cases fraud.
CBA's Narev says no damage to bank's reputation
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CBA's Narev says no damage to bank's reputation
Commonwealth Bank chief executive Ian Narev has hit back at claims the bank’s financial planning scandal has dented its reputation and deterred customers, saying it has had no impact on the bank’s financial planning business.
"Of course, there are going to be some customers who when these things happen don't want to deal with the bank. At the moment, we're not seeing that at any discernible level, but we never, ever take these things for granted," Mr Narev said on Channel Nine's Financial Review Sun-day program.
"It's really important to look at reputational damage in the long term. There's a lot of tendency to look at things day to day, what's happening today, what's happening yesterday.
"On those basic metrics, those levels of activities across that business and right across the Commonwealth Bank are actually really very strong," he said.
Even so the bank is updating how it assesses whether front-line staff from its financial planning arm receive performance bonuses. In some cases the bonuses can be up to 10 per cent of salary.
The new CBA policy is part of its "balanced scorecard" model – an approach used by all the big banks that was threatened by Labor's Future of Financial Advice (FoFA) laws.
Under the latest CBA policy, branches will be assigned revenue and cost targets as a "key performance indicator" when assessing staff eligibility for bonuses. This will replace a previous system where tellers received a certain number of points for each product they sold, which fed into bonus calculations.
The bank is not changing the 50 per cent weighting it gives to "branch performance" in bonus calculations. But the Finance Sector Union, which is negotiating with CBA over a new enterprise agreement, said the decision was a missed opportunity nonetheless.
In order to be eligible for a bonus, staff must meet minimum standards on risk and key capabilities.
They are also assessed against targets for customer satisfaction, their ability to direct customers to electronic banking channels, and sales productivity.
FSU national assistant secretary Geoff Derrick said the new arrangements showed that bank bonuses were ‘‘transparently about revenue,’’ and this was not in customers’ interests.
‘‘It drives risky behaviour, because it potentially forces staff to choose between meeting a sales quota and meeting the customer’s best interests. That’s a conflicted pay model, that’s what got them into strife in the first place,’’ Mr Derrick said.
‘‘There was an opportunity, particularly in the crisis the Commonwealth Bank is now facing, to actually confront the cause of the problem,’’ he said.
CBA rejected the union’s claim, and Mr Narev last week cited the ‘‘balanced scorecard’’ as one way in which it had reformed remuneration since the planning scandal that occurred between 2006 and 2010.
Mr Narev emphasised that staff now had to meet standards on risk and behaviour before being eligible for a bonus, and argued the incentives made business sense.
‘‘As long as you have acted in the right way and have all the right risk and compliance, you can be rewarded for making the right [recommendation] ... that is good business,’’ he told Fairfax Media.
A bank spokeswoman said the new policy on bonuses, including the revenue targets, did not change the requirement for staff to serve customers on a ‘‘needs-based’’ approach. ‘‘They are free to recommend whatever product or service that would meet a customer’s financial needs,’’ the spokeswoman said.
Balanced scorecards are used by all the major banks, but have been thrown into the spotlight by the controversy surrounding the FoFA roll-back.
Under the government’s proposed changes, branch staff are banned from collecting commissions but they can receive rewards of up to 10 per cent of their salary if they hit their targets. Critics say there remains a tension between incentives to sell product and the best interests of customers.
Mr Derrick argued ‘‘balanced scorecard’’ payments may have fallen foul of the former government’s FoFA laws because they were very like commission-based sales. The present government has made it clear this type of pay arrangement will remain legal under its roll-back.