Day 364: Not far enough on pay
An introductory weekday newsletter from Schwartz Media. Counting the days since the banking royal commission was established.
Good afternoon and welcome to day 364.
Today in summary: Westpac shareholders send a strong message to the bank’s directors on remuneration; the Commonwealth Bank’s compliance and remediation costs blow out by another A$100 million; and both industry players and financial counsellors call for more regulation at the Senate inquiry examining payday loans.
-- Charis
Current banker panic level: 😱
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Westpac shareholders have overwhelmingly voted down the bank’s remuneration report, with 63.48% of early votes against. The bank did not pay long-term incentives during the year as a result of targets not being met, and it reduced short-term incentives by an average of 25%. Shareholders were unimpressed.
Westpac Chairman Lindsay Maxsted admitted some of the bank’s remuneration arrangements “inadvertently contributed to poor behaviour”, and said the board would now “review our reward frameworks”.
"The key point from those voting against the remuneration report has been that although the board took events over the year into account, many have questioned whether we went far enough, particularly in reducing short-term variable reward paid to the CEO and other executives."
Both ANZ and NAB are expected to face similar strikes at their AGMs next week.
Director and former AMP chief Craig Dunn survived a push by the Australian Shareholders Association to vote down his reappointment, with 64.4% of early votes in favour. The ASA’s John Campbell told the meeting:
“We believe that directors share a collective responsibility for upholding the bank’s reputation and ensuring there remain valid grounds for customers to place their trust in banks. The bank’s directors have failed in this duty over the last year or two and Mr Dunn was a member of the board in 2015 when matters were being overlooked…He was the CEO of AMP at the time in 2008 when it commenced significant and numerous improprieties.”
The Commonwealth Bank has been forced to put aside another A$100 million to cover “higher than expected” costs for compliance and remediation, and A$200 million as an indemnity provision for when it spins off its wealth management arm. The bank has already paid out A$270 million to customers given bad or no advice. In some rare relief for the bank, it was able to claw back A$135 million from professional indemnity insurance to cover civil penalties and legal costs.
ABC | The Australian | SMH
A 2017 push by Nationals leader Michael McCormack to increase protections for people accessing payday loans is yet to be legislated, a Senate inquiry heard today, despite the Coalition mostly accepting the recommendations. Consumers who take out payday loans are being forced further into financial hardship, according to consumer group Financial Counselling Australia. National Credit Providers Association chair Robert Bryant said his industry was heavily regulated, but irresponsible lending was still happening given the portion of the credit market that remained unregulated.
Today’s burn prize: ASA’s John Campbell
🔥🔥🔥
“We do not believe Mr Dunn is appropriate to represent our interests.”
The Australian Shareholders’ Association didn’t hold back in letting Westpac know just how unhappy it is with Craig Dunn staying on the board.
The Commentariat
Embattled wealth manager IOOF is likely to fight back against action by APRA by using testimony the regulator gave at the Hayne royal commission, writes The Australian’s Richard Gluyas.
“On the key issue of compensating superannuation members for IOOF’s missteps by using their own funds, Glenfield made some admissions that Kelaher and Venardos will no doubt preserve for their day in court.”
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