Investor Revolt Over Executive Pay Adds to Australia Bank Woes
(Bloomberg) -- After a year of mounting scandals and plunging stock prices, Australian bank investors have run out of patience.
Shareholders at National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. on Wednesday emphatically rejected proposed compensation packages for the lenders’ executives. They join investors at Westpac Banking Corp. and AMP Ltd. in venting anger against bonus payments after a year of shredded reputations and valuations.
Over A$80 billion ($58 billion) has been wiped off the combined market value of the big four banks and AMP this year after an inquiry into misconduct exposed extensive wrongdoing and the slowing housing market dimmed prospects for growth. Total profits slumped to a four-year low. Yet to the anger of investors, banks still allocated millions to executive bonuses. Only at Commonwealth Bank of Australia was the CEO’s short-term bonus cut to zero.
It’s “a protest vote,” said David Sokulsky, chief investment officer at the Concentrated Leaders Fund. “And there’s a lot to protest against at the moment.”
National Australia Bank Chairman Ken Henry said more than 80 percent of the votes cast would be against the remuneration report, despite reforms. “We tried, but we got it wrong,” he said in speech notes to the AGM. “We are listening to you. We will try again.”
ANZ Bank said 34 percent of shareholders had so far voted against its remuneration report, exceeding the 25 percent threshold needed for a so-called first strike. The chairman and all existing non-executive directors will receive a 20 percent reduction in fees, it said.
In Australia, shareholder votes on pay are non-binding, meaning while they are an embarrassing public censure, there is no immediate consequence for executive wallets. However, a second strike the following year can trigger a motion to vote out the entire board.
With the final report of the Royal Commission due in February there is plenty to trigger further shareholder disenchantment.
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