‘We got it wrong’: NAB, ANZ suffer first strike over pay

An overwhelming 88 per cent of NAB shareholders rejected the group’s remuneration report, while ANZ chair David Gonski told shareholders in Perth that the bank would receive a first strike. 

“At this stage, approximately 66 per cent of the votes have been in favour of the report,” Mr Gonski said.

“The board would like to thank those shareholders for their support in what has been a difficult year; however, this means that, at this stage, 34 per cent have voted against – and as a first strike occurs if 25 per cent vote against – we face a first strike at this meeting.”

NAB chairman Ken Henry, who recently represented the bank as a witness during the final round of the royal commission, admitted that the group had failed its customers and shareholders in 2018. 

At the bank’s AGM in Melbourne on Wednesday, Mr Henry noted how the NAB board had decided to change its executive remuneration model ahead of the royal commission’s final report in February. 

“We could have waited until after the royal commission, which has brought a sharp focus to incentives in the banking industry. However, the board came to the view long before the commission started that our executive remuneration scheme was not right,” he said. 

“It didn’t put enough focus on the management of non-financial risks and conduct matters. And, there was a risk that our so-called long-term incentive (LTI) scheme might even be encouraging short-term thinking and value-destroying behaviours.

“We were not alone in considering this challenge – the consequences of traditional LTI schemes have been exercising the minds of remuneration specialists around the world for some years now.

“There seems to be clear alignment on the goal, to better measure and reflect customer outcomes alongside long-term financial performance – and bring greater transparency to the way reward is determined for individual executives.”

But NAB shareholders unanimously rejected the new scheme, which was announced in September and includes a 15 per cent pay cut for executives. 

“Having pressed ahead with our reforms to executive remuneration with this intention, the board is hearing loud and clear that our new scheme is not right. We tried, but we got it wrong. We are listening to you. We will try again,” Mr Henry said. 

The NAB chairman had predicted that more than 80 per cent of the votes cast on the group’s remuneration report would be “against”.

“We will learn from your feedback, consult with our major shareholders, and consider the final report of the royal commission and APRA’s review of remuneration practices at large financial institutions,” Mr Henry said. 

The news comes after Westpac incurred a first strike against its remuneration report at its annual general meeting last week.

[Related: ANZ outlines 'responsible banking' initiatives]