Westpac CEO Brian Hartzer dug his own grave using power of words

Westpac chief executive Brian Hartzer leaving his home on Monday morning. Picture: Jane Dempster

It was Brian Hartzer’s Lehman Brothers moment. For a week the embattled CEO of the nation’s second-largest bank clung to his job as calls for heads to roll over the Westpac child exploitation funding scandal grew louder.

It was only after The Australian revealed his behind-closed-doors comments to senior staff, playing down the community’s rightful rage about facilitating pedophilia in The Philippines, that the Westpac board succumbed to reality.

At 2.30am on Tuesday, Westpac’s spin doctors were in crisis as they grappled with the chief executive’s comments detailed on the front page of this newspaper.

READ MORE: Maxsted calls for calm as CEO exits | What a difference six days makes | How Westpac’s board decided Hartzer’s fate | Bank axed from first-home loan scheme

The Australian's front page on Tuesday.

“This is not an Enron or Lehman Brothers, we will get through this,” Hartzer had told a crisis meeting of key senior bankers. ‘‘We all read the Fin (The Australian Financial Review) and The Australian, and we all read that and think the world is ending. But actually for people in mainstream Australia going about their daily lives, this is not a major issue so we don’t need to overcook this.’’

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Come 8am on Tuesday, Westpac issued a statement to the ASX: “Brian Hartzer will be stepping down as CEO.”

Words are free. It’s how you use them that may cost you.

“They were very disappointing statements to read and clearly I and the board and all of Westpac do not agree with those statements in isolation,” said Westpac chairman Lindsay Maxsted as he explained the bank’s senior management changes, including his own early resignation.

In the world of Australian high finance, words have never, until recently, appeared to hold such value. With just a few inches of ink printed on page 411 of his final ­report into the royal commission, former High Court judge Kenneth Hayne wrote disparagingly that National Australia Bank’s leadership “stands apart” from the other major banks.

Within a week, both NAB chief executive Andrew Thorburn and chairman Ken Henry were gone.

The anti-money-laundering regulator Austrac issued a similar missive against Westpac last week, nestled in its terse statement of claim about the bank’s ­alleged failure to comply with money-laundering legislation 23 million times. “These contraventions are the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board.” Within a week, Hartzer was gone.

Much has already been said of Austrac’s allegations. The claimed breaches are unprecedented in their scale, with 23 million instances of alleged breaches that could result in a likely fine above $1bn.

But the seriousness of the scandal was also unprecedented, underlined by Westpac’s alleged failure to tackle just 12 customers who made almost 3000 transactions to The Philippines, sending $500,000, most probably to child exploitation criminals.

Scott Morrison made it clear there needed to be atonement. “Boards need to take accountability,” the Prime Minister said.

But Westpac did not budge.

Attorney-General Christian Porter described the alleged ­behaviour as “off the charts” and “unbelievably serious”.

Yet the senior bankers ­remained in their jobs.

Home Affairs Minister Peter Dutton dropped all pretence on Monday, accusing Westpac of giving “a free pass to pedophiles”.

As one institutional investor said, the failure to act when senior members of government are clear in their desires revealed a board swamped by naivety.

In standing down, Hartzer ­offered fewer than 40 words. ‘‘As CEO I accept that I am ultimately ­accountable for everything that happens at the bank. And it is clear we have fallen well short of what the community expects of us, and we expect of ourselves,” he said.

It is an increasingly common refrain that community expectations are rising.

But blind Freddy could have seen what needed to happen at Westpac.