Westpac’s CEO Brian Hartzer ‘will be gone in a week’

Forget the consequences facing Westpac. What is at stake is the responsibility of chairman Lindsay Maxsted.

Forget for a minute the huge consequences facing Westpac, its board and executives over more than 23 million breaches of anti-money laundering laws.

What is at stake is the responsibility of chairman Lindsay Maxsted.

“How would he explain the board’s role to the parents of the children whose exploitation his bank facilitated?

“Would he walk into the room and say ‘I take responsibility for this’, and keep his dignity intact?”

That’s the view of one seasoned and influential adviser in the wake of the shocking revelations that among those breaches were more than 3000 transfers by 12 Westpac customers to The Philippines and other Southeast Asian countries to pay for child pornography.

It captures the horror at Westpac’s appalling oversight and puts a human dimension on what can be seen as dry and distant issues about reporting transactions.

And it highlights the dangers for Westpac as it scrambles to come to grips with what may be its worst crisis in 30 years, just weeks out from fronting shareholders at its annual general meeting.

What happens at the AGM on December 12 — where a second strike on remuneration and votes on five directors are in play — very much depends on what the bank’s board and management say and do in the next few days, another institutional adviser says.

By some reckoning, chief executive Brian Hartzer is already a dead man walking. “He will be gone in a week,” an adviser says.

Despite his public statement on Wednesday that he wished to stay and oversee the response to this crisis, Hartzer yesterday faced calls from Prime Minister Scott Morrison and the Opposition’s Tanya Plibersek to take responsibility for the scandal or be sacked.

“These are things the board and the management need to determine for themselves. It is not for the government to say who should be in those jobs or not,” Mr Morrison told ABC radio. “But they should be taking this very seriously, reflecting on it very deeply and taking the appropriate decisions for the protection of people’s interests in Australia.”

NAB’s Andrew Thorburn was gone within a week after being singled out by royal commissioner Kenneth Hayne for failing to learn from past mistakes.

But the bigger question will be just how far up the chain accountability will be felt, and whether heads will roll on the board.

Next week voting recommendations from the institutional proxy advisers will start to hit the mailboxes of big investors. They will have been scrambling to make sense of the Austrac case ahead of what already promises to be a meeting fraught with danger for the bank.

Executives and board members will also be redoubling efforts to win investor support, with a series of meetings already under way before the Austrac case broke and set to continue for the next few weeks.

Westpac was already trying to recover from an astonishing 64 per cent vote against its remuneration report last year and is now at risk of a second strike that could trigger a board spill.

It’s not the most likely scenario and will depend on how shareholders want to register their displeasure. Remuneration report votes have become a lightning rod for grievances that may have little to do with actual remuneration issues, and there are likely to be at least some shareholders relishing the prospect of triggering a board spill with a second consecutive 25 per cent-plus no vote.

Five directors are standing for re-election. They include Ewen Crouch, who chairs the board risk and compliance committee and is a member of the audit committee chaired by Peter Marriott, who also faces a vote.

They face searching questions about how this extraordinary number of transactions, as well as the smaller but far more damaging transfers by Westpac customers to facilitate child exploitation, failed to be detected, reported and prevented.

Westpac came out of the Hayne royal commission with its reputation least dented.

As Ian Narev at CBA and then NAB’s Thorburn and his chairman Ken Henry succumbed to their own scandals, Hartzer was even emerging as the leading voice in banking.

His reputation inside the bank and in the market would also have been enhanced by his record in standing up to regulators in three separate court actions, including the bank bill swap rate rigging and the “wagyu and shiraz’ lending standards case, and emerging victorious on the most important points.

Instead, he and others at the bank look likely to become another scalp for what is fast becoming the most consequential regulator in the country.

Rod Sims, at the Australian Competition & Consumer Commission, has been described as the government’s go-to enforcer.

But Austrac, which sits under Home Affairs Minister Peter Dutton rather than Treasurer Josh Frydenberg, has already scalped Narev, detonated Westpac and has NAB, online auctioneer eBay and buy now, pay later juggernaut Afterpay Touch in its sights.

Former CBA chief executive Ralph Norris is lauded for his decision to resign last year as chairman of Fletcher Building after three consecutive profit downgrades led to a $660m loss.

It was an inglorious end to Norris’s public company board career. But it might be the sort of sacrifice that is required to show accountability.