ACSI's Louise Davidson: "If they didn't cut the pay this year, when would they ever be zero?"
One of Australia's most powerful superannuation fund advisers says it is shocked that any of the country's major banks have paid bonuses to senior executives after a scandal-ridden year.
The Australian Council of Superannuation Investors, which represents some of Australia's biggest industry super funds, has confirmed it will recommended its clients vote against the Westpac, ANZ Banking Group and National Australia Bank remuneration packages.
This increases the likelihood that Westpac will face a potential first strike against its remuneration report (meaning a vote of 25 per cent against the motion) with proxy adviser ISS also confirming a recommendation against. Westpac's annual general meeting will be held in Perth on December 12.
ACSI's collective members typically hold 10-15 per cent of bank shares and chief executive Louise Davidson said she was shocked at the banks' attitude on bonuses.
"We will recommend our members vote against the remuneration reports on the basis that we're really disappointed and surprised to see substantial bonuses for the CEOs and other executives given the systemic breaches of the law and serious cultural failures."
Ms Davidson was concerned about the message this sent to the community when the banks were awarding millions of dollars in bonuses against a backdrop of widespread misconduct revealed by the banking royal commission.
"If they didn't cut the pay this year, when would they ever be zero?"
These bonuses, also known as 'at risk' pay, are theoretically structured to reward good performance said Ms Davidson.
"But these bonuses are not actually 'at risk'. The executives expect to be paid them."
Vasili Kolesnikoff from ISS said he was recommending against Westpac's remuneration package because the bank's bonus structure was significantly higher than the other banks.
"We're recommending against Westpac because they're outliers in the market," said Mr Kolesnikoff, the head of ISS' Australian and New Zealand research arm.
"The CEO Brian Hartzer's bonus is many more millions higher than any other of the three banks."
The vote on remuneration is non-binding which means the result, if successful, would be considered a censure and a public rebuke rather than having a material effect on bonus pay. If shareholders chose to cast another strike next year, it could trigger a vote to spill the board.
Bankers defend bonuses
The nation's top bankers defended executive bonuses at the royal commission, where counsel assisting the commission cross-examined NAB, ANZ and Westpac's chief executives on executive pay and the link between the structure of bonuses and the widespread misconduct.
ANZ chief executive Shayne Elliott rejected a push for more transparency around banker pay this week at the royal commission because it would amount to "ritualistic shaming" and he did not want to instil a "culture of fear" at the bank.
NAB changed its scheme from short and long term bonuses to a single bonus scheme based on performance.
"We've got a variable reward scheme where it's annual, it's centralised, based on achieving a number of things across four or five key result areas, it's deferred, deferred for the longer term for executives. It's starting to get more sustainable," NAB CEO Andrew Thorburn told the banking royal commission on Monday.
Mr Thorburn rejected the idea of a fixed reward scheme for NAB executives.
"I would have some concerns about abolishing it because I think for Australia, less competitive I don't think we would be able to attract the people we need to make our banking system really excellent."
NAB's AGM is on December 19 in Melbourne. ANZ's is on the same day in Perth.
By Sally Patten & Elouise Fowler
29 November 2018