Day 458: 'Consider the board's intentions'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 458.
Today in summary: AMP squeezes director fees and executive bonuses in a bid to head off another shareholder strike; Commissioner Hayne’s recommendation to extend the definition of a small business looks to be dead in the water; and ANZ switches from sales targets to “team financial targets” for branch staff.
-- Charis
Current banker panic level: 😫 😉🤗
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AMP Chairman David Murray, less than a year into the role, will receive a pay cut in 2020, following on from the 25% cut to director’s fees announced in April last year. In today’s annual report, Murray said the group had not yet finalised its remuneration framework for 2019, but had awarded zero short-term incentives for group leadership team in 2018 (excluding AMP Capital), and would not be paying A$10.8 million in unvested equity incentives to former executives involved in the fees for no service scandal.
AMP faces a potential second strike and vote for a board spill by shareholders at its AGM in May, but Murray defended the A$1.7 million in cash and A$5 million in restricted shares awarded to new CEO Francesco De Ferrari as a buy-out incentive, saying it represented the amount foregone by leaving his previous employer, and that:
“given the circumstances of the Royal Commission, at the time it was unlikely we could appoint an executive from within Australia”.
Murray encouraged shareholders to read the remuneration report and “consider the board’s intentions”.
“These intentions are anchored in the principle that incentives should be aligned with the financial outcome for our shareholders and must be accompanied by consequence management for misconduct. In addressing incentive remuneration, the board recognises there is not one formula or scorecard that can outweigh the exercise of judgement.”
Commissioner Hayne’s recommendation to extend greater protections to small business borrowers by expanding the definition to include any small business with loans of less than A$5 million looks unlikely to proceed, after the Council of Financial Regulators said it should remain as is for now.
The group, which includes APRA, ASIC, the Australian Treasury and the RBA, said tightened credit conditions were already affecting small business lending, and existing changes in the pipeline for the banking code of practice were significant. It recommended the suggestion to change the definition be reviewed 18 months after the new code comes into affect on July 1.
ANZ will make permanent a pilot that has seen sales targets removed for individual branch staff, reports the Australian Financial Review. The bank will not remove all incentives and bonuses, but will instead reward branch staff with a “team financial target”. Tellers who process property loans will not be included in the new arrangement.
Today’s burn prize: Finance Sector Union National Secretary Julia Angrisano
🔥🔥🔥
““If Australia’s banks are to recover from the impact of the bad behaviour revealed by the Banking Royal Commission they should all be making commitments to cease branch closures.”
Angrisano made the comment following NAB’s announcement it would stop closing branches in regional areas, at least until 2021. It closed several regional branches in 2018.
The Commentariat
Outgoing Westpac executives Brad Cooper and George Frazis are likely to pop up at another bank, possibly NAB, writes The Australian’s Richard Gluyas.
“It remains to be seen whether Cooper and Frazis will be serious CEO contenders at NAB. Thorburn and his predecessor Cameron Clyne both ran Bank of New Zealand, which has emerged as a de facto CEO incubator for the group.
Coincidentally, Cooper and Frazis are one-time Westpac NZ chiefs.”
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