Ever wondered how much a banking executive gets paid? Unsurprisingly, the short answer is a lot.

The Commonwealth Bank's board has announced it will cut the bonuses of senior executives in response to last week's sensational allegations it breached anti-money-laundering laws.

But why are they paid so much in the first place?

The ABC spoke to two corporate governance experts who said Australian banking executives were among the highest paid in the world.

It starts with the bonus system

"When we're talking about the senior executives of the banking sector, we're talking about quadruple figures," Professor Thomas Clarke says.

Professor Clarke, from the University of Technology in Sydney, says Australian chief executives, especially banking executives, are among the world's highest earners.

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Banking executives often bring home a performance bonus on top of their fixed salary linked to specific targets. In many cases, the bonuses are larger than the salary itself.

So how is a bank chief executive's base pay worked out? And is it fair, or does it comes with a wink and a nod?

"The criteria are usually very complex formulae, and have been provided by highly paid salary consultants the board hires," Professor Clarke says.

"But the strange thing is that always these complex formulae work in the favour of the recipient and indeed in the favour of the consultancy, which is on a percentage of what the executive receives for providing the advice.

"And the board always accepts these formulae and the results, and congratulates the executive on their truly amazing performance."

Does performance matter?

"That's the mythology," says Robert Montgomery, who has experience signing off on chief executive pay as a former chair of a publicly listed company.

The strange thing is that executive bonuses, in spite of their name, often appear to be the rule, not the exception.

"The interesting thing is even when performance at the company in terms of its annual results falls, normally these bonuses are maintained," Mr Montgomery says.

"[Senior executives] always seem to hit their performance targets, and they get these astonishing amounts of money."

Instead, a more common way to determine executive pay is quite simply by looking at what others are earning.

Mr Montgomery says he would look at a similar company to his own, and offer his chief executive slightly more.

"Unfortunately there's a comparison element to the process where we would look at companies of a similar size elsewhere," he says.

"Because of course the CEO is mobile and they can take a better offer if they don't get what they want in the company that they're working for."

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Doesn't it just come down to negotiating skills?

In a way, yes. And the experts agree it's part of a bigger problem.

"There is a negotiation element, but what you don't want is a board that's just made up of nodding yes men," Mr Montgomery says.

"It's really important to have a board that are really happy to stand up to the CEO. Unfortunately that's much rarer than it should be."

But whichever way you cut it, even the experts say Australian executives are paid far too much.

It's especially galling with broader annual wage growth in Australia at its lowest since records began.

Not only are multi-million-dollar bonuses outside the realm of possibility for most Australians, most Australian wage earners haven't seen a pay rise in years.

"I believe it's deeply inequitable, I believe it's unnecessary," Professor Clarke says.

"It's an historical aberration that CEO pay has been able to inflate wildly without control while everyone else wages have been held firmly to the annual inflation rate.

"Senior executive pay is a serious social and economic problem that needs serious attention by governments and inquired into and reformed."