ANZ, BNZ and Westpac CEOs paid a combined NZ$12 million; Finsec floats idea of executive salary controls

By Gareth Vaughan

The bosses of three of the countries big four Australian owned banks, combined, saw their pay rise this year to A$9.41 million (NZ$11.97 million) against a tough economic backdrop and as many customers' face rising interest rates.

Annual reports out this week from National Australia Bank (NAB), ANZ and Westpac, show their respective New Zealand CEOs - the BNZ's Andrew Thorburn, ANZ's Jenny Fagg and Westpac's George Frazis - were paid a combined A$9.41 million in the year to September. That's up from A$5.5 million last year although Frazis joined Westpac half way through the last financial year, in March 2009.

Frazis, who joined Westpac from NAB where he was group executive general manager, was paid A$4.38 million this year, compared to A$2.6 million for the period of the 2009 financial year he worked for Westpac. NAB's annual report shows he received A$336,380 from the rival bank in the 2009 year.

ANZ's annual report shows Fagg, who stepped down on September 1 to undergo cancer treatment and was replaced by David Hisco, received a total of A$2.13 million for the September 2010 financial year, up from A$913,600 last year.

And NAB says Thorburn received A$2.9 million in the September 2010 year, up from A$2 million last year.

Commonwealth Bank of Australia, owner of ASB, doesn't disclose what ASB's recently departed CEO Charles Pink was paid in its June year annual report.

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ANZ, BNZ and Westpac saw their profit rise strongly this year as impairment charges fell and following a bottom line hit last year from settling their structured finance transaction disputes with the Inland Revenue Department when the three banks, plus ASB, agreed to cough up a combined NZ$2.2 billion.

ANZ's annual profit rose to NZ$867 million this year from NZ$194 million last year, Westpac's earnings rose 36% to NZ$322 million and BNZ recorded a profit of NZ$602 million versus a loss of NZ$181 million last year. In their results some of the banks also said the "repricing" of products to "more appropriately" reflect risk and funding costs was boosting their margins.

Bank workers union Finsec has floated the possibility of executive salary controls. Commenting on Frazis' remuneration, Finsec campaigns director Andrew Campbell said it was unethical to pay such a large salary to one person while the economy falters and the average worker has seen no, or limited, wage growth. He also noted the remuneration covers a period when the banks were covered by the Crown retail deposit guarantee scheme.

"While Westpac staff did receive a pay increase this year it came after a significant campaign following a zero offer," Campbell says.

Westpac’s annual report shows Frazis received 41% of his 2010 remuneration in share rights and options. Of 14 senior group executives covered in the annual report, this was easily the highest percentage, with group CEO Gail Kelly second at just 24%. A Westpac spokesman declined to comment on why Frazis received a greater percentage of his remuneration in shares and options than his Australian-based colleagues.

Frazis’ pay comprised A$967,330 in fixed remuneration, A$1.29 million in annual cash performance awards accrued during the year but not yet paid, A$292,613 of non-monetary benefits which Westpac says covered Frazis relocating from Sydney to Auckland, accommodation payments and travel between Australia and New Zealand.

He also received superannuation benefits of A$14,586, A$399,634 worth of options, plus A$1.4 million worth of unhurdled share rights.

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Fagg's 2010 package consisted of A$782,000 in cash and A$643,559 in short-term benefits, A$12,975 in accrued long service leave, and A$691,576 in share-based payments. The A$105,359 of non-monetary benefits, incorporated in the short-term benefits figure, included the preparation of Australian taxation returns by PricewaterhouseCoopers and relocation expenses.

Fagg also received a total cash incentive of A$538,200 which included reward for achieving 95% of her short-term incentive target which was 120% of fixed remuneration. The performance objectives set for ANZ executives can include financial measures such as profit and revenue growth, customer measures such as customer satisfaction and market share, process measures like risk management, people measures such as diversity targets and corporate responsibility and strategic goals such as integrating acquisitions.

In addition Fagg received three year deferred shares worth a maximum of A$300,000 in September 2007 for retention purposes. These became available on September 3 this year and were valued at A$241,483 at vesting.

NAB’s annual report shows Thorburn's A$2.9 million was comprised of A$1 million salary, A$658,385 in short-term incentives including A$58,350 of non-monetary benefits potentially including parking, health fund benefits and tax advice. He also got A$215,316 worth of shares and A$1 million in rights, the latter up from A$452,033 last year.

BNZ chairman John Waller, meanwhile, received remuneration totaling A$409,746 for the year.

The bank bosses pay compares to the just over NZ$5 million received by Fonterra CEO Andrew Ferrier, NZ$5 million paid to Telecom's Paul Reynolds and NZ$2.7 million received by Jonathan Ling, CEO of the country's biggest listed company Fletcher Building.