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.
Grilled for more than three hours over issues including falling share prices and a dividend that has not been raised since 2013, chairman Ken Henry told unhappy shareholders at the bank’s annual general meeting that NAB had got it wrong on pay.
“We’re in a bad place,” Dr Henry said.
“We’re sorry we’re in a bad place.”
Although the final tally had not been recorded when he spoke, Dr Henry said a record 80 per cent or more of shareholders will vote against reforms that cut chief executive Andrew Thorburn’s total pay by 32 per cent but still left him with $4.375 million.
Dr Henry acknowledged that “the quantum of remuneration” was 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 rivals Westpac and ANZ, will be at risk of a second strike and a board spill next year.
Mr Thorburn, who goes on leave after the AGM, took a $2 million pay cut after a year in which NAB’s full-year cash earnings fell 14.2 per cent and it owned up to poor customer treatment.
His pay cut was the largest among the big four bank CEOs in both percentage and absolute terms, but NAB’s revolt still overshadowed Westpac’s 64 per cent.
Mr Thorburn will return by February 1 to lead NAB’s response to the royal commission’s final report, and then take long service leave.
“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 decided to overhaul its pay structure before the royal commission heard widespread instances of wrongdoing from NAB and its peers, having identified the possibility it 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.
They were the most expensive of the big four at $32 as recently as 2003, but are now the cheapest – at less than $24 compared to CBA’s near $70.
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.”