NAB chair says two-strikes wouldn’t pass now

— 1 minute read

NAB chair Ken Henry has said corporate accountability law, the two-strikes rule, would not pass in current circumstances as it forces company leadership to prioritise profit over customer outcome.

Counsel assisting Rowena Orr questioned Dr Henry in the second week of round seven of the royal commission, asking about the company’s remuneration for its executives, with the bank switching from short and long term variable remuneration to a single form of bonuses.

A note from a meeting between Dr Henry, NAB executives and APRA chair Wayne Byre was examined that said that the bank’s board saw hurdles for long-term incentives were too high, describing it as a ‘lottery ticket’.


Last week CBA chair Catherine Livingstone had criticised NAB’s new single bonus model during the hearings, saying it had the risk of rewarding short-term performance and distracting from the long-term.

The two-strikes rule, legislated in 2011, aims to hold directors accountable for executive salaries and bonuses. It allows for a process involving two strikes and re-election, where an entire board can be re-elected if company shareholders dispute what they are being paid.

Ms Orr clarified Dr Henry’s thinking on the two-strikes rule, that it requires boards to focus too much on financial measures in the design of their remuneration systems at the expense of measures such as reducing risk of misconduct or ensuring good outcomes for customers.

“So do you think that any changes should be made to the two-strikes rule?” Ms Orr said.

“Yes. And let me put it this way: the two-strikes rule would never have been legislated in today’s circumstances,” Dr Henry said.

Dr Henry added he didn’t know what changes should be made to the law.

“How that is operationalised in a way that has the relevant stakeholders holding the board accountable for its performance, I don’t know,” he said.

“And that really is, in my view, your challenge, and I think it’s really hard.”

Ms Orr had also asked about cases where board members had been forced to pay back some or all of their variable remuneration even after it had been vested, because issues had later been discovered.

“And what were those circumstances?” Ms Orr said.

“With respect to former executives who had responsibility for the wealth management business,” Dr Henry said, referring to adviser service fee issues among others.


NAB chair says two-strikes wouldn’t pass now
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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