In May, the bank sent a Toronto customer, who had requested details of his own account activity, details of transactions involving more than 100 other CIBC customers as well.
The Toronto Star
June 30, 2005
New CIBC boss stays on course
McCaughey says he'll continue predecessor's strategy. 'I've left him something to work on,"" CEO Hunkin says
Stuart Laidlaw
The newly named CEO of the Canadian Imperial Bank of Commerce says he'll stick to the bank's strategy of growth through expanding consumer services, rather than more risky corporate lending.
"Continuity is extremely important," Gerry McCaughey said in an interview yesterday.
Two years ago, the bank decided to shift its focus from corporate banking to the less-risky sector of consumer lending.
"It's at least a five-year plan and there's still several years left," McCaughey said of the bank's growth strategy. "I was part of the team that implemented this plan."
Chief executive officer John Hunkin announced yesterday he will retire this summer a year ahead of expectation. McCaughey, 49, currently the bank's president and chief executive officer, will replace him.
At this spring's annual meeting, in response to a question, Hunkin told a reporter he would be at the bank's annual meeting next year.
"I remember thinking when I was answering the question, 'I hope he doesn't ask in what capacity,'" Hunkin said in an interview with the Star yesterday.
He will attend the meeting as an investor, having picked up millions of dollars worth of shares during his tenure. Hunkin has been with the bank for 36 years, and was appointed chief executive in 1999.
The 60-year-old Hunkin will collect a pension of more than $1 million a year upon retirement. Had he stayed until he was 61, next April, his pension would be $1,328,877 a year. Spokesman Rob McLeod said he could not put an exact figure to Hunkin's pension at this time.
McCaughey said the shift to consumer banking has served CIBC well.
The consumer side now accounts for 73 per cent of the bank's capital, up from 40 per cent when he took over.
McCaughey has been groomed for the top job for several years, holding key positions in preparation for taking over from Hunkin, who said he did not want a repeat of the race for the top that marked his appointment as chief executive.
"I was determined not to have the horse-race process, which was divisive within the bank," Hunkin said.
Analysts were not surprised McCaughey got the top job.
"You could see it coming," said Denis Durand, a senior partner at Jarislowsky Fraser Ltd. in Montreal, which owns CIBC shares. "For the past two years, McCaughey has had a much higher profile. He clearly was being groomed for the top spot."
Hunkin, who refused a bonus during tough times at the bank two years ago, received $8.3 million in salary and bonuses in 2004. His base salary was $1 million, plus a performance bonus of slightly more than $3 million and $4.2 million worth of restricted share awards.
He also picked up 50,560 options to buy CIBC stock.
During the past year, the bank has been plagued by a number of embarrassing gaffes. Late last year, Hunkin apologized after dozens of the bank's confidential faxes, containing personal banking information, were sent to a scrap yard in Ridgely, W.Va. Faxes were also sent to a Montreal business that distributes machines that collect retail-chain carts.
The next day, the bank had to apologize again when one of its cash machines in New Brunswick dispensed Canadian Tire money instead of $20 bills. The bank refunded the money.
In January, the bank was forced to apologize once more when President's Choice Financial, whose banking services are run by CIBC's Amicus unit, mistakenly told federal tax authorities that 3,061 customers had cashed in part of their RRSPs, triggering tax bill.
In May, the bank sent a Toronto customer, who had requested details of his own account activity, details of transactions involving more than 100 other CIBC customers as well.
Past problems have also continued to haunt the bank. It set aside $300 million in its fiscal fourth quarter to deal with Enron Corp.-related litigation, in addition to paying $80 million (U.S.) to settle claims with the U.S. Department of Justice related to Enron's collapse in the wake of an accounting scandal.
The hit, coupled with another $28 million (Canadian) on sublease losses at its New York offices, dragged down net income for the quarter to $439 million. For the year, CIBC reported net income of $2.2 billion up from $2.1 billion in 2003.
Both Hunkin and McCaughey said the important thing in such situations is how the bank handles the fallout. Hunkin said the bank now has some of the best preventative measures among North American banks.
"The real question isn't whether you have problems, but how you dealt with them," said Hunkin.
McCaughey said the bank will maintain its current, scaled-back, operations in the United States, reiterating he will not stray far from the path of his predecessor. He added he's confident investors will reward the bank for its efforts to reduce risk, saying, "I think its full value will emerge over the next few years."
Hunkin said he decided about a month ago to leave and felt it was time to hand over power to McCaughey. "The worst thing that can happen to a CEO is to find himself with nothing to improve upon," he said. "So I've left him something to work on."
With files from the Star's wire service
Brought to you by WikidFranchise.org
Risks: Banks, Bank CEO's pay, Bank violates federal privacy laws, Personal Information Protection and Electronic Documents Act, Canada, Predatory lending practices, Opportunism (self-interest with deceit), Towers of gold, feet of clay, Canada, 20050630 New CIBC
