Contrite Westpac board deserves no credit for surviving torrid meeting

There was an inevitability about Westpac receiving a second strike against its remuneration. It was equally inevitable that few would take their protest to the extreme and commit financial suicide by throwing out the entire board.

A protest can only go so far. The ousting of the board would have left the bank stewardless.

It might feel like sweet revenge but it’s not practical. This explains why less than 10 per cent voted for a board spill.

Westpac chairman Lindsay Maxsted fronts shareholders at the annual general meeting on Thursday.
Westpac chairman Lindsay Maxsted fronts shareholders at the annual general meeting on Thursday.Credit:Peter Braig

A significant portion of those voting against the remuneration report were projecting their anger and disappointment at the lack of governance and the board’s failure to understand or appreciate the importance of laws around anti-money laundering and counter-terrorism financing.


Banks are supposed to understand risk – financial and non-financial. It is at the heart of what they do, and Westpac failed miserably.

But at least one major proxy firm, Institutional Shareholder Services (ISS), registered its disapproval with the structure of the remuneration scheme.

At an emotional level shareholders were appalled that the bank, in which they are part owners, could have potentially enabled child sexual exploitation.

Westpac chairman Lindsay Maxsted probably won’t agree but the marathon shareholder meeting the board endured could have been worse.

Thanks to a group of large institutional investors, all shareholders got some retribution.

Had the major shareholders not taken control of this process the already fiery investors would have formed a lynching mob.

And no number of sandwiches, tea and apologies would have tamed them.

Directors were lucky the annual meeting took place before the big shoe dropped – the fine that shareholders will need to pay.

Remember, it was only a few weeks ago that Maxsted poured his support behind then-chief executive Brian Hartzer.

Left without interference from big shareholders, Maxsted would have been serving out his full term and the shareholders would have been voting on a new pay package for Hartzer.

Fellow director Ewen Crouch, who chairs the board’s risk and compliance committee, would have been seeking re-election.

So the board should not accept credit for surviving, albeit a torrid annual meeting.

Rather, it should read the mood of that room full of furious shareholders and appreciate this is a useful measure of the brand damage the 200-year-old bank has sustained.

Maxsted would have saved himself some abuse had he undertaken to shareholders to initiate a broader overhaul of the board. He could have assured them that all directors other than the recent additions would be transitioned off the board over the next year.

The Commonwealth Bank did this after its $700 million scandal with AUSTRAC.

(Long-time director and the most qualified member of the board Peter Marriott narrowly escaped being voted off.)

Maxsted could also have assured shareholders that bonuses would be dialled back to zero.

So emotionally charged was the meeting that a relatively small portion of the shareholders actually took the opportunity to talk about financial issues.

There was little protest about the fact the bank had underperformed its peers in profitability – hardly a peep about the share price.

But there were questions about the timing of the company’s $2 billion equity placement to institutional shareholders which took part in the weeks before AUSTRAC launched its legal action.

Shareholders asked why no provisions were made in the 2019 accounts for costs associated with AUSTRAC when directors had become aware in 2018 there had been millions of breaches.

This was the only point at which Maxsted looked close to losing his calm demeanour.

For the most part the chairman allowed shareholders plenty of time to air their grievances.

All those sitting on the podium understood that Thursday was about contrition, about voicing their personal devastation at AUSTRAC’s allegations and about their need to suck up the abuse and let the shareholders vent.

Directors were lucky the annual meeting took place before the big shoe dropped – the fine that shareholders will need to pay.

It’s a fair bet that if the cost of settlement of the anti-money laundering and counter-terrorism laws comes in excess of the $1 billion mark, those directors up for re-election in 2020 may not survive.

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