Day 369: 'We got it wrong' 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 369.
Today in summary: ANZ Chairman David Gonski defends political donations and says customer remediation will be one of management’s main priorities in the year ahead; NAB chairman Ken Henry walks back the bank’s new pay strategy as shareholders lodge an unprecedented protest vote against the remuneration report; and banks and the housing lobby welcome APRA’s decision to lift regulatory caps on investment loans.
-- Charis
Current banker panic level: 😱
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ANZ has scraped through its AGM with a shareholder strike against its remuneration report, but one that looked markedly better than that faced by competitors Westpac and NAB.
The word “confronting” again featured at a bank AGM, as 34% of shareholders voted against the bank’s renumeration report. Chairman David Gonski , who did not appear before the Hayne royal commission, told shareholders the bank had at times been too focussed on the short-term profit of the group, rather than long-term sustainability, and was now working to better “align” things, including banker pay.
"The board acknowledges the very real concerns of those who have voted against the report and I assure you we will continue to work hard in 2019 to ensure further alignment between compensation and shareholder interests. We have been making changes to remuneration for some years, including significantly reducing the compensation paid across the group."
ANZ was also criticised by the Australian Shareholders’ Association for recent political donations of A$100,000 to both Federal Labor and the Coalition, but Gonski defended these on the basis the bank was “supporting democracy”.
“We generally do believe that both parties must be given money to put forward their plan and it is up to Australia to determine.
“Money doesn’t buy anything, nor should it, but at least it’s a statement that we believe in the democratic system.”
NAB chairman Ken Henry says the bank will spend the next year getting its pay settings right in a bid to avoid another strike against its renumeration report from shareholders. Some 88.1% of early votes at the AGM were against, which the AFR reports is the biggest vote against a remuneration report recorded against an ASX300 company since voting was introduced in 2005. Henry told shareholders:
“The board is hearing loud and clear that our new scheme is not right. We tried, but we got it wrong.”
NAB CEO Andrew Thorburn also saw 63.6% of shareholders vote against shares being awarded to him, and faced questions about his performance at the Hayne royal commission.
One shareholder said he was disappointed at Thorburn’s decision not to describe fees for no service as unethical, but Thorburn argued the bank wasn’t aware of the fees being charged and therefore the lack of intent needed to be taken into account.
AFR | The Australian | SMH
The Australian Banking Association and property lobby groups have welcomed APRA’s decision to remove its 30% benchmark on interest-only mortgages. The benchmark was designed as a temporary measure, and APRA said “most” banks had now provided the assurances it was seeking as to the strength of their lending standards. The Housing Industry Association welcomed the move, but said more needed to be done to ease the credit squeeze.
“The credit squeeze is happening at the behest of the banks’ own lending practices which have been tightened above and beyond APRA’s requirements.”
The Australian Banking Association said the move showed banks could quickly and effectively respond to a changing environment.
“In terms of banks home loan commitments, the proportion of interest-only loans are now 16.2% much lower than the proportion seen two years ago (37%).”
Today’s burn prize: NAB shareholder
🔥🔥🔥
“Seeking to delay compensation…that is not a mistake.”
A NAB shareholder calls out CEO Andrew Thorburn for suggesting the bank mistakenly charged fees for no service and therefore it was not unethical.
The Commentariat
It was a very different Ken Henry who fronted the bank’s AGM today to the one who appeared before the Hayne royal commission, writes the AFR’s Chanticleer.
“Henry on Wednesday was contrite, thoughtful and stoic. As well he should have been.
“The mood of the room was much more hostile than the average bank AGM crowd, with barbs thrown at the board and management regularly met with applause.”
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