CBA pay report faces revolt by super funds

CBA is under pressure to revise its pay policies after big super funds opted to vote against its remuneration report.

CBA chief Ian Narev. Picture: Adam Yip

Commonwealth Bank is under growing pressure to revise its pay policies after a raft of big superannuation funds opted to vote against the bank’s remuneration report and the grant of performance rights to chief executive Ian Narev at this week’s annual ­meeting.

The Australian understands super industry heavyweights Australian Super and UniSuper will join the powerful Australian Council of Superannuation Investors in voting against both the remuneration report and the grant to Mr Narev.

ACSI’s board members include representatives of industry funds Cbus, HESTA, Hostplus, Local Government Super, QSuper and State Super.

UniSuper made headlines two years ago when it opposed the restructure of the $70 billion Westfield empire, which led to a public rebuke from the retail group’s chairman Frank Lowy.

The latest moves have led to speculation CBA will suffer an embarrassing strike against its remuneration report at its AGM on Wednesday if it receives a “no” vote of 25 per cent or more.

Some are also suggesting the bank may also decide to pull the proposal to grant Mr Narev up to 55,443 reward rights under the bank’s leadership reward plan.

The super funds are believed to be critical of CBA’s move to pay a larger slice of bonuses on performance against non-financial measures. CBA’s board recently revised the leadership reward plan to incorporate staff and the community, weighted at 25 per cent, with TSR and customer satisfaction performance components now making up 50 per cent and 25 per cent, respectively.

Outgoing CBA chairman David Turner has argued the setting and achieving targets in the areas of diversity and inclusion, sustainability and culture was “both the right thing to do and made good business sense”.

“Senior leaders will be objectively benchmarked on their progress in achieving targets in all these areas alongside their normal financial and risk measures,” Mr Turner said.

The prudential regulator, APRA, said last month that it supported the inclusion of non-financial performance bonuses in the remuneration of bank CEOs.

But proxy adviser Institutional Shareholder Services has previously labelled them “essentially HR policies” that were part of executives’ and Mr Narev’s day job.

CBA has provided a table over the past week to some fund managers attempting to give more detail on the measures. It amplifies what is contained in the bank’s remuneration report.

The super funds are also said to be aggrieved by the magnitude of the bonuses paid to key executives after the bank reported negative total shareholder returns, lower return on equity and weaker earnings per share last year.

They are worried that the bonus payments have essentially taken the guise of base pay to maintain the competitiveness of CBA’s pay offering in the marketplace when they should instead be at risk.

Both funds declined to comment on their intentions yesterday. ISS was the first to oppose the grant to Mr Narev and the remuneration report.

Influential adviser Ownership Matters then revised its recommendations to “against” on both proposals after CBA was a fortnight ago caught up in the Australian Securities & Investments Commission’s damning findings about wealth companies charging advice fees for services not provided.

CBA was hit with the biggest compensation bill of $105.7m, plus interest, to financial planning clients, adding to $65m already paid for a separate scandal involving inappropriate advice.

It is believed Australian Super and UniSuper came to their voting decisions independently of the proxy adviser’s recommendations. Australian Super apparently made its decision after a recent meeting with Mr Turner where it expressed its concerns. UniSuper is not thought to have had a meeting with Mr Turner.

Earlier this month he announced plans to stand down, to be replaced former Telstra chairman Catherine Livingstone.

Alistair Hunter, lead analyst and investment manager at the Franklin Templeton-owned Balanced Equity Management — a CBA shareholder — said the rem report showed the banks were concerned about the reputational elements of their customer management “in terms of being seen to do the right thing”.