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You can find the current article at its original source at https://www.theguardian.com/australia-news/2016/nov/17/banks-brace-for-protest-votes-over-executive-pay-after-shareholders-reject-cba-plans
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| Banks brace for protest votes over executive pay after shareholders reject CBA plans Banks brace for protest votes over executive pay after shareholders reject CBA plans | |
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| Australia’s big banks will face further pressure to rein in executive bonuses after a landmark rejection of the Commonwealth Bank’s remuneration plans heralded a new phase of shareholder backlash. | Australia’s big banks will face further pressure to rein in executive bonuses after a landmark rejection of the Commonwealth Bank’s remuneration plans heralded a new phase of shareholder backlash. |
| The prospect of more protest votes against executive pay under Australia’s “two strikes” laws looms when the rest of the “big four” banks put forward their remuneration reports at annual general meetings next month. | The prospect of more protest votes against executive pay under Australia’s “two strikes” laws looms when the rest of the “big four” banks put forward their remuneration reports at annual general meetings next month. |
| ANZ appears likely to face the closest scrutiny over its payout package to former chief executive Mike Smith, the banking sector’s highest-paid figure over the past decade. Smith will have collected about $90m since 2007, including $10m for three months’ work last year, despite his failed push into Asia now being unwound by his successors. | ANZ appears likely to face the closest scrutiny over its payout package to former chief executive Mike Smith, the banking sector’s highest-paid figure over the past decade. Smith will have collected about $90m since 2007, including $10m for three months’ work last year, despite his failed push into Asia now being unwound by his successors. |
| While proxy advisers to institutional shareholders doubt whether ANZ, NAB and Westpac will suffer the same level of backlash as the Commonwealth Bank, observers of the executive pay issue said more strikes against pay packages were possible. | While proxy advisers to institutional shareholders doubt whether ANZ, NAB and Westpac will suffer the same level of backlash as the Commonwealth Bank, observers of the executive pay issue said more strikes against pay packages were possible. |
| The common perception that Australian bank executives are grossly overpaid is disputed by some proxy advisers and shareholder activists. They point to the banks’ long run of profitable returns to shareholders and the parity of their executives’ pay with other large national companies in contrast to bigger pay packages for overseas peers. | The common perception that Australian bank executives are grossly overpaid is disputed by some proxy advisers and shareholder activists. They point to the banks’ long run of profitable returns to shareholders and the parity of their executives’ pay with other large national companies in contrast to bigger pay packages for overseas peers. |
| But they say shareholders who have tired of scandals around customer rip-offs, which have bedevilled the Commonwealth Bank in particular, want to see executive performance bonuses reflect these problems. | But they say shareholders who have tired of scandals around customer rip-offs, which have bedevilled the Commonwealth Bank in particular, want to see executive performance bonuses reflect these problems. |
| Julie Walker, associate professor of accounting at the University of Queensland, said public disquiet was understandable and companies should report executive pay as a ratio of their rank and file workers, as in the US and the UK. | Julie Walker, associate professor of accounting at the University of Queensland, said public disquiet was understandable and companies should report executive pay as a ratio of their rank and file workers, as in the US and the UK. |
| Walker has calculated Commonwealth Bank chief executive Ian Narev’s 2016 pay, when bonuses and shares were added, at 106 times the average Australia fulltime worker’s salary at $8.6m. | Walker has calculated Commonwealth Bank chief executive Ian Narev’s 2016 pay, when bonuses and shares were added, at 106 times the average Australia fulltime worker’s salary at $8.6m. |
| Chief executive pays in the US were about 300 times the median employee wage, while the ratio in the UK was 183:1. | Chief executive pays in the US were about 300 times the median employee wage, while the ratio in the UK was 183:1. |
| Walker said: “I think we do need this kind of reporting. It speaks to the increased demand for accountability from these very large corporations to the public in general. | Walker said: “I think we do need this kind of reporting. It speaks to the increased demand for accountability from these very large corporations to the public in general. |
| “It’s a healthy thing for our economy that this conversation is taking place. These guys are accountable, as we all are. | “It’s a healthy thing for our economy that this conversation is taking place. These guys are accountable, as we all are. |
| “We should be able to see an alignment between what we’re paying executives and the value of your shares in that firm. Shareholders should be sharing in the benefits of this pay.” | “We should be able to see an alignment between what we’re paying executives and the value of your shares in that firm. Shareholders should be sharing in the benefits of this pay.” |
| Under executive pay laws since 2011, shareholders can reject a company’s remuneration report with 25% of the vote. Such a “strike” cannot force companies to change executive bonuses but puts pressure on a board, who face a spill if a second strike follows a year later. | Under executive pay laws since 2011, shareholders can reject a company’s remuneration report with 25% of the vote. Such a “strike” cannot force companies to change executive bonuses but puts pressure on a board, who face a spill if a second strike follows a year later. |
| Stephen Mayne, a director of the Australian Shareholders’ Association, said there could be another two strikes against big bank’s pay next month. | Stephen Mayne, a director of the Australian Shareholders’ Association, said there could be another two strikes against big bank’s pay next month. |
| “All of the banks are potentially in the crosshairs over quantum [of pay] and scandals and the pay not reflecting appropriate loss of bonuses. That was the biggest issue at CBA,” he said. “Collectively you’ll see the biggest protest votes across the big four banks. | “All of the banks are potentially in the crosshairs over quantum [of pay] and scandals and the pay not reflecting appropriate loss of bonuses. That was the biggest issue at CBA,” he said. “Collectively you’ll see the biggest protest votes across the big four banks. |
| “I don’t think you’ll see four strikes but you may get two or three and none of them will be above 90% [in favour] whereas, traditionally, you’ve had some years where they’ve all been above 90%.” | “I don’t think you’ll see four strikes but you may get two or three and none of them will be above 90% [in favour] whereas, traditionally, you’ve had some years where they’ve all been above 90%.” |
| Mayne said strikes would trigger “significant changes” to executive pay structures at banks that had already reduced their base salaries for incoming chief executives after some “outrageous” packages prior to the global financial crisis. | Mayne said strikes would trigger “significant changes” to executive pay structures at banks that had already reduced their base salaries for incoming chief executives after some “outrageous” packages prior to the global financial crisis. |
| Shareholders last week punished Commonwealth Bank with a record protest vote against executive remuneration, prompting the bank to withdraw a contentious proposal to reward Narev with bonuses based on non-financial measures of changes in company “culture”. | Shareholders last week punished Commonwealth Bank with a record protest vote against executive remuneration, prompting the bank to withdraw a contentious proposal to reward Narev with bonuses based on non-financial measures of changes in company “culture”. |
| The protest also reflected the bank’s role in an industry-wide scandal in which it alone charged customers at least $105m for financial advice they never received. | The protest also reflected the bank’s role in an industry-wide scandal in which it alone charged customers at least $105m for financial advice they never received. |
| It was the first strike against a major Australian bank since the “two strikes” laws were enacted in 2011 on the recommendations of the Productivity Commission. | It was the first strike against a major Australian bank since the “two strikes” laws were enacted in 2011 on the recommendations of the Productivity Commission. |
| A source at one proxy adviser, speaking on condition of anonymity, said there was “a good chance ANZ will attract a fair amount of scrutiny”. | A source at one proxy adviser, speaking on condition of anonymity, said there was “a good chance ANZ will attract a fair amount of scrutiny”. |
| “The concept of continuing to pay bonuses at a time when financial returns are going southward is pretty difficult to justify,” the source said. | “The concept of continuing to pay bonuses at a time when financial returns are going southward is pretty difficult to justify,” the source said. |
| Executive bonuses at NAB and Westpac were less likely to come under serious challenge, the source predicted. | Executive bonuses at NAB and Westpac were less likely to come under serious challenge, the source predicted. |
| “NAB have been performing terribly but they haven’t been crazily overpaying,” he said. “And Westpac had their turn in the sun last year, when they changed their accounting policy to preserve a $10.4m bonus for the executives that otherwise wouldn’t have been paid.” | “NAB have been performing terribly but they haven’t been crazily overpaying,” he said. “And Westpac had their turn in the sun last year, when they changed their accounting policy to preserve a $10.4m bonus for the executives that otherwise wouldn’t have been paid.” |
| Vas Kolesnikoff, the head of Australia and New Zealand research at proxy adviser ISS Governance, declined to say whether he thought further strikes were likely. | Vas Kolesnikoff, the head of Australia and New Zealand research at proxy adviser ISS Governance, declined to say whether he thought further strikes were likely. |
| He agreed ANZ would “probably attract the most scrutiny” but this would likely focus more on Smith’s payout after his failed Asia strategy than current executives. | He agreed ANZ would “probably attract the most scrutiny” but this would likely focus more on Smith’s payout after his failed Asia strategy than current executives. |
| “It’ll be a contractual remuneration payment but that doesn’t mean that you’re happy with poor contracts that are entered into by people,” Kolesnikoff said. “That type of thing always earns the ire of people. | “It’ll be a contractual remuneration payment but that doesn’t mean that you’re happy with poor contracts that are entered into by people,” Kolesnikoff said. “That type of thing always earns the ire of people. |
| “[However] I sort of can’t see the point of belting somebody on the head for something that happened in the past.” | “[However] I sort of can’t see the point of belting somebody on the head for something that happened in the past.” |
| Kolesnikoff said issues with NAB included its “Clayton’s sale” of Clydesdale and Yorkshire banks to existing shareholders in a bid to “make their operations look better and ultimately with the hope of the CEO and executives being paid more money”. | Kolesnikoff said issues with NAB included its “Clayton’s sale” of Clydesdale and Yorkshire banks to existing shareholders in a bid to “make their operations look better and ultimately with the hope of the CEO and executives being paid more money”. |
| Westpac would also face contention over its move to preserve executive bonuses by reducing their return on equity hurdles, he said. | Westpac would also face contention over its move to preserve executive bonuses by reducing their return on equity hurdles, he said. |
| Walker said while the “two strikes” laws lacked the legal force of “say on pay” laws in some other countries, they appeared “pretty effective in doing what they’re designed to do, which is to enhance accountability and maybe give some of these corporations a bit of a fright”. | Walker said while the “two strikes” laws lacked the legal force of “say on pay” laws in some other countries, they appeared “pretty effective in doing what they’re designed to do, which is to enhance accountability and maybe give some of these corporations a bit of a fright”. |
| “It seems to work. The corporations do jump when they get a no vote,” she said. “The media comes in with lots of reports about it. It isn’t a good look at the company.” | “It seems to work. The corporations do jump when they get a no vote,” she said. “The media comes in with lots of reports about it. It isn’t a good look at the company.” |