Westpac chair John McFarlane set to extend term

John McFarlane can see the work ahead of him at Westpac and, if elected, plans to extend his chairmanship beyond 2023.

Westpac chairman John McFarlane. Picture: Adam Yip

Westpac chairman John McFarlane has looked at the work in front of him and decided that, if elected, he will serve longer than the one term planned.

He has decided the challenges ahead will take longer than first thought to clear and, while not committing to stay for a full second term, plans to extend his chairmanship past 2023.

The former ANZ boss became chairman in February, replacing Lindsay Maxsted, who stepped down in the wake of the governance gaps revealed in the Austrac scandal, a report into which Westpac released yesterday.

Mr McFarlane later this year will also unveil a new pay structure for senior executives which will do away with short term incentives and put more emphasis on long term bonuses.

This is a step towards the pay he received when running ANZ for a decade until 2007, where his cash pay totalled just $43.

This was the amount needed to join the staff social club. The rest of Mr McFarlane’s pay was in ANZ shares, which was financially very beneficial for the Westpac chair.

Given the timing of the planned change in Westpac’s pay arrangements, it could be equally lucrative for its executives.

The new pay structure will be presented with the annual report later this year.

Mr McFarlane has identified at least two cultural issues at the bank, including distorted accountability chains, so it is difficult to know who is responsible for what, and poor execution.

Westpac has long had a culture of doing more, which has meant more reports and more analysis on decisions.

Under Mr Maxsted the whole board was responsible for risk, which had a good ring to it, but ultimately, as shown by the breaches of anti-money laundering laws in the Austrac scandal, it failed.

Mr McFarlane has split audit and risk with the latter under his old ANZ finance boss Peter Marriott and audit under former KPMG boss Peter Nash.

There will also be a separate technology committee under Alison Deans.

Westpac chief Peter King has mirrored the changes at executive level with David Stephen in charge of financial risk and Les Vance as head of financial crime, compliance and conduct.