Westpac CEO Brian Hartzer quits over Austrac scandal

Westpac boss Brian Hartzer steps down in the wake of the Austrac scandal while chairman Lindsay Maxsted fast-tracks his retirement.

Embattled Westpac chief executive Brian Hartzer will step down from the company in the wake of a money laundering scandal involving claims the bank facilitated transactions enabling child exploitation in The Philippines.

In a statement released on Tuesday the bank said the change would be effective next Monday, December 2, with chief financial officer Peter King set to take up the role of acting CEO while the bank searches for a long-term replacement. Chairman Lindsay Maxsted would also fast-track his retirement, the bank said.

READ MORE: Chairman Maxsted reveals why Hartzer had to go | John Durie — Why Hartzer couldn’t hang on | Stay calm, this is no Enron, Brian Hartzer tells execs | Hartzer payout not so golden | Westpac giving a free pass to paedophiles, Peter Dutton says | Kohler — Westpac’s response to Austrac scandal completely inadequate

By lunchtime, Westpac’s shares had risen as much as 1.8 per cent to $24.87, after hitting a nine-month low of $24.26 on Monday.

The news comes after The Australian revealed on Tuesday that Mr Hartzer had tried to assure the bank’s most senior leaders that the Austrac scandal “was not playing out as a high street issue”.

Mr Hartzer will be paid $2.69 million in lieu of 12 months notice. However all his unvested short term and long term bonus entitlements will be forfeited. He also loses his entitlements to any short term bonus payments up until financial year 2021. At the same time Westpac will scrap its long term bonus plan at the upcoming annual general meeting.

“As CEO I accept that I am ultimately accountable for everything that happens at the bank. And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves,” Mr Hartzer said in the statement.

In the statement, Mr Maxsted said the board accepted the gravity of the issues raised by Austrac.

Read the full statement here

Westpac said Mr Maxsted would bring forward his retirement to the first half of 2020, while chairman of the board risk and compliance committee, long-serving director Ewen Crouch, will not seek re-election. “This will enable an incoming chairman and the board to oversee the appointment of a permanent CEO,” Westpac said in its ASX statement. Chief operating officer Gary Thursby will step in for Mr King as CFO.

About turn

The board’s about turn came after Mr Maxsted held a series of meetings in Melbourne on Monday with stakeholders including with proxy adviser ISS, institutional investors and industry superannuation funds.

Despite a second day of investor meetings having been planned for Tuesday, Sources said the initial feedback that more accountability was needed from Westpac’s leadership over the scandal, was too strong to ignore. The messages relayed to the board were overwhelmingly clear that Westpac’s response plan, released on Sunday, didn’t go far enough given the bank was likely facing a penalty in the order of $1bn.

The changes come ahead of Westpac’s annual general meeting on December 12. Carrying a massive 65 per cent strike vote from shareholders from the 2018 AGM, the bank’s board faced a spill vote if a second strike was recorded this year – something many observers believed was likely in the wake of the Austrac scandal.

A “strike” is recorded if more than 25 per cent of votes are cast against an organisation’s remuneration report.

Brian Hartzer, managing director and CEO of Westpac with Chairman Lindsay Maxsted speak during a press conference after the Westpac Group 2017 annual general meeting in Sydney.

The Austrac statement of claim includes allegations that Westpac financially facilitated transactions enabling child exploitation in The Philippines. More than 23 million transactions are alleged to have breached anti-money-laundering laws and the bank is facing the prospect of fines totalling more than $1bn.

“As was appropriate, we sought feedback from all our stakeholders including shareholders and having done so it became clear that board and management changes were in the best interest of the bank,” Mr Maxsted said.

He said Mr King had had a long and distinguished career at Westpac.

“He is an executive of exceptional integrity who is deeply respected by the market and the entire Westpac team,” Mr Maxsted said.

Departing Westpac CEO Brian Hartzer. Picture: Hollie Adams

“The board has asked Peter to focus on two immediate priorities: to implement the Westpac response plan and to continue to execute the group’s broader strategy.

“We are determined to urgently fix these issues and lift our standards to ensure our anti-money laundering and other financial crime prevention processes are industry leading.”

The bank has faced enormous political and community pressure to take action in the wake of the scandal, including several statements from Prime Minister Scott Morrison that the bank needed to demonstrate that it was accountable for the problems.

The final story that sunk Westpac CEO Brian Hartzer https://t.co/l1qA6eNgOf great scoop by @vanOnselenP @australian

— John Lehmann (@lehmannatlarge) November 25, 2019

The Australian reported on Tuesday that Mr Hartzer had told his ­executives on Monday that the bank’s pedophile money scandal was “not an Enron or Lehman Brothers”, and mainstream Australia was not overly concerned, so “we don’t need to overcook this”.

In an hour-long, closed-door meeting, Mr Hartzer implored his team to “get mortgages going and we’ve got to get NPS (net promoter score) going” following allegations the bank facilitated child exploitation in The Philippines.