NAB boss Andrew Thorburn takes $2m pay cut

Andrew Thorburn’s total remuneration has been slashed as NAB executives pay the price for poor treatment of its customers.

NAB says CEO Andrew Thorburn has accepted responsibility for the bank’s shortcomings. Pic: Aaron Francis/The Australian

National Australia Bank has slashed chief executive Andrew Thorburn’s deferred shares and bonus for the 2018 year, but his total take home pay rose to $6.2 million.

NAB’s annual report shows Mr Thorburn’s total realised pay – which includes deferred remuneration from prior years – rose to $6.2 million for the 12 months ended September 30, from $4.1 million a year earlier. That rise was underpinned by a long-term incentive payment of $1.4 million and a deferred short term shares, while his fixed pay was $2.3 million.

But for the 2018 year, the board took a knife to his variable pay, which came in at 45.5 per cent of Mr Thorburn’s target.

Total remuneration awarded in 2018 dropped by $2.1 million to $4.4 million, reflecting a large reduction in deferred shares, as the board imposed accountability measures for a string of wrongdoings at the bank uncovered by the Hayne royal commission. The commission found the sector failed to put customer interests above profit considerations.

Total bonus payments – or variable rewards as the bank calls them - across the bank’s entire employee base fell by $114 million in 2018. The Australian revealed the planned bonus cuts last week.

The NAB board was also forced to respond to allegations against Mr Thorburn in media reports, which claimed he may have accepted an expensive trip to Fiji and a kitchen appliance from a company being investigated for fraud. It conceded a number of inadvertent breaches of company policy by MR Thorburn but said the matter was closed.

“The board considered that the group CEO had performed strongly in a difficult environment,” the annual report said.

“However, the group CEO has accepted accountability for NAB’s failure to fix mistakes quickly, remediate customers promptly and set things right. These failures have impacted NAB’s reputation.

“In addition, certain matters emerged in the course of an investigation into an alleged fraud on NAB by a former employee and supplier to NAB. These included certain control failings and breaches of policy in the Office of the CEO, and a small number of unintended breaches of policy by the Group CEO. These matters have been resolved and closed to the board’s satisfaction.“

In the notice for the bank’s annual general meeting NAB’s chairman Ken Henry told shareholders the Hayne royal commission had “shone a light” on the industry and its poor treatment of customers.

“We have been presented with evidence of conduct that is simply unacceptable. There have been times when we have fallen well short of providing quality customer service and meeting community expectations,” he said.

“Most of the customer issues which have featured in the royal commission should have been dealt with better and faster.”

Mr Henry said the board took the matters seriously and had “significantly reduced” the 2018 bonus pool as a result.

“For the CEO and executive leadership team, targeted reductions ranging from 10 per cent to 75 per cent have been applied to individual variable reward outcomes in consideration of individual risk matters.

“In addition, the board determined a further significant reduction of group variable reward outcome for the whole executive leadership team to 70 per cent, reflecting their collective accountability for the standards of the organisation.”

NAB announced an overhaul of its remuneration structure in September. It cut the total level of CEO pay by 11 per cent on 2017 and the aggregate for the leadership group by 15 per cent, including Mr Thorburn, and also introduced more non-financial metrics and measures including that 60 per cent of variable pay would comprise shares, deferred for at least four years.

The annual report also showed former head of NAB’s wealth and retail division Andrew Hagger - who ceased being an executive in October and formally exited the bank on November 14 - received a termination payment of $752,351. His total realised pay in 2018 was $3.5 million, although Mr Hagger received just 17.5 per cent of his maximum targeted variable remuneration.

In 2017, Mr Hagger’s realised pay was $2.8 million, meaning without his termination cheque his remuneration was flat.

Mr Hagger parted ways with the bank after its wealth unit receiving a hammering in the royal commission.

After Mr Thorburn, New Zealand boss Angie Mentis was the next best paid NAB executive at $3.7 million, followed by technology chief Patrick Wright at $3.5 million.

Former NSW premier and NAB’s head of consumer banking Mike Baird had total pay of $1.8 million for 2018.

Direct comparisons with 2017 total pay for NAB executives were made difficult by a change in the remuneration structure. The annual report did disclose, however, that fixed pay increases were awarded to head of business and private bank Anthony Healy, Mr Wright, chief legal and commercial counsel Sharon Cook and finance chief Gary Lennon reflecting “an extension to their roles or to maintain alignment with the external market”.

Mr Thorburn’s headline rate of pay outstripped his rivals at other big banks.

Commonwealth Bank chief executive Matt Comyn received nearly $3 million in total remuneration, and no bonus.

This mirrored the fate of ANZ Bank chief executive Shayne Elliott, with the bank’s annual report on Monday revealing a 15 per cent cut in the CEO’s realised pay from $6.2m to $5.25m.

Westpac Bank’s Brian Hartzer suffered a 9.3 per cent fall in his realised pay from $5.5 million to $4.9m, reflecting a $450,000 cut in his short-term cash bonus.

NAB’s annual report also highlighted its self-assessment on governance following the prudential regulator’s scathing review of rival CBA. NAB said its own review was concluding and the findings would be reported to the Australian Prudential Regulation Authority by late November.

Andrew Hagger leaves the royal commission hearings in August. Pic: AAP

After Mr Thorburn, New Zealand boss Angie Mentis was the next best paid NAB executive at $3.7 million, followed by technology chief Patrick Wright at $3.5 million.

Former NSW premier and NAB’s head of consumer banking Mike Baird had total pay of $1.8 million for 2018.

Mr Thorburn’s headline rate of pay outstripped his rivals at other big banks.

Commonwealth Bank chief executive Matt Comyn received nearly $3 million in total remuneration, and no bonus.

This mirrored the fate of ANZ Bank chief executive Shayne Elliott, with the bank’s annual report on Monday revealing a 15 per cent cut in the CEO’s realised pay from $6.2m to $5.25m.

Westpac Bank’s Brian Hartzer suffered a 9.3 per cent fall in his realised pay from $5.5 million to $4.9m, reflecting a $450,000 cut in his short-term cash bonus.