NAB agrees on new LTI package for Group CEO
The National Australia Bank Board agreed a new long-term incentive (LTI) package for the Group Chief Executive, John Stewart.
National Australia Bank Chairman Michael Chaney said that the long-term incentive arrangements were linked to sustainable shareholder returns, CEO succession planning and cultural and management development.
The long-term incentive has a two-year performance period but cannot be accessed by Stewart for four years from August 2007.
According to NAB, the new long-term incentive award is being made to Stewart in order to provide ongoing financial incentives as NAB moves into its next phase of development.
Stewart has been instrumental in the rebuilding of the National Australia Bank since his appointment in 2004 and he will continue to play a critical role in motivating, developing and retaining the right executive team going forward.
The long-term incentive (LTI) allocation to Stewart will comprise three tranches of performance rights with an approximate accounting value of $6.m. No dividends will be payable until the required level of performance has been met and the rights exercised.
Shareholders will be asked to approve the new long term incentive at the next annual general meeting. All other terms and conditions relating to John Stewart’s existing employment contract are unchanged.
Summary of new long term incentive (LTI):
Tranche 1:
77,000 performance rights (approximate accounting value of $1.8m) tied to the relative total shareholder return compared with the performance of other major Australian banks.
50% of this tranche will vest if National Australia Bank is ranked at the median in the comparator group. 100% will vest if National Australia Bank is ranked in the upper quartile.
The first performance test will take place at the end of year two (30 August 2009). Only one further test will be performed at the end of year three (30 August 2010).
If the performance test is satisfied, any shares resulting from the exercise of the performance rights would be restricted from trading until the end of year four (30 August 2011).
Tranche 2:
77,000 performance rights (approximate accounting value of $2.4m) tied to internal
Return on Equity targets as determined by the Board.
50% of this tranche will be performance tested at year two (30 August 2009). A further
25% will be tested at year three (30 August 2010). In the event that either of these portions does not meet the performance test, a further test will be allowed 12 months later based on the high hurdle established for that later date.
The final 25% of this tranche will be tested at year four (30 August 2011), with no further test allowed. If any of the performance tests are satisfied, any shares resulting from the exercise of the performance rights would be restricted from trading until the end of year four (30 August 2011).
Tranche 3:
77,000 performance rights (approximate accounting value of $2.4m) tied to CEO succession planning, cultural and management development as determined by the Board.
All of this tranche will be performance tested at year two (30 August 2009). If the performance test is satisfied any shares resulting from the exercise of the performance rights would be restricted from trading until the end of year four (30 August 2011).
For all tranches, the trading restrictions would continue to apply if Stewart, with the Board’s prior approval, separates from the National Australia Bank Group prior to 30 August 2011.
In the event that income tax is payable by Stewart on any of the performance rights or shares prior to the end of year four, then shares to the value of the tax may be released.
Any remaining shares would continue to remain restricted. National Australia Bank intends to purchase on-market all shares resulting from the exercise of the performance rights under this long-term incentive package.
31-Aug-2007