July 22, 2019 / 7:05 AM / a month ago

Australia's Macquarie bank faces shareholder backlash over pay

SYDNEY (Reuters) - Australia’s biggest retail shareholder group has asked investors to reject the executive pay plans of investment bank Macquarie Group (MQG.AX), accusing it of withholding pertinent information and setting overly achievable performance targets.

FILE PHOTO: A pedestrian walks past the logo of Australia's biggest investment bank Macquarie Group Ltd which adorns a wall on the outside of their Sydney office headquarters in central Sydney, Australia, July 18, 2017. REUTERS/David Gray/File Photo

The Australian Shareholders Association (ASA) said the bank’s remuneration report gives incomplete and confusing information about its “uncommon remuneration structure”.

The ASA called on shareholders to reject the pay proposals at Macquarie’s annual meeting on Thursday, and urged the bank to release the findings of an internal investigation into its governance and culture.

“The reason we are voting against it is the lack of transparency,” ASA monitor Alan Goldin said by telephone.

Macquarie executives had apparently met their performance hurdles for each of the previous five years, and “if you keep making a hurdle, it’s not really a hurdle”, Goldin added.

Under Australian law, if more than a quarter of a company’s shareholders vote against its remuneration report for two years running, shareholders can call for a subsequent vote on whether to sack the entire board.

Australian banks are facing a new trend of heightened shareholder scrutiny after a public inquiry into the financial sector last year found widespread wrongdoing and serious flaws in the management of compliance and risk.

But Macquarie, which has posted record profits every year since 2013, has largely been spared the kind of pressure for greater transparency that shareholders have applied to Australia’s four big retail banks.

A bone of contention for some advisers is the bank’s policy to accelerate to 2 years from 7 the vesting period of deferred equity - worth about A$88 million ($61.9 million) - awarded to previous CEO Nicholas Moore.

Australia’s biggest wealth manager, AMP (AMP.AX), and three of its big 4 lenders - Commonwealth Bank of Australia (CBA.AX), Westpac (WBC.AX) and National Australia Bank (NAB.AX) - have had their remuneration reports voted down in recent years.

In the case of Macquarie’s pay proposals, the ASA cannot get a successful “no” vote on its own as the several hundred of Macquarie shareholders it represents account for far less than a quarter of the bank’s share register.

Proxy advisers Institutional Shareholders Services Inc, Glass Lewis and Co, and Ownership Matters, which vote on behalf of institutional investors at AGMs, said they had concerns about Macquarie’s remuneration but would vote to approve them.

Macquarie was among 32 major financial institutions told by the Australian Prudential Regulation Authority, the financial sector watchdog, last year to provide self-assessments of their risk-management strategies. It was one of just two major banks which declined to make the reports public.

“Our self-assessment was not made public by us because the request from (the regulator) indicated it could be on a confidential basis and Macquarie performed an in-depth assessment that included sharing commercially and competitively sensitive information,” a spokeswoman said.

She added that the bank had not fully met one performance hurdle in 2016.

Reporting by Paulina Duran; Editing by Stephen Coates and Himani Sarkar

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