Austrac saga opens door for regime change at Westpac

Prime Minister Scott Morrison. Cartoon: John Spooner

Westpac chairman Lindsay Maxsted’s term on the board runs until December next year, which means he is effectively in his final term, having been on the board since 2008 and chair since 2011.

The rule of thumb at Westpac says after 12 years it’s time up for the chair and 10 years for a regular director, but such rules are sometimes broken.

Right now the message from Westpac is the company needs stability, which means neither CEO Brian Hartzer nor Maxsted will necessarily step down in a hurry.

Maxsted also serves as chairman of Transurban, but he told shareholders this would be his last term, and he is also chairman of the BHP audit committee.

Regulator concerns at a lack of oversight from the board then become an issue.

Long-term lawyers Allens were on site en masse preparing the defences once again, underlining what a wonderful client the bank had been over the years.

It depends in part what feedback the bank gets from the market, but the message coming loud and clear is that this is the final straw for Hartzer, given the bank has proved to be a chronic underperformer and has had a litany of disasters behind it.

The Austrac saga opens the door for regime change at Westpac and the company’s annual ­report noted Maxsted is up for renewal at the 2020 annual meeting.

His former KPMG colleague Peter Nash is the most obvious replacement as the next chair.

Hartzer is fighting to save his job and if the chair walked first that may well save the CEO.

The board met late on Wednesday and was kept in touch throughout Thursday, with some suggesting this is a case of regulatory overreach. That comment was kept very quiet and nowhere near head office.

The issue once again was failure to remedy known problems.

The overwhelming focus was on Westpac’s 40,000 staff who went through the wringer with last year’s royal commission and now there’s the Austrac scandal.

From Hartzer down, trips were made to brief staff and pass on the top brass’s encouragement and gratitude for the job they were doing. The immediate focus is to settle the staff.

In a note to staff on Wednesday, Hartzer said “this should never have happened’’, adding it was “disappointing we have not met our own standards and those of regulators”.

Hartzer described the actions as a “sharp reminder of our obligations”. He also used the letter to thank staff for their own actions in support of the bank and its remediation programs.

In a note to clients, Jeffries analyst Brian Johnson said the Austrac action “reads badly for WBC and management — reminiscent of CBA’s derating after the launch of an Austrac AML action in August 2017”.

He added: “Can WBC senior management and the board survive such scathing criticism and allegations of inaction?

“The CBA Austrac episode, and even NAB’s following the royal commission, suggests possibly not. Concerns regarding WBC’s capital sufficiency are further heightened.”

PM sets his agenda

Scott Morrison used his 41-minute speech to the BCA annual dinner on Wednesday night as a wake-up call to doubters about the extent of his policy agenda.

The Prime Minister has seen feedback suggesting his election was such a shock that he had no real plans for the government outside tax cuts and infrastructure. If any of the business leaders present at the Sydney dinner were of that view, he went to some lengths to persuade them otherwise. It was a convincing performance.

Incoming BCA chief Tim Reed impressed with a much shorter opening speech outlining his agenda, which starts with skills training, tax and regulation cuts, a plea to stop the policy division between big and small business, and restoring trust to the business sector. The latter, he noted, was a case of doing “what we should do, not what we could do”.

The Westpac-Austrac saga sets back that agenda.

Morrison was onto the skills push. His list was familiar to anyone seeing the former advertising executive speak in recent months, but provided room for hope.

“Two-way trade”, which is both imports and exports, is now 70 per cent covered by trade agreements, up from 26 per cent in 2013.

Trade figures are normally cited as exports or imports, but the PM combined the two, and noted that when the EC and the UK are added, as much as 100 per cent of Australian exports will be covered by trade agreements.

That is an impressive sounding statistic even if the export mix is iron ore, iron ore, iron ore, education and tourism, and needs to be expanded.

Morrison talked up the digital economy with a 2030 target of business being digitally enabled, including government services, to make it easier to deal with.

He has set up a digital technology taskforce to push the agenda.

Regulation will be cut on new projects to speed them up, and the 32 business registries will be cut to one.

Regulation around the food sector, particularly focused on ­exports, will also be cut, which will be welcome changes.

Industrial relations changes are also on the agenda, as are productivity changes even if the latter are moving at a glacial pace.

The message then from the top: there is a big “to do” list in front of the government, on which it can be measured when the next election comes.

In business, there is a sense of long-needed stability on the political front and, assuming it is real, this sets the stage for Morrison to turn the talk into action.

Maybe next year’s BCA lecture will be equally as lengthy, but listing more achievements than plans.

Registry unity

The federal government has finally affirmed plans to combine its business registries under one banner within the Australian Taxation Office, which will cut paperwork for business.

In his speech to the BCA on Wednesday night, Scott Morrison said 32 business registries would be cut to one.

The idea is to move all registries onto a new common platform, which will save time and also step up regulation of phoenix companies by enabling a director identification number. This means the ATO can track who is a director of which company.

The move will take the registry office out of ASIC, freeing its time and enabling more efficient processing under the ATO.

This will save business from the need to file multiple forms when changing registration details.

The move was first flagged by former minister Kelly O’Dwyer two years ago, but has now won prime ministerial endorsement.

It’s part of the government’s deregulation agenda.

A proxy on both houses

What a difference a day makes — Wednesday night and a topic du jour at the BCA annual dinner was that proxy advisory firms should be shot on sight.

As an aside, proxy advisers are already regulated, being holders of Australian Financial Services Licences.

Some company chairs rightly reject the notion of more regulation.

Yesterday it was the Australian Investor Relations Association conference in Melbourne, where investors including leading wholesale funds and industry funds, including UniSuper, REST and AustralianSuper, made clear the job is for the company to engage with shareholders and start the process early in the piece.

The same message came loud and clear from Yarra Capital and Balanced Equity.

All of the above said proxy advisers were part of the education process, but ultimately the shareholders make the choice.