National Australia Bank is scrapping its overhauled executive pay structure in response to an overwhelming first strike in which more than 80 per cent of shareholders voted against it.
Chairman Ken Henry, who was grilled by unhappy shareholders for more than an hour about falling share prices and a dividend that has not been raised since 2013, told the bank’s annual meeting on Wednesday that NAB had got it wrong.
Dr Henry said a record 80 per cent or more of shareholders were to vote against moves that cut chief executive Andrew Thorburn’s total pay by 32 per cent but still left him with $4.375 million.
Dr Henry acknowledged that “the quantum of remuneration” was a factor in the revolt.
“The board is hearing loud and clear that our new scheme is not right. We tried, but we got it wrong,” Dr Henry told shareholders in Melbourne.
“We are listening to you. We will try again.”
NAB, like rival Westpac, will now be at risk of a second strike and a board spill next year. ANZ was expected to become the third of the big four banks to face shareholder antipathy at its annual meeting in Perth later on Wednesday.
ANZ chairman David Gonski was to tell shareholders that 34 per cent of early votes had gone against its remuneration report.
“The board acknowledges the very real concerns of those who have voted against the report and I assure you we will continue to work hard in 2019 to ensure further alignment between compensation and shareholder interests,” Mr Gonski will say.
ANZ chief executive Shayne Elliott took a near $1 million pay cut after a year of declining profits, a falling share price and industry-wide reputational damage.
His overall package fell from $5.25 million to $6.2 million in 2017, but shareholders apparently did not feel this went far enough.
All three of the banks now face the possibility of a second strike and board spill at next year’s annual meetings.
Just a week ago, a majority of shareholders at Westpac’s annual meeting voted against the bank’s remuneration report.
“The key point from those voting against the remuneration report has been that although the board took events over the year into account, many have questioned whether we went far enough, particularly in reducing short-term variable reward paid to the CEO and other executives,” Westpac chairman Lindsay Maxsted said after the vote.
NAB has said that Mr Thorburn, who goes on leave after the AGM, took a $2 million pay cut after a year in which NAB’s full-year cash earnings fell 14.2 per cent and it owned up to poor customer treatment.
His pay cut was the largest among the big four bank CEOs in both percentage and absolute terms.
Protest votes against bank remuneration:
NAB – 88%
Westpac – 63%
ANZ – 34%
CBA – 6%
Now look at the table of CEO pay below and spot the differences… pic.twitter.com/W6lVgsSBww
— Gemma Felicity Acton (@GemmaActon) December 19, 2018
Mr Thorburn will return from leave by February 1 to lead NAB’s response to the banking royal commission’s final report, and then take long service leave.
Dr Henry said NAB had a clear plan for its future and remained confident in the leadership of Mr Thorburn and “an executive team of truly global quality”.
“We are now 12 months into a three-year strategy to transform the bank and we look forward to Andrew returning from leave rested and recharged to see through the transformation – and beyond,” he said.
Dr Henry said NAB had decided to overhaul its pay structure before the royal commission heard widespread instances of wrongdoing from NAB and its peers, having identified the possibility it was “encouraging short-term thinking and value-destroying behaviours.”
NAB’s shares have fallen 22 per cent this calendar year and are at a six-year low.
Dr Henry said he had been “appalled” by some of the wrongdoing exposed at the royal commission, and Mr Thorburn admitted banks had committed “terrible” misconduct.
“I know you have been disappointed and upset by issues of the past year,” Mr Thorburn told shareholders.
“We have been too – we are determined to get better.”