The remuneration culture among the big four banks is likely to receive more attention next week at National Australia Bank’s annual meeting.
The AGM will be held just weeks after the announcement of NAB’s 22 per cent fall in net profit for the 2012 financial year on large write-downs at its struggling UK operation.
Shareholders could voice their disappointment with NAB under the “two strikes” rule, especially considering the performance-based compensation of bank CEO Cameron Clyne remains unchanged.
This is despite Clyne’s presiding over a share price that has underperformed its peers. NAB’s cumulative earnings per share growth in the time Clyne has been CEO – the start of FY08 to the end of FY12 – is 1.7 per cent, compared with the 20 per cent average of its peers, says researcher CLSA.
A strike for NAB would go against voting on executive pay at the other three banks, which received support for their pay packages at AGMs this year.
But some institutional shareholders are beginning to question whether shareholders at the banks are getting value for money.
One prominent investment manager, Simon Marais, the founder and part-owner of Allan Gray
, says for the $10 million or so Australian bank CEOs are taking home, they should be bringing a lot more to the table.
“You expect them to be doing something very special, you want them to be entrepreneurial for that money,” Marais says.
What shareholders are looking for is a stronger link to performance, says Australian Shareholders’ Association chief Vas Kolesnikoff. He says a lot of short-term and long-term incentives built into bank CEO pay seem as much a tool to ensure executives are paid in line with their peers as a reward for performance.