CEO Andrew Thorburn has mounted a stout defence of National Australia Bank’s (NAB) top executives including Andrew Hagger, the bank’s chief customer officer, whose wealth management division copped the lion’s share of parliamentary ire in the opening round of public hearings into the major banks in Canberra.
Hagger became a lightning rod for criticism after the House of Representatives Standing Committee on Economics chair, Liberal MP David Coleman, called out NAB on executive accountability, public transparency and, in particular, of Andrew Hagger.
Coleman immediately went on the offensive, questioning why Hagger had apparently been rewarded following the corporate regulator’s (ASIC) pursuit of his division over 62,000 cases of customer breaches, amounting to some $35 million worth of overcharging.
Thorburn described the breaches as "not misconduct," but rather “well-intentioned” and “poorly executed.”
“Andrew Hagger came in to actually lift the standards and he has done so,” Thorburn told the committee. “Andrew Hagger has led the lift in standards and he has led the lift in conduct.”
“I think Mr Hagger has done an excellent job,” Thorburn added.
The chair’s response was to suggest it was the bank’s wealth division under Hagger, a responsibility he has assumed since April 2013, that was the source of the majority of NAB’s problems.
“Mr Thorburn, I think people might take exception to that… I think a sensible observer would say - ‘who is the boss of this division?’ From a customer perspective this is the problem division of the bank… and the buck needs to stop with the executive,” Coleman said.
“Mr Hagger is the boss of this division and what I want to understand is whether Mr Hagger has experienced any consequences from all of these quite serious issues that have taken place in the division he has been running all that time,” the chair continued, before the following exchange:
Coleman: What about his bonuses, his short-term incentives? Have these been affected by these issues? Has Mr Hagger’s bonus been affected in any way?
Thorburn: He has been held accountable for what he needed to deliver, most of this occurred before he came in.
Coleman: You might argue Mr Hagger has been successful but an observer could form a different conclusion. What percentage of Mr Hagger’s bonus target did he receive in 2016?
Thorburn: I think he received 120 per cent.
120 per cent appropriate
According to NAB, Hagger’s chief customer officer role in the bank’s consumer and wealth arm, garnered $4.08 million in total remuneration last financial year, consisting of a $1 million salary plus bonuses, superannuation and shares. He received $3 million in 2015.
NAB’s chief operating officer Antony Cahill's remuneration was $2.5 million in 2016 and $2.1 million for the previous year.
Both Coleman and Labor MP Matt Thistlethwaite questioned the appropriateness of this.
“And then we see the bank has paid 120 per cent to the leader of the wealth management division where virtually all the issues that concern this committee about NAB have taken place! You might say why that doesn’t appear to be a very appropriate outcome to the committee, or to the broader community,” Coleman said.
Thistlethwaite accused the NAB CEO. “I fail to understand why you say Mr Hagger did a good job,”
Are you living in the real world?
Thistlethwaite then grilled the chief executive on disgraced financial planner Graeme Cowper.
Cowper, despite breaching the bank’s code of conduct including offering questionable advice to NAB clients and receiving around $850,000 in commissions in one year, the bank allowed him to resign and paid him out $180,000 - the details apparently outlined in a confidential letter. Confronting Thorburn over the issue, Thistlethwaite questioned the chief: "Are you living in the real world?"
Thorburn refused to disclose the contents of the agreement, citing confidentiality.
He went on to tell the committee that the bank has since improved its standards for planners and no confidentiality agreements will be included in any future contracts.
Despite further questioning from Thistlethwaite on the confidentiality agreement, Thorburn refused to provide any details of the “complex, litigious case”.
The hearings will continue on Tuesday.