(Bloomberg) -- Pressure is growing on ANZ Group Holdings Ltd. to further slash the outgoing chief’s pay packet after a series of missteps within its markets unit.
Two influential proxy advisory firms and a body representing Australian pension funds — among the biggest ANZ shareholders — advised investors to vote against the lender’s executive compensation plan at its annual general meeting on Thursday in Melbourne. They’re calling on Chief Executive Officer Shayne Elliott, who took a pay hit and will leave the firm in July, to get a bigger reduction in compensation.
Instead of spending his ninth year as CEO bedding down the lender’s A$4.9 billion ($3.1 billion) acquisition of Suncorp Group Ltd.’s banking arm, Elliott’s been grappling with regulatory investigations over allegations of market manipulation and misbehaving traders.
His final annual general meeting allows shareholders a chance to vote against the board’s position that it has “taken appropriate action to ensure executive accountability” after having already docked some A$1.1 million from his pay package.
Under Australian law, a so-called two-strikes rule means that if more than 25% of shareholders vote down a remuneration report two years running, they can then vote on whether to purge the entire board in a so-called spill resolution. This would be the first year for ANZ. Such votes have happened before, with ANZ’s peer Westpac Banking Corp. suffering two strikes in 2019, but narrowly avoiding a spill.
“We remain unconvinced that the 2024 remuneration consequences for executives are sufficient given the scale of issues faced by ANZ,” proxy firm CGI Glass Lewis wrote, in sentiments echoed by peer proxy advisor Ownership Matters.
Still, even if shareholders vote down the remuneration report on Thursday, the result would not obligate the board to take any action immediately.
The potential rebuke does mean that a tumultuous year is not yet over for Australia’s second-largest bank by assets. Unhappy shareholders may continue to put a bigger check on the board and management despite announcing Elliott’s retirement last week. He will be replaced by Nuno Matos, the former HSBC Holdings Plc’s wealth chief, in the role.
The Australian Council of Superannuation Investors, an industry group representing the nation’s powerful A$4.1 trillion pension industry, recommended that shareholders vote against Elliott’s pay, according to a ANZ notice to shareholders. A representative for ACSI declined to comment.
A representative for ANZ declined to comment, directing Bloomberg to a series of statements the bank sent to shareholders regarding the AGM recommendations from ACSI, CGI and Ownership Matters.
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“The ANZ board believes it has taken appropriate action to ensure executive accountability, in line with our approach to align risk and remuneration,” it said to shareholders in each of the letters. “The Board took account of Australian Prudential Standard CPS 511 which requires deferral of significant amounts of CEO and Senior Executive remuneration,” it said in each letter.
ANZ shares have risen about 13% this year, though are underperforming its local rivals.
While the bank cut Elliott’s bonus, it was just 10% of his overall compensation and did not include clawbacks which “falls short of adequately addressing the significant issues facing the Company,” Glass Lewis wrote.
In August, the country’s banking regulator imposed more capital requirements on ANZ due to a lack of improvement in risk management. Of the major banks that had capital add-ons applied in 2019, ANZ is the only bank yet to have its add-on either removed or reduced.
The long-serving executives most responsible for the risk management shortcomings — referring to the CEO, chief risk officer and the head of its institutional division — didn’t receive sufficient reductions in their “incentive outcomes” for 2024 to demonstrate “genuine accountability,” Ownership Matters wrote.
Elliott’s short-term variable remuneration almost halved to A$1.3 million from A$2.4 million the previous financial year, the bank’s latest annual report shows. For Mark Whelan, the head of institutional banking, his payout was similarly slashed to A$595,000 from about A$1.5 million.
--With assistance from Adam Haigh.
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