Day 438: 'It feels right for us’
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 438.
Today in summary: APRA sets out its policy priorities for the year ahead; NAB kicks off the difficult task of once again overhauling executive pay; and the Business Council of Australia calls “time” on bank bashing, and questions Labor’s Hayne response that would enable unsuccessful compensation claims to be revisited.
-- Alex
Current banker panic level: 🤑 😲 ☹️
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APRA has executive pay, superannuation trustees, and a greater focus on non-financial risk on its priority list for 2019. Aside from implementing the Hayne recommendations it controls, the regulator says it will also progress changes to the ADI capital framework, in line with Basel III; and collect more data on superannuation, in particular on choice products.
“Financial soundness and stability remain at the core of APRA’s objectives. But APRA’s Prudential Inquiry into Commonwealth Bank of Australia (CBA) highlighted the importance of not just having a healthy balance sheet, but also strong governance, a sound culture, appropriate internal controls, and clear accountabilities.”
The regulator is undertaking a review of its enforcement actions, stemming from Hayne’s damning observations along with the prudential inquiry bringing to light CBA’s dismal governance. It says the review will be presented to APRA Members by the end of March, followed shortly by a new enforcement strategy.
National Australia Bank will defer a portion of its top 400 managers’ bonuses for three years in an effort to overhaul remuneration amid the fallout from the banking royal commission and shareholder discontent. Executives will have 40% of their variable pay deferred for three years, up from 25% deferred for only one year. The Australian is reporting that of the staff outside the top 400 who are awarded a bonus of $50,000 or above due to performance, 30% will be deferred for two years.
NAB executive general manager of performance and reward Lynda Dean said.
“We are confident it [the changes] takes our reward practices in the direction shareholders would expect. It feels right for us.”
The latest restructure comes after 88% of shareholders voted against a Ken Henry-led executive payment scheme revealed in NAB’s December remuneration report.
Business Council of Australia chief executive Jennifer Westacott says politicians should stop business bashing. Speaking on radio station 6PR this afternoon, Westacott outlined why any overreaction to the banking royal commission would encourage businesses not to invest, calling the political response to the royal commission “a race to the bottom on who can be meaner to business” and arguing it will only hurt workers.
Westacott criticised Labor for promising additional measures against the banks, beyond what Commissioner Hayne recommended, including a new levy to fund more financial counsellors and a ramped up compensation scheme that would permit old cases to be revisited.
“Are we seriously going to retrospectively revisit cases that were settled by existing legal processes when the royal commission said that was not warranted and not necessary?"
Westacott welcomed the new ASX Corporate Governance Rules, released yesterday, saying the toned down guidance had made “measured changes to keep the guidelines workable into the future”.
Today’s burn prize: Business Council of Australia chief executive Jennifer Westacott
🔥🔥🔥
"If a business had changed its leader every 18 months, changed the entire executive team, completely changed the strategic direction, how much do you reckon its shares would be worth? I just think, enough."
Westacott told the Australian Financial Review that many of the measures being proposed in response to the banking royal commission amounted to an “anti-business agenda and was simply “people wanting heads on sticks", and called for politicians to focus on the country’s shambolic politics.
The Commentariat
The Australian’s associate editor Andrew White writes that there has been a sigh of relief among companies as new ASX Corporate Governance Rules, released yesterday, revealed a toned down approach. White points to the loss of the contentious phrase “social licence to operate”, calls for companies to have policies on recruiting from ethnically and socially diverse backgrounds and prescriptions against “aggressive tax minimisation strategies”.
“The final principles and recommendations have been radically slimmed down — from 56 pages in last year’s draft to 35 in the final version released yesterday — in the process jettisoning pages of commentary on issues that companies should be required to report on.”
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