National Australian Bank's Executive Pay Scandal: A Case of Corporate Governance & Ethics

RUNNING HEAD: Corporate Governance & Ethics
Corporate Governance & Ethics
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Corporate Governance & Ethics 1
Editorial 1:
“NAB to Investors: We Have Let You Down and will Never Reiterate the Same”
National Australian Bank, one of the most renowned banks present in the country on which
people rely completely is found guilty in financially harassing the investors by providing their
bonus amount to executives as pay. The issue was represented in media on 19th of September
2018 [Wednesday] after the AGM held by the bank in Melbourne. From the distress of investors
and chairperson Ken Henry, it was clearly explained that the bank had gone wrong in initiating
executive pay functions in the business. The fact is still unknown that whether the bank had
organized this type of remuneration structure unknowing or they have organized it to deceive the
investors and provide their share of bonus as a part of remuneration to the employees of the
company. However, the bank still managed to formulate such unethical remuneration scheme in
the business for a long period of time till few investors got information about it.
The shareholders of the company called the chairperson a ‘failed capitalist’ who was unable to
practice good activities and satisfy the investors. One of the miffed investor also added that the
company has destroyed billions and billions of dollars from the shareholder’s value due to which
the management has become an unacceptable face of capitalism in the society. This kind of act
has occurred for first time in the corporate history of National Australian Bank where more than
88% of the shareholders opposed the remuneration report at the annual general meeting. The
shareholder’s along with proxy voting power with the Australian Council of Superannuation
Investors (ACSI), Australian Shareholders Association (ASA), Ownership Matters and
Institutional Shareholder Services clearly stated that they would not vote in favour of the NAB’s
remuneration report. The management of company clearly expressed that they are disappointed
and embarrassed of what the investors had to face due to unethical remuneration scheme of the
bank.
With the occurring of this event, it can be clearly assumed that reputation of the bank and trust of
shareholders has clearly went into vain. Years and years of practice of the bank to treat the
investors well and satisfy them spoiled. This activity also depleted the brand image of the
company in the market. Disbelief of the shareholder on the activities of the company can
increase the risk level of the bank in the external environment. As a bank, it is important for them