Push to accelerate NAB’s changing of the guard as CEO gets $1m

National Australia Bank investors have called on the board to secure a new chief executive within six months.

Outgoing NAB chief executive Andrew Thorburn. Picture: Stuart McEvoy.

National Australia Bank investors have called on the board to secure a new chief executive within six months, with chairman Ken Henry sidelined from the selection process as the bank revealed a $1 million golden handshake for outgoing chief Andrew Thorburn.

But NAB yesterday said Mr Thorburn would forfeit up to $22m in performance rights as a result of his early exit.

In an about-turn from earlier statements, Dr Henry will not be leading the CEO search or sitting on either of two committees set up to spearhead the search for a new chairman and CEO.

One investor yesterday said Dr Henry was better off parting from the bank as soon as practicable, in the wake of pressure exerted by the Hayne royal commission.

NAB’s board will make the ultimate decision on Mr Thorburn’s replacement. Shareholder unrest over NAB’s failings and lack of accountability means Mr Thorburn will forgo about $22m in out of the money performance rights that were forfeited in addition to bonus NAB shares.

“In accordance with his contractual entitlements, Mr Thorburn will receive payment of $1,041,449 in lieu of 26 weeks’ notice, along with accrued leave entitlements. All Mr Thorburn’s unvested deferred awards will be forfeited in accordance with plan rules,” the bank said.

Royal commissioner Kenneth Hayne hit out at Mr Thorburn and Dr Henry in his landmark report into misconduct in the financial services industry, which was made public on February 4. It prompted NAB to announce the departures of the CEO and chairman just days later.

Sources said as the besieged NAB board was seeking to spread its larger workload, it had chosen non-executive director Ann Sherry to lead the CEO search, largely due to her experience as head of people and performance at Westpac during her 12 years at the bank.

Former PwC partner David Armstrong, who joined the NAB board in 2014, will lead the search for a new chairman.

An executive search firm will be drawn on but is yet to be ­appointed.

Investors were supportive yesterday of the decision to exclude Dr Henry from the CEO search and stressed the board needed to accelerate its search efforts from here.

White Funds Management boss Angus Gluskie wants NAB to have a new CEO in place within six months, saying the right candidate needs experience, integrity and “strength of character”. “They are just trying to create the right corporate governance framework (for the CEO and chairman search),” he said. “That will make sure those committees aren’t tainted.”

Mr Gluskie said the sooner Dr Henry moved on the better, but the board had to navigate the practicalities of that. “Delaying would only seem to be slowing the progress of board renewal.”

Another fund manager said his preference was for NAB to have a new CEO on deck well ahead of its annual results.

“The board will want to get a move on,” he said.

“The new CEO will have to re-base the dividend, perhaps around the full-year result.”

NAB reports its annual profits in early November after ruling off its financial year on September 30. Acting CEO Phil Chronican — a NAB non-executive director until this month’s dramatic events — will formally take the reins at the bank on March 1.

He will be paid $150,000 per month or $1.8m a year during his temporary tenure, which will expire once the committee and the board selects the new CEO. That is markedly lower than the pay packet of around $4m earned by Mr Thorburn last year.

“Mr Chronican will not be eligible for any variable remuneration, nor will he receive non-executive director fees while in the group CEO position,” NAB said.

Mr Chronican is not on either of the selection committees for the CEO or chairman roles at NAB, and is said to be lightening his broader directorship load ahead of formally steering the bank.

The board is yet to replace him as chairman of its risk committee.

Mr Chronican — a former ANZ and Westpac executive — is said to be a frontrunner to take over as NAB chairman, but also isn’t being ruled out for retaining the CEO role.

CLSA banking analyst Brian Johnson said shareholders would be happy with Mr Thorburn’s pay and Dr Henry’s exclusion from the CEO selection process.

“Hayne was really about accountability and this is what has happened,” Mr Johnson said. He viewed Mr Chronican as the leading candidate to eventually take over as NAB chairman, but he also could stay on as CEO.

Mr Hayne reserved his harshest criticism of the big four banks for NAB and its leadership. “Having heard from both the CEO, Mr Thorburn, and the chair, Dr Henry, I am not as confident as I would wish to be that the lessons of the past have been learned,” he said.

The Australian Council of Superannuation Investors boss Louise Davidson applauded NAB’s handling of Mr Thorburn’s leaving package.

“We hope to see a greater focus on CEO accountability reflected in future pay levels,” Ms Davidson said.