The system will apply to the current 2018 financial year and to future years.

Embattled Australian lender NAB is cutting its chief executive and executive leadership team’s pay and reducing rewards as part of a simpler system. The system will apply to the current 2018 financial year and to future years.

The new framework is designed to offer greater simplicity in how executives are rewarded and incentivise performance in a way which represents the interests of all NAB stakeholders, it said.

The total CEO reward for this year, at target levels, is reduced by approximately 11 per cent compared with 2017, and 18 per cent compared with 2016 (this includes allowance for the value of dividends). The aggregate 2018 ELT total reward at target levels (including the CEO) has been reduced by approximately 15 per cent compared with the previous year, including allowance for the value of dividends under the new framework.

The board will determine actual individual executive outcomes for the 2018 financial year based on the new framework. These outcomes will be published in NAB’s 2018 remuneration report available on 16 November. The new framework is compliant with the Banking Executive Accountability Regime.

Key changes include:
- A single variable reward based on performance (replacing short-term and long-term incentives);
- Alignment to long-term performance through deferral in shares; and
- Variable reward can be forfeited, further deferred or clawed back.

“The NAB Board is determined to drive customer focus at every level of the organisation, said NAB chairman, Dr Ken Henry. “This lens needs to be considered alongside financial metrics when assessing executive performance if we are to deliver long-term, sustainable performance for shareholders. The new framework provides the right tools to assure performance. NAB is a complex business and the board recognises it is important to attract, retain and reward skilled executives, while remaining mindful of the quantum of executive remuneration.  Where NAB falls short of customer, shareholder and community expectations, the new framework provides the board with the ability to hold leaders accountable.”

In September, this publication reported that NAB had rebranded its customer products and services team as customer experience, which will include customer experience, marketing, digital, products, NAB labs and NAB ventures. This comes at a time when the Australian wealth management sector is coming under scrutiny by regulatory authorities after the Royal Commission’s investigation. This publication reported in June on all of the issues arising from the investigation.