Westpac appoints Peter King as new CEO, axes bonuses

Westpac appoints Peter King as permanent CEO for two years and scraps executive bonuses in the wake of the AUSTRAC scandal.

Peter King, appointed Westpac’s new CEO

Westpac has appointed bank veteran Peter King as permanent chief executive for a period of two years, and scrapped bonuses for all executives as a result of its financial crimes scandal.

In a statement to the ASX on Thursday, new Westpac chairman John McFarlane cited global and domestic economic uncertainty linked to the COVID-19 pandemic, which required management stability.

“I believe we need a chief executive in place now, not later, and with full, rather than acting authority. On my recommendation, the board has appointed Peter King as CEO,” he said.

“Peter has agreed to do this for two years. I have built a strong relationship with Peter since we first met. He understands the bank, its business and its finances, and has the confidence of the management team, as well as my own and that of the board.

“He and I are also completely aligned on what needs to be done. He is the right person to take the company forward at the present time, and now has the full authority to make change and to see it through,” Mr McFarlane added.

Mr King has worked at Westpac for 25 years, most recently as chief financial officer, ahead of taking the acting CEO reins last year when Brian Hartzer became a casualty of AUSTRAC’s legal action against the bank.

New chairman of Westpac, John McFarlane. Picture: Adam Yip

AUSTRAC has alleged Westpac breached financial crimes laws 23 million times, including facilitating payments that were linked to child sexual exploitation.

Before taking up the role as acting CEO, Mr King had announced his intention to retire when a replacement as CFO was identified. A decision that was later reversed.

Mr McFarlane said the Westpac board and CEO had also decided that the group executive team would not receive any short-term bonuses for 2020, “in recognition of collective accountability for the financial crime outcomes in Westpac’s business which led to the action brought by Austrac”.

Mr King will receive a base salary of $2.4m, a potential short-term bonus of $2.4m and will be eligible for a long-term incentive of $3.2m pro-rated from his start date to September 30.

His short-term bonus is not available to him in the 2020 year and the board also has all 2019 executive bonuses on hold as it conducts an accountability review for compliance failures linked to the AUSTRAC legal action.

Commenting on his appointment, Mr King said: “We are focused on responding to the COVID-19 outbreak and supporting our customers and protecting our people.

“We have a critical role to play alongside government and regulators in supporting Australians and New Zealanders and our countries’ financial systems.

“My medium-term priorities remain to drive performance through our lines of business and sharper accountability, simplify the business through digital transformation, and lift our service culture and risk management capability.”

Mr King’s appointment comes a day after new chairman John McFarlane took the reins from Lindsay Maxsted, who had brought forward his retirement to March 31.

In a letter to shareholders also released on Thursday, Mr McFarlane touched on the immense impact COVID-19 was having around the world.

“The global COVID-19 pandemic has brought extraordinary challenges in the way we manage our lives, our health, our workplaces and our finances. I have family spread around the world and share much of the anxiety I know many of you must be feeling,” he said.

Mr McFarlane said Westpac was “responding appropriately” and expressed confidence the decisions the bank was making would make “a significant difference”.

But he warned that the coronavirus spread and its hit to the economy would likely lead to a rise in bad debts.

“Given the impact of the Coronavirus on the economy and the level of uncertainty, while it is difficult to make a reasonable assessment of its potential impact at the moment, we expect to see a rise in our credit provisioning this year and probably beyond, which will be accelerated by recently implemented accounting standards. We are currently working through this and will update shareholders in due course.”