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Westpac’s newly appointed chairman has promised to overhaul executive pay – including possibly eliminating short-term bonuses – after demands from shareholders for greater accountability for the bank’s failures.
About 95% of Westpac’s shareholders approved the bank’s remuneration report at the annual general meeting Friday, according to a report by The Sydney Morning Herald. The approval meant the lender avoided a third consecutive strike against its executive pay.
However, Westpac Chairman John McFarlane faced grilling from shareholders about the need for greater accountability at the bank in the wake of a record-breaking $1.3bn penalty for breaches of anti-money laundering laws.
Westpac is also facing scrutiny from the Australian Prudential Regulation Authority, which last week launched a court-enforced undertaking to improve the bank’s approach to risk management.
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“Will the board and Westpac’s senior executives admit they have failed their shareholders?” one shareholder asked at Friday’s meeting. “Where is the evidence of accountability for these failures?”
McFarlane said that there has been accountability for the bank’s missteps, including the suspension of the executive team’s short-term bonuses for this year. He also said that he would like to change the bank’s remuneration strategy permanently.
“I have a personal view on this in that I’m not in favour of short-term incentives. I would prefer remuneration to be much longer-term for the more senior members of the bank, including the chief executive,” McFarlane said. “We don’t have that position today, but I would like that to be a position going forward.”
McFarlane said there were no definite plans for reforms, but that change was coming, the Herald reported.
“If it can be resolved satisfactorily after discussion with shareholders, in general, we may amend our approach,” he said.
All the directors put forward for re-election were waived through with high support except for Peter Nash, who saw a protest vote of 12.5% against his election, the Herald reported. Shareholders questioned Nash’s level of knowledge of the 23 million breaches of anti-money laundering laws that caused the ouster of chief executive Brian Hartzer.
“Could he tell shareholders why they should entrust him with another term?” asked Australian Shareholders Association director Carol Limmer.