How the Westpac board decided Brian Hartzer’s fate

Westpac Chairman Lindsay Maxsted (left) and CEO Brian Hartzer. Picture: Colin Murty

By the time Lindsay Maxsted and his embattled Westpac board gathered for a telephone hook-up last night at 7pm, the writing was on the wall for chief executive Brian Hartzer.

Maxsted, who has been chair of Australia’s second biggest bank for eight years, had spent Monday in his hometown of Melbourne in a series of face-to-face meetings with Westpac’s institutional shareholders and their proxy advisers.

The message from key stakeholders, who’d had almost a week to digest news of the bank’s alleged 23 million breaches of anti-money laundering laws, some of which enabled child exploitation in the Philippines, was clear.

READ MORE: Enron comments disappoint chairman | Two conversations but only one option | Leaked quotes, then the end for Hartzer

After almost five years in the job, the native New Yorker Hartzer - who lives in a $12 million-plus modern mansion in Vaucluse (mortgaged to Shayne Elliott’s ANZ, Hartzer’s former place of work) and has a $7 million historic weekender on Pittwater (that’s unencumbered) - had to go.

The buck stopped at the top and by about 9pm Monday the Westpac board’s phone meeting, led out of Melbourne by chairman Maxsted, had decided Hartzer must fall on his sword in a show of accountability.

Confirming the wisdom of their decision was this newspaper’s “Tomorrow’s front page” email, which was sent at about 10.30pm.

Once again, Westpac had a starring role, this time because of Hartzer’s tone deaf comments to a meeting of his most senior executives on Monday.

More grim reading for the board and execs, but by that late hour operatives (with the assistance of external lawyers from Allens) were already drafting the two page announcement that would be sent to the market first thing Tuesday.

Long-serving head of corporate communications Carolyn McCann, who when the crisis hit last week was in London, had returned to base and was marshalling her team.

Margin Call gathers Hartzer had addressed his team off the cuff, or “riffing” as one exec told us, and was not speaking from any notes that had been prepared by him or anyone else.

Just as well.

Westpac CFO Peter King will take over from departing chief executive Brian Hartzer as acting CEO. Picture: Hollie Adams

Maxsted on Tuesday said the now former-boss’s words “need to be read in context” and were “definitely not Westpac’s views”.

The board agreed to send Hartzer out the door with just a termination payment - albeit a healthy $2.7 million one that’s equal a year’s base pay - and not grant the exiting chief any of his almost 640,000 unvested performance rights, which was at their discretion.

At Westpac’s closing share price on Monday those rights had a face value of $15.5 million (about 200,000 rights had lapsed earlier this month).

Hartzer does, however, take with him a parcel of fully paid Westpac shares worth $1.6 million.

After the decision on Hartzer, the board’s late night call is understood to have continued for some time to deal with the appointment of CFO Peter King, who until his summoning was meant to be retiring. He’s now the acting boss on a potential $7 million-a-year package.

The board also decided Maxsted’s retirement as chair would be brought forward to early next year and that the head of the board’s risk and compliance committee Ewen Crouch, would also depart.

In his call to analysts on Tuesday, Maxsted said former Allens partner Crouch had, until the events of recent days, been Maxsted’s most likely successor to chair the bank’s board.

So much for succession planning.

Winners and losers

Once again Nicole Rose’s Austrac has scared a lucrative big bank client into the arms of Brian Tyson’s strategic communications outfit Newgate.

Margin Call can reveal that in recent days Westpac enlisted Tyson and his shop to advise, as the bank’s encounter with the financial transactions regulator put its now felled CEO Brian Hartzer into corporate Australia’s emergency ward.

The assignment ultimately required Newgate’s mortician services rather than its emergency surgery skills.

Still, with a 1.6 per cent share price bounce, the $89bn bank shouldn’t quibble with the bill.

In recent years, Austrac has functioned more like a cash machine than a financial transaction regulator for Tyson’s gang.

Two years ago, Newgate was brought in by CBA chair Catherine Livingstone, not long before Austrac helped claim the scalp of the bank’s previous CEO Ian Narev.

So while it might be booze-free for Westpac staff this December, things should flow more freely at Newgate’s upcoming Christmas party in Melbourne.

Doing it tough

What now for the soon-to-retire Westpac chairman Lindsay Maxsted?

His combined non-executive directorships make him $1.7m a year.

That’s more than four times the $392,048 that Austrac boss Nicole Rose is paid annually to run Australia’s financial transactions regulator.

However, Maxsted’s loot is about to experience a severe contraction.

Thanks to Rose’s explosive statement of claim alleging the bank breached anti money laundering laws more than 23 million times, Maxsted has brought forward his retirement as chair for which he earns $810,000 a year.

It’s far from how the Westpac chair, 65, might have hoped to end his almost decade-long tenure in the boardroom of Australia’s second-biggest bank.

And now what?

Maxsted remains chair of Transurban where he’s paid $600,000 a year.

He is also a director of BHP, in 2017 losing out to Ken McKenzie in a boardroom battle to take over from Jac Nasser as chair. Maxsted is paid $252,000 a year by the mining giant.

It’s conceivable that in the near future, the public servant Rose will overtake him in the salary scales. The indignity.