The Commonwealth Bank has bowed to concern from some shareholders about adding more so-called “soft targets” to CEO Ian Narev’s bonus targets.
Proposed changes to the way incentives are calculated were withdrawn just hours before they were due to be voted on at the bank’s annual meeting.
The changes would have meant equal ranking, in determining bonuses, for human resources targets and customer satisfaction scores with financial hurdles which currently make up most of the performance targets.
The board of directors announced the withdrawal of Resolution 4, to grant reward rights to Narev, from the 2016 notice of AGM.
“While we have heard shareholders’ concerns relating to our proposed long term incentive plan, we still believe a balanced set of measures between financial, customer, people and community will enable the business to continue to achieve both superior and sustainable value over the long term,” says CBA chairman David Turner.
“We look forward to talking to shareholders about how best to achieve this.”
Proxy votes indicate the resolution would have passed the meeting. However, if the vote was 25% against, that would have counted as a first strike. A second strike next year would mean a spill of directors from the board.
Narev will continue to get a grant of reward rights, 55,443 shares, for his 2016 long term incentive but the previous performance measures approved in 2015 will be used and not the 50% human resources and customer services targets.
The CEO was paid $12.3 million in 2016. Just $2.65 million of that was base pay, the rest being short and long term incentives.
Total statutory remuneration for Narev and his 11 senior executives for the 2016 financial year was $44.8 million.
Some institutional shareholders have expressed concern that senior executives at the bank are still getting bonuses despite a series of scandals, including poor advice from financial planners and restricting payouts by CommInsure.
The bank could still get a first strike, depending on the voting at the AGM due to start in Perth at 9.30am (12.30pm AEDT).