Big banks' 'wages of terror'

Business

Bank bosses get millions of dollars while front line staff face sales targets that cause high levels of stress and anxiety, union says

21st Nov 13, 1:43pm by David Hargreaves

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The big bank chief executives are making "massive salaries" on the back of a "terror regime" in operation at the banks, according to the union representing bank workers.

"Big profits and massive salaries paid to bank CEOs come off the back of aggressive sales targets and an associated climate of fear in banks," general secretary of FIRST Union Robert Reid said.

The union says its going to present a research paper tomorrow on the "terror regime".

The comments from the union follow release in the past week of the salary figures for the NZ CEOs of Westpac, ANZ and BNZ.

"While those at the top of the pile are awarded multi-million dollar salary packages, front line staff are facing a sales targets regime that is leaving many suffering high levels of stress and anxiety," Reid said.

"Bank staff are incentivised to drive up New Zealand household debt as much as they can in order to boost their company’s profits. If workers don’t meet targets, they’ll be put on a performance improvement plan. If there’s no improvement at the end of that, they will be sacked or forced out of the bank.

"CEO pay in banks is well out of kilter with the rest of their staff. The ANZ CEO is paid over 100 times more than front line staff at his bank."

Reid said the union was following with interest a referendum in Switzerland this week on capping executive pay at no more than 12 times the amount of a firm’s lowest paid worker.

FIRST Union will tomorrow present the paper Women and work in the New Zealand banking industry: Targets and debt following the crisis at a seminar at the AUT in Auckland.

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38 Comments

by Stephen Hulme | 21st Nov 13, 1:51pm 1384995108

When was it never thus? - build the strength and influence of that guild/union, just as lawyers, doctors etc.do.

by David George | 21st Nov 13, 2:17pm 1384996627

I can confirm the bank's "terror" regime. My daughter had a bank career and was taken to task if she didn't sign up lot's of new debt and/or credit cards. She never felt comfortable with it as it was usually not in the customers interests. Some staff had no such qualms and were rewarded accordingly. Debt pushers.

Regarding the outrageous salaries; the boss earning 100 times the staffs wages means they earn as much in a single year as their staff do in their entire working lives. That doesn't seem right to me. Capitalism worked just fine with much more modest ratios - what's going on here?

The top man at the worlds biggest bank - Industrial and Commercial Bank of China - is on a salary of $310,000. http://www.bloomberg.com/news/2012-08-21/jiang-s-310-000-at-icbc-compares-to-dimon-s-23-million.html

I see they have got a banking ticket in NZ now.

http://www.interest.co.nz/business/67418/chinese-banking-giant-icbc-gets-official-registration-nz-bank-former-rbnz-governor-an

by Grant A | 21st Nov 13, 2:43pm 1384998236

ZZ - still waiting for that margin analysis to back up the populist rhetoric. By the way I think you'll find that banking wages across the board are pretty good, and if we were all bankers the average wage in NZ would be somewhat higher ...but lets not let facts get in the way of a good rant

by Grant A | 21st Nov 13, 2:37pm 1384997832

Dave understand your comment but frankly this is just typical union stuff. Yes bosses are arguably making too much in some industries and banking is one of them...personally I think that gap is only the board and shareholders business and absolutely nothing to do with unions. But this sales target talk always amuses me - what sales oriented industry doesn't have sales targets, and I've never met a saleman who thinks his targets aren't completely over the top. So what's different with banking, just the fact that its debt ? I've seen plenty of other industries inappropriately sell product to the innocent, and where that happens they should be equally in the gun, although the buyer has to accept some responsibility for their decsions ..un-PC I know

You're a debt pusher only if you don't have the network and ability to achieve those targets without doing so, and that can be pretty tough for many young people. Frankly, you have to lend, but you have to lend well and appropriately, and if you can't do that for any reason, find an industry that better suits you and let others try as there are many that can.

by Stephen Hulme | 21st Nov 13, 3:02pm 1384999322

This is typical union stuff - what are you talking about ?- I worked as a trader/dept head for various banks over 20 years where department budgets and bonus break points were set annually - and I never belonged to a union.

Grant A, isn't it time you stepped out from behind the protection afforded by the anonymity of your alias?

by Grant A | 21st Nov 13, 3:52pm 1385002335

Then I think we have similar past experiences and can be more balanced in an assessment. However, you misunderstood my posting. I never worked for an union either and I wasn't suggesting that all bank officers do/did. I was simply making a comment about unions bleating about peformance targets and asking how that is majorly different in any industry, as I've worked for more than one.

by PeakEverything | 21st Nov 13, 3:43pm 1385001819

Grant I suspect you don't actually understand what debt is. Debt in its simplist from is a claim on future energy. So whether or not you have the right "network" makes no difference if you are writings debt the earth can't pay you are a debt pusher. The only way continually increasing debt targets can be legitimate is if we have continually increasing energy sources, which as of today we don't.

by Grant A | 21st Nov 13, 4:06pm 1385003208

Peakeverying - sure, and with a nickname like yours I'm sure you'd say that and who knows - debt has been used for hundreds of years and we're still here - but in the context of what was discussed, banks only lend to people who want to borrow, and whilst they do, banks will comptete and expect their people to get their share of it.

by powerdownkiwi | 21st Nov 13, 7:27pm 1385015267

Grant A - a little relativity, perhaps.

The dinosaurs were round for 170 million years (bet you think you're superior).

Humankind has been around for perhaps 200,000. and organised debt about 500.

Exponential growth, lack of underwrite - it ws only a matter of 'when'.

Hardly registers, does it?

by Grant A | 21st Nov 13, 8:06pm 1385017575

Powerdownkiwi - maybe not superior to dinosaurs but clearly superior to you mate by the totally nonsensitical response you've just made - unless of course youre prepared to explain yourself to show a superioity of your own which I now question...whats your issue ?

by steven | 21st Nov 13, 8:35pm 1385019359

It makes sense, just that you cant see it. In your case I guess its like trying to tell a colour blind man what green is. That of course is an advantage to those that do v those that dont, or maybe that's those that wont.

regards

by Grant A | 21st Nov 13, 8:44pm 1385019896

Personally Steven I get tired of people who will come in and say the likes of "it makes sense" but won't explain how - either lazy (so why bother commenting), or just plain hot air.

by PeakEverything | 22nd Nov 13, 9:41am 1385066487

The point Powerdown was making (and he can correct me if i'm wrong) is your comment "debt has been around for hunderds of years and we are still here" seems to imply that debt hasn't caused a problem so far only growth and prosperity. Now of course so far you are correct. The issue is that every increasing debt requries every increasing growth. The issue is that GDP growth at just 3% will result in a doubling of total GDP in just 23 years. Thats not a big problem at the start but if you understand exponential growth you will know that doubling of a doubling of a doubling of a doubling starts to add up quicker and quicker.

So today our world is consuming twice as much everything as it was in 1992 and arguably back then we were approaching the limits of population and comsumption the world can support long term.

If we know the earth can't sustain long term the numbers we currently have it really is immoral to keep pushing debt on people, because ultimately debt is a call on future resources.

Now I don't know when exactly we will hit the hard limits It could be a year from now it could be 20 years from now. I suspect sooner rather than later and I suspect the first hard limit will be oil. But just because I don't know when the game will change, we do know that in a finite world we can't keep having exponential growth.

Now it is possible that some new source of energy will be found, maybe. But as things stand right now we don't have anything realistic on the horizon. So with that in mind pushing more debt is soon going to be a cheque the earth can't cash. When that happens things are going to change.

I know us peak types bang on about it but its not because we need to be right it's because the consequences of not understanding are so big. I would love to be wrong about this and if you can show me why what I say is not true please do.

Cheers

by rastus1 | 22nd Nov 13, 4:22pm 1385090563

Nicely explained ... even a school kid can follow this. Of course raises the question as to why the main stream media or our politicians can't - I'm guessing because to do so is as scarry as heck.

by speckles | 22nd Nov 13, 4:33pm 1385091211

If people here can get peak property prices they should be able to get their heads around this, nicely put.

by Plutocracy | 21st Nov 13, 9:45pm 1385023544

The 'real economy' is based around the physical economy of goods and services. People who take on debt expect have an expectation to be able to pay the debt off. To pay back debt with interest the economy has to grow (i.e. produce more goods and services).

Now for years the money economy could continue to grow by feeding off the secondary economy of goods and services which could grow by feeding off the primary economy of raw materials, such as water and land and air, all powered by that magic yet invisible ingredient called energy. Energy is the feedstock for every piece of 'work' that happens in our world.

Now we've reached a point where our energy supply is no longer growing, but our financial system requires this perpetual growth or it collapses. The financial system has become decoupled from physical reality and if everyone cashed in, we'd come up well short!

by Grant A | 21st Nov 13, 9:57pm 1385024240

Good explanation of your viewpoint Plutocracy but I have no opinion on it as its unrelated to the more minor picture that I was talking about which is NZ banks have a perfect right to give their staff sales targets on any product they sell. I'll leave it to others to debate the wider picture about the revelancy of growing debt, peak everything, indeed everything else people want to spin the conversation out into. At the end of the day, whether right or wrong, banks have a business to run and won't stop doing business just because of something that may or maybe not be right, or on the basis even if it is right its now reached the decade in the past several hundred years where it becomes an issue and they stop setting lending targets.

by B088Y | 22nd Nov 13, 1:31am 1385037095

Shareholders and Boards can have a very short term profit focus at the expense of the long term. CEO performance packages which enshrine the need for increased profits and profitability can lead to outcomes that are bad for all of us. When that happens someone needs to step in.

While I agree that most sales industries have targets and eveyone moans about them, financial products can be very toxic especially when mis- or over sold. While the consumer has to take some responsibility the assymetry in knowledge puts the consumer at a disadvantage.

And the toxicity of financial products isn't limited to the individual - taking debyt specifically - in part the GFC was a result of "liar loans" and NINJA mortgages.

Dentists don't get targetted on the number of filings they do - there'd be an incentive to fill healthy teeth. So, why should bank staff get targetted in a way that incentivises them to act in a manner detrimental to a customers financial health? We've a whole raft of new securities legislation that in part reflects the impact of targets/incentives and mis-selling that has resulted.

I like your approach of if you don't like it, can't stomach it or are no good at it leave - I just don't think that the job market is such that people can pick and choose so easily!

Of course it's typical union stuff; they're there to represent their members. What the rest of us have to look out for, often on behalf of the most vulnerable, are the bigger issues.

by Grant A | 22nd Nov 13, 8:54am 1385063663

Alot of that is true Booby, and I agree that, in my experience at least, whilst banks do have long-term plans and strategies these are very "flexible" because yes there is undoubtedly also a more prevalent short-term focus on the current year's fanancial results...however, I've seen similar focus in other corporates that I've worked for as well. And I'm very happy to see the regulators be very active in ensuring that the banks remain prudent with the RBNZ's recent LVR rules to shore up bank capital an example of that. In the end the banks have their own prudential controls and touch wood to date throughout many financial and economic crisis' in this part of the world (in a banking industry that doesnt do things such as liar loans & NINJA loans, issuing motrtgage backed securities and then shorting them in the markets etc), only one mainstream bank has fallen over; the Govt owned BNZ in the 1980's which went insolvent and had to be bailed out by the Aussies.

I hear what you say about dentists but whats the solution for lending ?...tell your lenders to come into work and do their best ? I can tell you what human nature does in that situation, that bank's market share goes down, their share price with it, less capital, less investment in their business, less service levels for their dwindling customer base, less reward for their staff, a deep spiral over a period of time. With that in front of you I have no problem suggesting someone looks for some other occupation whether there are jobs out there or not...you don't survive in business by not doing whats right for the business just because its difficult for some people....yes you need to carry your staff with you on that journey as well, but the right staff suited for that industry

As always, there's the theory and the practice.

by MikeM | 22nd Nov 13, 11:23am 1385072615

" In the end the banks have their own prudential controls and touch wood to date throughout many financial and economic crisis' in this part of the world (in a banking industry that doesnt do things such as liar loans & NINJA loans, issuing motrtgage backed securities and then shorting them in the markets etc), only one mainstream bank has fallen over; the Govt owned BNZ in the 1980's which went insolvent and had to be bailed out by the Aussies."

Seriously Grant A? Which planet are you living on? The only reason our banks haven't tipped over is because our part of the world miraculously avoided a 20-30% decline in property values. Have a look at the appalling state of the banking industrys' balance sheet. Equity in the mid-single digits and huge exposure to overseas lenders. The only prudential measures our banks have taken is that which is forced on them by the central bank. Otherwise they would be running completely amok like kids in candy shop.

by Happy123 | 21st Nov 13, 4:10pm 1385003446

The workers should have their pay doubled immediately, these poor people have no other options, it's not like they could quit and get another job if their not happy.

And sales targets! ! ! How dare the bank expect a return on their investment in their staff. An employee should be allowed to make the bank no sales at all and still have, not only their job, but a big fat pay rise too.

CEOs should be paid nothing at all, just a pat on the back, that will attract the top talent and ensure good management.

by Simon | 21st Nov 13, 4:27pm 1385004426

Peak energy is a myth. Technology re-defines the game continuosly.

USA has an energy glut, shale gas from fracking, making nat gas prices half price compared to most other countries. Companies are leaving europe to go to the US as it's cheaper there.

by PeakEverything | 21st Nov 13, 5:33pm 1385008401

It would be nice if it was. Re USA their energy production peaked in the 1970's and even with the fracking boom they are still producing less than the 1970's. Also you have to take into account the massive environmental damage to get the resources out of the ground. Also the depletion rates on the fracking wells is very high meaning you don't get high returns for very long.

I don't quite understand how you think we can have infinte energy in a finite world? Not to mention the effect on climate of energy population. Although I'm assuming you climate change denier also?

by steven | 21st Nov 13, 8:32pm 1385019124

Peak fossil fuel energy is a mathematical fact. Peak energy ditto just some hundreds of years away. Its all in the expotential function....and doubling time.

If fracking oil was as easy as it is with gas then pray tell why isnt oil in the USA $50 a barrel? It isnt because it isnt. Neither is gas btw given the depletion rates, but be my guest, buy shares.

Technology is the ever improving way of using more energy so we do less work.

regards

by Machiavelli | 21st Nov 13, 4:53pm 1385006014

"...capping executive pay at no more than 12 times the amount of a firm’s lowest paid worker."

Love the idea but I see only two possible scenarios:

1) Incredibly poor quality Executives in NZ banking, or;

2) Incredibly well paid cleaners in NZ banking

It will never happen.

by benwave | 21st Nov 13, 11:41pm 1385030513

Remind me again how strong the link between executive pay and executive performance is?

by Kakapo | 21st Nov 13, 5:01pm 1385006482

If I was a far more nefarious parrot who happened to be planning some kind of daring bank heist, I'd be thinking to myself, 'self, there's lots of disgruntled and exploited people with access to the system, just ripe for the corrupting'.

by cowboy | 21st Nov 13, 6:20pm 1385011246

How is this any different from every other business with performance requirements?

by Wayno | 22nd Nov 13, 9:14am 1385064846

Well done HAPPY123 for possibly the sillyiest post I have read so it requires no reasoned response.

Grant - your sweeping comment - this is 'just typical union stuff' - so whats your point?

Unions represent their constituency as does other organisations such as employer organsiations and think tanks. Why attack the Union for researching their membership and finding high levels of distress - why is that bad?

Kiwidave is spot on as like him I know very well 2 people affected by these sales targets etc - its been a highly stressful experience for them and is not working for them - they are falling behind. Why should someone in a non sales role be force to sell?

Just this morning the OECD reported that labours (workers) share of gains vs Capitals share of gains (across all OECD members) has further reduced and in fact NZ was fourth from the bottom which saw workers get less that 50% of the posted share of growth - the owners of the capital secured the majority. As the OECD report stated essentially this is another step towards social instability - thier words not mine.

Grant - the BNZ in the 1980s did not go insolvent nor did it have to be 'bailed out by the Aussies' - it was sold for a dirt cheap price by an uninterested government who had the means to restructure the bank but chose not to.

by Grant A | 22nd Nov 13, 10:12am 1385068360

Wayne - I was involved in the days, the BNZ was very close to going to the wall. Yes the Taxpayer could have balled them out with taxpayers money, but I don't see that as a mitigant ? If you're running a business that needs tax payer bail-outs, let someone's else do it.

My point was that you can't expect the unions not to make a song and dance about something to protect their members who struggle to do the job. It is a tough job, no doubt about it, and many many bank officers are very good at it and not "debt pushers" as the unions and others on here describe it. There are plenty of jobs that I'm not cut out to do and others would do far better, so I try not to get into, or stay, in those industries...common sense.

by Grant A | 22nd Nov 13, 11:58am 1385074698

Mike - I know for a fact banks model the likes of a 20-30% fall in the housing market, have you access to their models suggesting that it's saying they can't handle it and that they're ignoring it ? I'm all for regulation, the US is a great example of what happens when you deregulate excessively....that hasn't happened here. It's the regulators job to regulate and the banks job to operate within thoseregulations whether they like them or not...I don't see your point

But I certainly do though on funding front and the banks were luckly to escape 2008/09 with only a short term problem. However, that is now well down the track in changing and the banks have hugely increased their long-term and sticky funding sources - yes because of increasing regulatory requirements initiated before the crisis even started, but contrary to what you say, something that the banks were fully supportive of and we're moving towards anyway...it's just that the RBNZ put numbers around what they wanted and demanded uniformity.

by Stephen Hulme | 22nd Nov 13, 12:06pm 1385075218

sticky funding sources

You mean unsecured OBR pre-positioned domestic depositors. Not a good position to be in after NAB's actions to extricate itself from unsecured loans to the BNZ unit.

by MikeM | 22nd Nov 13, 1:45pm 1385081144

Stephen, here's an another article of interest:

http://www.bloomberg.com/news/2013-09-12/banks-allying-with-hedge-funds-as-capital-rules-bite.html

by Stephen Hulme | 22nd Nov 13, 2:12pm 1385082741

Thks MikeM

by Ricardo99 | 22nd Nov 13, 1:32pm 1385080362

Did wonder what justified David Hisco's $4m salary and perks.

by MikeM | 22nd Nov 13, 1:44pm 1385081070

Grant, my point was that you implied our banking industry didn't implode during the GFC due to prudent self management. I'd say they dodged a bullet. But I guess one's view of what sound self management is, is somewhat subjective.

by Grant A | 22nd Nov 13, 3:27pm 1385087276

ZZ - people aren't forced to borrow money any more than the insurance salesman forces you to buy a policy for more than you need, a real estate agent forces you to buy a $1m house when you should only afford to buy one for $750k, the shop salesperson influences you to buy the add on product...such as ,,,,,,,,,,,,,personal responsibility does apply as well.

by Grant A | 22nd Nov 13, 3:23pm 1385087002

No, I totally accept your point Mike, the Australasian banks funding was far too short, they knew if beforehand, we're looking to resolved it, but hadn't by the time of the GFC and indeed escaped a bullett pretty much because of the US Treasury's massive bail-out of the system and the Fed's QE. Clearly they hadn't modelled that as it was a once in a generation event, and there has been huge learning, or more particularly, action since.

Not so sure about your comment on the appalling state of the bank balance sheets - yes in the US and Europe where they have amazingly even been able to orchestrate a suspension of mark-to-market valuation of their assets, but on a comparative basis they are hugely stronger on this side of the world - or is it just a comment on the fact that the capital requirement of banks even under the new Basel regulation are too low. Make it higher that put more costs onto the customer but maybe that's not a reason to not so so.