Michael Pascoe writes:

Give most people an extra half million dollars a year in base pay and they’d stick around in the job a bit longer. The CEO of the National Australia Bank John Stewart is like most people.

The indefinite extension of Stewart’s contract – taking his possible annual packet up to $8.375 million – is good news for his bank balance and probably NAB’s chief of Australian banking, Ahmed Fahour, but bad news for NAB’s CFO, Michael Ulmer.

While Stewart was operating under his “here for the war, not the peace” banner, the odds on Ulmer becoming the next CEO kept shortening. The word from within the NAB was that Fahour increasingly made Ulmer look good.

Yesterday’s announcement changed all that, particularly with the line reported in the Smage that “Stewart said he would be around for the ‘foreseeable future’ – as long as ten years – when questioned by journalists in Melbourne at the launch of the bank’s corporate social responsibility report.”

Should Stewart only hang around for half that decade, Ulmer will be too old to be considered favourite for the top job. The highly paid Fahour is still youthful enough – and may have learned a great deal more about running a bank by then.

Stewart’s extension does not come as a surprise to those near the top of the bank. There was a strong hint at the annual results briefing, but perhaps more importantly, I hear he has been behaving internally more like a CEO taking control and enforcing his power.

Whether Stewart deserves such a big pay rise (making him the most highly paid of the bank CEOs – at least until the remuneration committee racket gets to work and reprices the others) is another matter.

The NAB’s consistent line is that it is half way through a three-year turnaround. Well, it’s two years next month since the forex trading scandal hit the fan, but the bank still hasn’t been able to convince APRA that it’s capable of running itself.

There seems to be a little slippage in the expectation of having the NAB’s internal model accreditation approved by APRA by March/April. Lack of approval is costing NAB shareholders scores of millions of dollars a year in lost profits as the bank is forced to keep more capital in reserve to back its liabilities.

It’s also spending a fortune on consultants to help it work out when it might be able to run itself again.

So why give a CEO who is yet to deliver the promised turnaround such a big pay rise? On what basis can the NAB board really claim Stewart is the best bank CEO in the country?

Maybe it’s because there isn’t a good enough succession plan in place. And whose responsibility is that? The board and CEO together.