Corporate Governance & Ethics: Analysis of NAB Bank Editorial

This assignment presents an editorial analysis of the National Australian Bank (NAB) and its corporate governance and ethical failures. The analysis focuses on two editorials discussing the bank's controversial executive pay scheme, which led to a shareholder revolt. The first editorial highlights the investors' distress and the bank's unethical practices, emphasizing the damage to the bank's reputation and shareholder trust. The second editorial discusses the bank's response, including promises to rectify the situation and investigate the issue. The assignment explores the impact of these events on the bank's stakeholders, including shareholders and clients, and the potential consequences for the banking industry. The analysis references multiple news articles to support the arguments and provide context to the NAB's situation.

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Corporate Governance & Ethics
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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

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to attain maximum level of trust of its shareholders so as to successfully organize its functions in
the target market. The banking industry works on building a compact relationship with the client
so that they can safely give their belongings bank and the bank can trade it further in the market.
However, it act will definitely make the bank loose some of its precious clients. So, summing up
the entire situation, it can be said that the irresponsible act of the management to fool the
employees with executive pay strategy made them pay a heavy penalty in the business market.
Editorial 2:
“NAB Coping Up with Executive Pay Revolt”
On Wednesday, 18th September 2018, National Australian Bank held the Annual General
Meeting. The highlight of the meeting was the displeasure of the shareholders against the
remuneration strategy used by the bank. The fact was stated in the meeting that the bank is
following corrupt executive pay strategy in the environment that is affecting the interest of
shareholders as well. It was reported that the bank is paying the bonus amount of shareholders to
the employees of the company from a long time that can expressed as defrauding the investors
present in the market. It is important for every bank to understand their roles and responsibilities
to take care of the money provides by the clients and use them wisely. The banks do not own the
money they have with them, it is the amount that investors lend which the bank lend to other
people. So, it can be clearly understood the crucial stage of banking that makes the company
more responsible to transact the money properly.
However, the NAB was providing wages to its employees using wrong executive pay scheme
that made the shareholders suffer. It is believed that the shareholders have faced loss of billion
and billions through this type of strategy. The management of the bank is ashamed that such
practices were happening in the bank without their notice. Due to which, Ken Henry including
other managerial bodies have given assurance to the shareholders of the company that they will
take proactive measures to maintain the trust of the shareholders of the company. The bank
believes that the shareholders have been ill-treated and they need to find ways to initiate
activities to rectify the cause. Such event has happened first time in the corporate history of NAB
where more than 88% of the shareholders have opposed against the remuneration report
presented by the bank in AGM. The chairperson of the bank clearly stated that they would not

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take enough time to repay their amount to the customers; however, a reasonable time will be
taken to change the bank culture. An investigation team has been charged to take care of the
event and find out the actual reason and the person behind the cause. The company cannot stay
undisturbed by disturbing the interest of so many shareholders of the company. Further, it should
be noted that the position of bank has gone low from first to fourth scale. Considering all such
effects on the position of the bank, the management is taking up strong actions rectify their
wrongdoing with a hope to get back to the position at which they were before the occurrence of
bonus scandal.

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Reference
Danckert, S., & Grieve, C., (2018). 'You have destroyed billions': NAB cops record protest vote
over pay. Retrieved from < https://www.smh.com.au/business/banking-and-finance/we-
got-it-wrong-nab-hit-by-record-protest-vote-against-exec-pay-20181219-p50n48.html>
Dunckley, M., (2018). Customer suffering, scandals to slash bonuses in NAB's new pay system.
Retrieved from < https://www.smh.com.au/business/banking-and-finance/customer-
suffering-scandals-to-slash-bonuses-in-nab-s-new-pay-system-20180919-p504nk.html>
Khadem, N., (2018). Bank bosses at NAB and ANZ face investor backlash over executive pay.
Retrieved from < https://www.abc.net.au/news/2018-12-19/nab-and-anz-bosses-face-
investor-backlash-on-executive-pay/10634000>
Oval, V. A., & Higgins, R. (2018). MD defends under-performance.
Ryan, P., (2018). NAB chief Andrew Thorburn takes a $2.1 million pay cut ahead of royal
commission grilling. Retrieved from < https://www.abc.net.au/news/2018-11-16/nab-ceo-
andrew-thorburn-takes-a-large-pay-cut/10504002>
Yeates, C., (2018). NAB to face record backlash on pay. Retrieved from <
https://www.smh.com.au/business/banking-and-finance/nab-to-face-record-backlash-on-
pay-20181218-p50my7.html>