The Macquarie Billionaires’ Club: A System of Incentives that Fuels Ambition

The announcement of Shemara Wikramanayake’s impending retirement as CEO of Macquarie Group and her successor Greg Ward’s appointment has raised questions about the financial giant’s approach to leadership and remuneration. As companies face increasing scrutiny over income inequality, Macquarie’s track record on pay and performance raises serious concerns.

Wikramanayake will leave with a personal fortune of over $880 million, a stark reminder of the lucrative rewards awaiting those at the helm of Australia’s most successful investment banks. Her compensation package last year stood at $26.5 million, dwarfing the average Australian wage by 70 times. This is not an isolated incident – Wikramanayake’s predecessor, Nicholas Moore, left with a similar-sized payout in 2018.

Macquarie’s system of incentives ties executive pay to short-term performance metrics, creating a culture focused on delivering quarterly profits over sustainable growth and long-term value creation. This leads to reckless risk-taking and perpetuates a culture of entitlement among senior executives. The fact that Wikramanayake has built up such an enormous shareholding over nearly four decades at Macquarie is a testament to this system’s ability to reward longevity and loyalty, rather than merit or innovation.

The phenomenon has been dubbed the “billionaires’ factory” by some, with companies like Macquarie serving as a conduit for the country’s wealthiest individuals to consolidate their fortunes. The handover to Ward, who has run Macquarie’s banking and financial services arm since 2013, is likely to see a continuation of this approach.

Ward’s leadership has overseen significant expansion in retail banking, with Macquarie aggressively taking on the big four banks in home loans and deposits. While this may have boosted profits in the short term, it raises questions about the company’s commitment to sustainable growth and its responsibility towards clients. The timing of Wikramanayake’s departure also coincides with a broader crisis in the auditing industry sparked by the KPMG scandal.

Macquarie has announced an external review into KPMG’s pursuit of its audit contract, which was worth $69 million last year. This is significant given that Allens, the law firm conducting the review, is also investigating whistleblower claims against KPMG. Macquarie’s chairman Glenn Stevens continues to defend the integrity of the tender process and the role of Michelle Hinchliffe, who heads Macquarie’s audit committee.

While Citi analyst Thomas Strong may see Ward as a “logical choice” for Macquarie, the transition will undoubtedly be watched closely by regulators and industry observers. As Macquarie embarks on its next phase of growth under Ward’s leadership, it must address the systemic issues that have contributed to its reputation as a “billionaires’ factory”. This includes overhauling its incentive structure to prioritize long-term value creation and sustainable growth.

The company also needs to be more transparent about its remuneration packages and ensure that executive pay is aligned with industry standards. Ultimately, Macquarie’s success will depend on its ability to balance the interests of its shareholders with those of its clients and employees.