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 has told the bank’s annual general meeting that, while the final tally has not been made, more than 80 per cent of shareholders will vote against reforms that cut chief executive Andrew Thorburn’s total pay by 32 per cent.
Dr Henry acknowledged that “the quantum of remuneration” was still a factor in the shareholder 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 on Wednesday.
“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.
Mr Thorburn, who will go on leave after Wednesday’s annual general meeting, was paid $4.375 million for a year in which its full-year cash earnings fell 14.2 per cent and it owned up to poor customer treatment.
That was down from $6.448 million in the previous financial year, making his pay cut the largest among the big four bank chief executives in both percentage and absolute terms.
Dr Henry said Mr Thorburn will return from annual leave by February 1 to lead NAB’s response to the royal commission’s final report, and then take long service leave.
Nonetheless, he said Mr Thorburn’s future with NAB was secure. “We have a clear plan for NAB and remain confident in our future under the leadership of CEO Andrew Thorburn and an executive team of truly global quality,” Dr Henry said.
“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.” Dr Henry said NAB had already decided to overhaul its pay structure before the royal commission heard widespread instances of wrongdoing from NAB and its peers, having identified the possibility is 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.” More than 64 per cent of Westpac shareholders voted against that bank’s remuneration report last week, while ANZ holds its annual general meeting in Perth later on Wednesday.