On Monday there was a significant restructuring of upper-level National Australia Bank managers, on Wednesday, the bank revealed an equally important revamp of pay and rewards for the new look management team.
The appearance from the two announcements is that the NAB is trying to get ahead of whatever fallout emerges from the Hayne royal commission. The NAB’s changes will apply from the about to end 20-17-18 financial year which winds up on September 30.
In some respects, it is following the industry leader, the Commonwealth which has cleaned out its CEO and many senior managers and the board – slashed pay and bonuses.
But the Commonwealth’s changes have been related to the Austrac money laundering scandal as much as early disclosures at the royal commission. AMP has already revealed wholesale changes in management and the board, with some evidence of cuts to executive pay.
Now the NAB has slashed executive pay and introduced a new remuneration framework aimed at driving “customer focus” in response to the royal commission.
The new pay policy replaces NAB’s existing short-term and long-term incentives payments with a single variable reward based on performance, of which 60% will be awarded in shares that will be deferred for at least four years.
That will see CEO Andrew Thorburn’s total target pay award for 2018 reduced by 11%, compared to 2017, while overall executive pay will be reduced by about 15%.
“The NAB Board is determined to drive customer focus at every level of the organisation. This lens needs to be considered alongside financial metrics when assessing executive performance if we are to deliver long-term, sustainable performance for shareholders,” said Ken Henry, NAB chairman in a statement released on Wednesday.
“Where NAB falls short of customer, shareholder and community expectations, the new framework provides the Board with the ability to hold leaders accountable.”
Under the new framework, NAB’s board will determine the size of the reward pool for each financial year based on group performance, including a mix of customer, risk and financial metrics.
It will have the discretion to adjust the size of the pool with regard to regulatory compliance, customer outcomes and other issues impacting the group.
NAB said it expects to see greater differentiation in individual performances under the framework, which will apply from the current financial year.
Monday saw the NAB announce the resignation of Andrew Hagger, head of consumer banking and wealth, following allegations at the inquiry that the bank engaged in potentially criminal misconduct for charging fees for no service and charging dead customers. He has been replaced by former NSW Premier, Mike Baird, which makes him a contender to replace CEO Thorburn.
NAB shares rose 0.7% to $27.82.
