NAB, ANZ to dodge ‘second strikes’ as bank AGM season heats up
National Australia Bank and ANZ Banking Group are set to evade the wrath of shareholders at this week’s annual general meetings with influential advisory groups endorsing executive pay packets and the re-election of board directors.
Major proxy advisory firms ISS and CGI Lewis have advised investors vote in favour of the two banks remuneration reports, which outline the pay packets for top executives’ and board directors. The two firms, which advise institutional investors on corporate governance, have also recommended shareholders vote in favour of all directors up for re-election.
If shareholders adhere to the recommendations it would mean both NAB and ANZ would avoid the fate of Westpac which last week became the first major bank to be hit with a symbolic ‘second strike’ on executive pay.
This week’s AGMs have taken on added significance amid fresh turmoil at major lender Westpac, and as the banking industry tries to move on from the royal commission. NABs recently installed chief executive Ross McEwan will address shareholders for the first time since beginning the job in November.
Westpac became the first of the big four to receive a second strike at its AGM on Thursday as retail shareholders vented their fury over a law suit from financial intelligence agency Austrac alleging 23 million breaches of anti-money laundering laws.
Under legislation put in place in 2011, a company records a first ‘strike’ if more than 25 per cent of shareholders vote against its remuneration report. If a company records strikes two years in a row, shareholders can then vote to spill its board.
In the ensuing vote last week, 90 per cent of Westpac shareholders voted against spilling the board.
Both NAB and ANZ copped first strikes against executive pay last year as shareholders punished the lenders for the revelations of the banking royal commission.
NAB saw the largest protest vote on executive pay in corporate history and ANZ was also hit with a 33.8 per cent vote against its remuneration report.
But in this year’s note to clients, ISS praised ANZ for the “evidence of restraint being applied to executive fixed remuneration” as well as the 20 per cent cut to director fees.
It also recommended a vote against the spill motion because it said the company had made steps to improve its governance and had addressed shareholder concerns.
ISS ticked off the performance rights for chief executive Shayne Elliott before quoting his remarks from February.
“The insights arising from the [banking royal] commission will change our industry for the better,” Mr Elliott said.
CGI Lewis said ANZ’s chief executive had received a smaller short-term incentive than in 2018 and the vesting of long-term incentives “remains modest”.
“Regarding accountability in remuneration outcomes, time will tell whether consequences are actually appropriately enforced,” the CGI Lewis report said.
The Australian Shareholders Association also praised the “clarity and understandability” in ANZ’s remuneration report and accuracy of other reporting.
“We are also very happy to see that the annual report is far better balanced than previous years showing both the good and the bad,” it said.
“We hope this better tolerance of bad news is occurring throughout the organisation.”
In a separate report, ASA praised NAB’s new chief executive for having “the right mix of skills and experience to make things right”.
Last month, NAB said it could be facing a significant penalty from finacial crimes watchdog AUSTRAC over breaches of anti-money laundering and counter-terrorism laws.
The bank said it had identified weaknesses in its know-your-customer obligations and had self reported a “number of issues” to the regulator.
“A clear priority will be to address the possibility of similar AUSTRAC breaches as revealed recently at Westpac,” ASA said.
NAB’s meeting will be held in Sydney on Wednesday and ANZ’s will be on Tuesday in Brisbane.
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