National Australia Bank’s incoming chair Phil Chronican has vowed the bank will step up the pace of compensating customers, as he reiterated the need to revamp executive pay after last year’s investor backlash.
In his first communication to NAB shareholders on Tuesday, Mr. Chronican said his focus as the leader of the bank would be on winning back trust, after an “extremely challenging” period for NAB.
His letter was long on regrets and mea culpas and promises to do better, but buried in the missive was the real fear for the bank’s board – a second heavy ’strike’ vote at the AGM later this year to follow up the 80% ’no’ vote at last year’s meeting of shareholders.
A second ’no’ vote would see a destabilising situation emerge for the NAB board. Even though it would probably be re-elected, that would come at a considerable cost, see resignations and a sharp sell-off in the share price.
Hence his remarks on the issue:
“I know you are demanding we address executive remuneration. The Board heard loud and clear that the 2018 remuneration outcomes did not meet your expectations or the community’s expectations.
“We are changing our framework to ensure it provides the right balance of financial metrics, customer outcomes and the management of non-financial risks over the long and short-term. And we will make sure compensation appropriately reflects the individual and collective performance of the Executive Team.
“The enormity of this task is not lost on me, because the royal commission is right. There is a big gap between where we are today and where we need to be,” Mr. Chronican said.
“We have let down our customers. We have let down you, our owners. And we have let down the community. We have also let down our people on the frontline who do a great job, day in, day out, serving customers,” Mr. Chronican said.
“Since June last year, we have returned more than $110 million to more than 310,000 customers – and we are stepping up the pace.
“We are confident that the recommendations made by the Commission will lead to a better financial services industry. I expect that at NAB we will lead the change the community wants to see,” Mr. Chronican forecast.
We have started this work. Last year, we set out a reform program for how we want to operate – to make our organisation a better one and by focussing on culture, accountability, and governance.
“This reform program and the Royal Commission’s Final Report set out a clear way forward for NAB to earn trust and build a culture that puts the customer first. It will not be enough to focus on customers; we need to obsess about getting it right for them every single time.
During my time as interim CEO, and before assuming the Chairman’s role later in 2019, a working committee of the Board has the responsibility to make recommendations to the full Board on the selection of our new CEO. In addition, the Board has identified renewal as a priority for 2019.
NAB shares barely moved in the wake of the release of the letter yesterday.