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NAB's remuneration philosophy is underpinned by principles that link employee rewards to value creation for shareholders; create consistency between shareholder returns and performance of the Group; and ensure we provide competitive levels of remuneration within the markets in which we operate.

STI OUTCOMES

REMUNERATION SUMMARY

The Group increased cash earnings by 19.3% to $4.58 billion as business conditions improved and we made progress against our strategic priorities. This generally resulted in increased performance payments for 2010, compared to 2009. However, lack of a strong NAB share price performance has, appropriately, resulted in a limit on payouts under our executive incentive plans (particularly long-term incentive plans).

OUTCOMES FOR 2010

Performance payments for the Group Chief Executive Officer and senior executives were as follows:

  • The average Short Term Incentive (STI) amount paid to senior executives (including the Group CEO) rose to 131%, as a percentage of STI target.
  • Current employees derived no value from Long Term Incentive (LTI) during the 2010 year (other than dividends).
  • LTI securities held by several senior executives lapsed during the year, unvested and therefore unexercised, as performance hurdles were not met.
  • A number of equity retention/recognition grants from prior years have provided value during 2010.

In addition, one-half of total STI for the 2010 financial year for the Group Executive Committee and other senior executives was deferred in shares, 25% restricted for 12 months and 25% restricted for 24 months. The STI Outcomes graph shows the average individual STI payment (as a percentage of each individual's target STI, where 100% is the target) for the Group's Executive Directors and other senior executives, reflecting both business and individual performance.

EXECUTIVE REMUNERATION

The NAB Board welcomes the continued public debate about executive pay. We believe our policies must be consistent with community expectations, while also providing appropriate performance-related incentive to our executives. The Board is concerned about an overseas trend in financial services to increase the proportion of fixed pay. This trend is counter to shareholder interests because it can result in executives receiving inappropriately large amounts of pay in poor years and can lead to a universal increase in pay levels. We are working with our regulators, industrial associations and wider community groups to voice our view.

NON-EXECUTIVE DIRECTOR FEES

The total fees paid by the Group to the Chairman and the non-executive Directors on the Board (including fees paid for their involvement on Board committees and for their services to controlled entities of the Company) are kept within the total approved by shareholders. Fees for the Chairman and non-executive Directors have not changed since 2008.

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REMUNERATION TABLE FOR MEMBERS OF THE GROUP EXECUTIVE COMMITTEE
ON 30 SEPTEMBER 2010*

  • * The above table summarises the actual remuneration executives received, including cash paid and the value of equity that vested. Additionally, equity that has lapsed without providing any value to the executive is shown. Further information on executive remuneration can be found in the Remuneration Report in the Company’s 2010 Annual Financial Report.
  • (1) Fixed remuneration is the total amount received by the executive during the year including cash salary, non-monetary benefits such as cars and parking, superannuation and annual leave and long-service entitlements.
  • (2) The cash component (50%) of the STI received in respect of the 2010 year. The remaining 50% of the STI for 2010 is deferred in shares, 25% restricted for 12 months and 25% for 24 months and is not reflected in this table as this equity is subject to forfeiture and further performance conditions and cannot be accessed by the relevant executives. In respect of Mr Ullmer it also includes a cash payment under the 2008 Motivation and Retention cash program of $250,000.
  • (3) Deferred STI amounts from the 2008 STI program fully vested in November 2009. The value is calculated using the closing share price of Company shares on the vesting date.
  • (4) Equity-based programs from prior years (other than the deferred STI shares referred to above) that have vested during the 2010 year. The value is calculated using the closing share price of Company shares on the vesting date (less any applicable exercise price). There has been no vesting of LTI during the 2010 year. Any securities where the exercise price is greater than the share price on the day of vesting is valued at zero.
  • (5) Total value of remuneration received during the 2010 year. This is the total of the previous columns.
  • (6) The value of equity lapsed during the year includes LTI securities that have lapsed, unvested and/or unexercised on their Expiry Date. The value is calculated using the closing share price of Company shares on the Expiry Date (with the exercise price subtracted in the case of any lapsed performance options). Any securities where the exercise price is greater than the share price on the Expiry Date is valued at zero.
  • (7) Ms Peacock’s STI outcomes for the 2010 performance year reflect the business result for the UK banks compared with business plan and results for the rest of the Group. She is entitled to a higher STI payment, however has elected to receive an STI payment that reflects the business results for the UK. The UK results reflect improved earnings and asset quality. This is a well-run bank with a strong balance sheet that has supported customers despite very difficult trading conditions.
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REMUNERATION TABLE FOR NON-EXECUTIVE DIRECTORS

  • (1) Mr Chaney received a non-monetary benefit relating to travel expenses. Sir Malcolm Williamson received a non-monetary benefit in relation to UK National Insurance contributions.
  • (2) From 10 May 2010, Mrs Cross was appointed as a Director of the JBWere Pty Limited Board.
  • (3) From 1 March 2010, Ms Segal was no longer a member of the Remuneration Committee and was appointed as a member of the Audit Committee.
  • (4) Mr Tomlinson receives fees in respect of services performed as Chairman of the Boards of National Wealth Management Holdings Limited and subsidiaries.
  • (5) The fees that were paid to Sir Malcolm Williamson in respect of services performed as non-executive Director of controlled entity boards and committees were paid in GBP. Mr Waller receives fees in respect of services performed as non-executive Director of BNZ, which are paid in New Zealand dollars.
  • (6) Mr Yuen became a Director of the Principal Board, a member of the Principal Board Risk Committee, Principal Board Remuneration Committee, Principal Board Nominations Committee and the Asia Management Board on 1 March 2010.