CEOs' salaries of state-owned banks to be rationalized
Wednesday, 2 December 2009
FE Report
The government has decided to cut salaries of top bosses of three corporatised banks as it moves to reduce the gaping discrepancy in perks in the state-controlled banking sector, officials said.
Officials at the finance ministry said that the incumbents would be unhurt by the decision, but the next chief executive officers (CEOs) of Sonali, Janata and Agrani banks would count monthly pay packages, much less than the current level.
Each of the three CEOs at the state-owned commercial banks, which became public limited companies in 2007 under a World Bank-financed reform project, is getting a monthly salary ranging between Tk 0.8 million and Tk 0.6 million, exposing a huge discrimination in the pay structure.
"Our idea is just to bring a sort of parity. The salaries drawn by the current CEOs are much higher than high-ranking and mid-level officials," a finance mninistry official said.
The move comes ahead of expiry of the contracts of the CEOs, who are at the helm of the country's three biggest banks.
"This doesn't mean the government will roll back banking reform. We're on the right track," he told the FE.
The official did not say how much would be curtailed from the existing salary but said a new pay structure would be finalised before a fresh recuitment.
The last military-backed caretaker administration tapped the CEOs of Sonali, Janata and Agrani outside the state banking sector with market-based remuneration as it buckled under pressure from the World Bank.
The global lender came up with a bank modernisation programme to turn around the banks long derided as breeding grounds for corruption and inefficiency.
But the finance ministry official noted that the World Bank-funded enterprise growth and banking modernisation project might not be extended beyond its December 2010 deadline.
Currently, a working group is conducting periodic evaluation of performances of the CEOs of Sonali, Janata and Agrani, which the World Bank says are faring well.
"The government has the prerogative to terminate the contract of a non- performing CEO," said a recent aide memoire of the WB.
But the Washington-based bank wants the current practice of picking CEOs from the market to continue as the corporatisation has started delivering "positive outcome."
It also rejected the notion that the salary structures of CEOs are high and unmatched with the pays of other staff members of the banks.
"The salaries of CEOs of three state-lenders are only comparable to the pays of [the top officials] of smaller private banks in Bangladesh," said the bank report.
"Discontinuing the management support at this juncture when these banks are just turning around and before the institutionalisation of the reforms will reverse all gains made in the last three years," added the report.
The CEO of Sonali Bank Ltd draws Tk 0.8 million a month while his counterparts at Janata Bank and Agrani Bank are getting Tk 0.7 million and Tk 0.6 million respectively.
The official said the salary of Rupali Bank's top boss would be matched with the private sector remuneration, although the incumbent managing director gets his compensation package as per existing pay structure for a state-owned bank.
The government has decided to cut salaries of top bosses of three corporatised banks as it moves to reduce the gaping discrepancy in perks in the state-controlled banking sector, officials said.
Officials at the finance ministry said that the incumbents would be unhurt by the decision, but the next chief executive officers (CEOs) of Sonali, Janata and Agrani banks would count monthly pay packages, much less than the current level.
Each of the three CEOs at the state-owned commercial banks, which became public limited companies in 2007 under a World Bank-financed reform project, is getting a monthly salary ranging between Tk 0.8 million and Tk 0.6 million, exposing a huge discrimination in the pay structure.
"Our idea is just to bring a sort of parity. The salaries drawn by the current CEOs are much higher than high-ranking and mid-level officials," a finance mninistry official said.
The move comes ahead of expiry of the contracts of the CEOs, who are at the helm of the country's three biggest banks.
"This doesn't mean the government will roll back banking reform. We're on the right track," he told the FE.
The official did not say how much would be curtailed from the existing salary but said a new pay structure would be finalised before a fresh recuitment.
The last military-backed caretaker administration tapped the CEOs of Sonali, Janata and Agrani outside the state banking sector with market-based remuneration as it buckled under pressure from the World Bank.
The global lender came up with a bank modernisation programme to turn around the banks long derided as breeding grounds for corruption and inefficiency.
But the finance ministry official noted that the World Bank-funded enterprise growth and banking modernisation project might not be extended beyond its December 2010 deadline.
Currently, a working group is conducting periodic evaluation of performances of the CEOs of Sonali, Janata and Agrani, which the World Bank says are faring well.
"The government has the prerogative to terminate the contract of a non- performing CEO," said a recent aide memoire of the WB.
But the Washington-based bank wants the current practice of picking CEOs from the market to continue as the corporatisation has started delivering "positive outcome."
It also rejected the notion that the salary structures of CEOs are high and unmatched with the pays of other staff members of the banks.
"The salaries of CEOs of three state-lenders are only comparable to the pays of [the top officials] of smaller private banks in Bangladesh," said the bank report.
"Discontinuing the management support at this juncture when these banks are just turning around and before the institutionalisation of the reforms will reverse all gains made in the last three years," added the report.
The CEO of Sonali Bank Ltd draws Tk 0.8 million a month while his counterparts at Janata Bank and Agrani Bank are getting Tk 0.7 million and Tk 0.6 million respectively.
The official said the salary of Rupali Bank's top boss would be matched with the private sector remuneration, although the incumbent managing director gets his compensation package as per existing pay structure for a state-owned bank.