NAB executive bonuses slashed as pay vote looms

National Australia Bank has pulled out all stops to try to avoid a second strike on its remuneration report.

NAB’s Phil Chronican Picture: AAP

National Australia Bank has pulled out all stops to try to avoid a second strike on its remuneration report, freezing the fixed pay of group executives and slashing their short-term bonuses from a maximum entitlement of $14.4m to zero.

The moves, which were flagged on Thursday ahead of the November 15 release of the annual report, are part of a wider overhaul of the bank’s pay framework in response to the record 88 per cent vote against the 2018 remuneration report.

Interim chief executive Phil Chronican said the board had been more rigorous in assessing performance against customer, risk, people, transformation and financial goals.

“While underlying business performance for 2019 was solid, NAB has not achieved benchmarks on some financial and non-financial goals,” Mr Chronican said.

“This takes into account the impact of substantial provisions for customer remediation.”

Directors, he said, had recognised the impact on NAB’s brand, reputation and trust that customers placed in the bank.

$28.42 NAB closed up 62¢ p

While progress had been made, it fell short of what was required to earn a short-term bonus.

As previously flagged, NAB confirmed that former chief executive Andrew Thorburn had forfeited all of his deferred variable reward, which was worth up to $21m.

Also forfeited was the 2016-18 deferred incentive for most of the 2018 executive team, which was potentially worth $5.5m.

The crackdown on pay and bonuses is a measure of NAB’s desperation to avoid a second strike on its remuneration report and a possible spill of the board at its December 18 annual meeting.

Shareholders staged a revolt last year, registering a massive 88 per cent vote against the remuneration report. This followed implementation of a controversial proposal by outgoing chairman Ken Henry to merge the short and long-term incentives into one.

Under Dr Henry’s model, then-CEO Andrew Thorburn’s target reward was reduced by 11 per cent compared with 2017 and 18 per cent compared with 2016.

As a measure of accountability for the brand damage suffered by NAB and the scale of wrongdoing highlighted in the royal commission, it was seen as nowhere near enough.

Two months later, Dr Henry and Mr Thorburn announced their resignations after royal commissioner Ken Hayne made damaging findings on their stewardship of the bank.

NAB is not the only bank facing a nervous wait for its annual meeting, with Westpac and ANZ Bank also having earned first strikes in 2018.