Westpac shareholders have handed the bank a first strike on executive pay in protest over bonus cuts they say did not go far enough.
Almost 64 per cent of votes cast ahead of the bank’s annual general meeting in Perth went against the remuneration report as the bank followed the likes of Telstra, Tabcorp and Harvey Norman in copping a first strike during this year’s unusually volatile AGM season.
All but one Westpac group executive had short-term cash bonuses cut and top-tier staff saw an average 25 per cent drop in rewards, but shareholders were still unhappy over the size of bonuses amid the fallout of scandals heard at the financial services royal commission.
While votes cast at Westpac’s AGM had yet to be counted, chairman Lindsay Maxsted accepted the bank would receive a first strike.
“Although the board took events over the year into account, many have questioned whether we went far enough, particularly in reducing short term variable reward paid to the CEO and other executives,” chairman Lindsay Maxsted told shareholders at Wednesday’s AGM.
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Mr Maxsted defended the bonus structure but said the bank would respond to the sizeable revolt, which puts the board at risk of a second strike and spill vote at next year’s AGM.
“The board takes your feedback very seriously,” Mr Maxsted said.
“Given the many concerns expressed we will reach out to more shareholders this year to fully capture and understand your views.”
Chief executive Brian Hartzer’s cash bonus was down about 30 per cent to $1.04 million for a year in which profits were flat and the big banks were hauled across the coals at the royal commission.
Mr Hartzer’s total realised remuneration fell 9.4 per cent, or $512,325, from $5.46 million to $4.94 million.
More than a third of early votes also went against the re-election of director Craig Dunn, with the Australian Shareholders’ Association citing concerns over his role as AMP chief executive from 2008 to 2013 – a period the royal commission heard included instances of misconduct.
Mr Maxsted said the issues raised at the royal commission – which included Westpac’s admission of falsely witnessed loan documents – did not represent the culture of the industry or the bank.
“Although the royal commission has clearly focused on matters of extreme importance, it has captured only a fraction of the activity taking place inside financial institutions,” Mr Maxsted said.
Nonetheless, Mr Maxsted said Westpac had taken four key lessons: it was slow to understand and react to complaints, it did not quickly enough focus on conduct and reputation, some bonuses encouraged poor behaviour, and it did not appreciate risks in financial planning.
Westpac has put aside $281 million for customer remediation and associated costs, but has indicated more could follow.
Westpac shares, which were worth $39.84 in 2015 and $31.74 in January this year, were up 1.88 per cent at $25.53 by 1529 AEDT – broadly in line with the ASX financials.