Will risky Westpac board trio survive latest AUSTRAC raid?

Westpac chair Lindsay Maxsted’s board is up for election. Picture: Aaron Francis

The three members of chairman Lindsay Maxsted’s Westpac board up for election at next month’s AGM all sit on its risk and compliance committee.

Will the risky trio survive AUSTRAC’s latest raid on the Big Four banks?

The anti-money laundering financial regulator Nicole Rose has suddenly elevated the gathering of the $90b bank in three weeks time to the biggest show in town this side of Santa.

AUSTRAC chief Rose has given Westpac investors 23 million reasons to turn up at the Sydney meeting, where they’ll be asked to approve the issue of $3.6 million worth of long-term performance rights to Hartzer, who has been boss since February 2015.

READ MORE: Writing on the wall for Westpac’s Hartzer

On the day the 52-year-old took over the top office from the retiring Gail Kelly, Westpac shares were trading at $34.26 each compared with their close on Wednesday in the wake of the regulator’s civil suit against the bank of $25.72.

Not what the boss would have hoped for after almost five years in the top office.

Maxsted, who by the December 12 AGM will have been Westpac chair for 9 years and a director for more than eleven, is seeking to stave off a second strike against the bank’s remuneration report, which followed the 64.2 per cent smack down by shareholders last year when Ken Hayne’s Royal Commission had just ended.

In an effort to avoid a second strike this time around and a potential subsequent motion to spill the entire Westpac board, in 2019 Hartzer didn’t get a short-term bonus.

There was no long-term bonus either for the Connecticut-born banker (who hasn’t had an increase in his $2.7 million base pay since he started as boss in 2015) because performance hurdles weren’t met.

Maxsted has also reshaped a handful of his bank’s broader executive and board pay policies, but whether that will be enough to sway investors in light of Wednesday’s lawsuit remains to be seen.

AUSTRAC’s fresh Federal Court proceedings and the prospect of Westpac having to pay out multi-billion dollars fines - Matt Comyn’s CBA, for example, had to pay $700 million for its 53,000-plus breaches - also raises the stakes for other shareholder votes at the AGM.

Each of the three Westpac directors that are up for re-election at next month’s meeting - M&A lawyer Ewen Crouch, former Veda boss Nerida Caesar and ex-ANZ finance chief Peter Marriott - are members of the board’s risk and compliance committee.

Crouch, as chair of the committee and a Westpac director for almost 7 years, should expect particular focus from investors on the day.

After all, Austrac in its statement of claim alleges Westpac’s “contraventions are the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board”.

It doesn’t get more pointy than that.