CBA tipped to avoid second ‘strike’ on executive pay
The Commonwealth Bank looks set to avoid a damaging second “strike” on executive pay, with influential proxy advisers and the peak group for retail investors supporting the bank’s remuneration report.
However, proxy firm CGI Glass Lewis is advising investors to vote against the re-election of one non-executive director, Andrew Mohl, pointing to damage to CBA’s reputation caused by the money-laundering compliance scandal.
After the bank suffered a fierce shareholder backlash at last year’s annual meeting, chair Catherine Livingstone will next week chair her first AGM at the bank after a tumultuous few months for the lender.
Ms Livingstone is likely to face questions over the explosive allegations from Austrac that CBA repeatedly breached anti-money-laundering laws by failing to report thousands of suspicious transactions through its ATMs between 2012 and 2015.
But in welcome news for the bank, proxy firms ISS, Ownership Matters, and CGI Glass Lewis have advised large investor clients to vote in favour of the company’s remuneration report.
This comes after Ms Livingstone scrapped all executive short-term bonuses as a form of collective accountability following the Austrac scandal, and a revamp of CBA’s remuneration policies.
Last year, 50.9 per cent of CBA’s shareholders rejected the remuneration report, making CBA the first major bank in to receive a first strike on executive pay.
If CBA receives a second “strike” next week, it will trigger another vote on whether to call another meeting to spill the board, but proxy firms are also recommending shareholders vote against this conditional motion, if it comes to that.
ISS recommended a “qualified” vote for the bank’s remuneration report. It welcomed changes such as CBA’s greater emphasis on financial targets when setting bonuses, and the fact outgoing chief Ian Narev will not be eligible to earn new long-term bonus shares.
CGI Glass Lewis also supported a vote in favour of the remuneration report, noting executive pay at CBA this year had been “significantly lower” than last year.
However, CGI advised clients to vote against the re-election of Andrew Mohl, who is seeking re-election for one more year before departing next year.
Mr Mohl has been on the board for nine years, and CBA says it is asking for him to serve one more year because of his experience in insurance, given the bank is in the process of selling its life insurance business.
But CGI said all directors who were on the board at the time of the alleged Austrac contraventions should be accountable, and the only non-executive directors who have served for more than three years were Mr Mohl and Brian Long.
As Mr Long is not up for re-election this year, CGI said it had “no other option” but to recommend a vote against the re-election of Mr Mohl.
While noting Mr Mohl’s insurance expertise, it said: “Nevertheless, we are unable to endorse this nominee up for election this year, in light of the reputational issues that have a significant negative impact on shareholders.”
ISS gave “qualified support” for the re-election of Mr Mohl, and other directors Sir David Higgins, and Wendy Stops.
Shareholders will also vote on the proposed appointment of former Westpac banker Rob Whitfield to the Commonwealth Bank’s board as a non-executive director. ISS and CGI supported Mr Whitfield’s appointment.
The n Shareholders’ Association has also backed the remuneration report, but will vote against the re-election of Mr Higgins as a director, because of his role in overseeing the creation of last year’s remuneration report that incurred a no vote.
“By voting against his re-election, the ASA is holding him accountable for the first strike on the remuneration report,” the ASA’s voting intentions document says.
Since Austrac accused CBA of the massive compliance breach in August, the board scrapped senior executive bonuses for this year, cut board fees, and it was announced chief executive Ian Narev will leave the lender by the end of this financial year.