Westpac will overhaul how it calculates executive pay in response to the last year’s protest vote by shareholders and has admitted that the bank’s culture can “dilute” accountability for its failings.

The country’s second largest bank said on Monday that it recognised last year’s cuts to executive bonuses did not go far enough, with 64 per cent of shareholders voting against the bank’s remuneration report at December’s annual general meeting.

Chairman Lindsay Maxsted acknowledged that Westpac had not given sufficient weight to the reputational damage caused by revelations of misconduct at the financial services royal commission.

He said an internal inquiry had shown Westpac needed to improve its approach to managing non-financial risks, and said work was already underway.

“While our culture, governance and accountability settings in their totality generally support the sound management of non-financial risks, our approach is less mature than our approach to managing financial risks,” Mr Maxsted said.

“At the same time, the report confirmed that we have an analytical and consultative culture that can slow down decision making, create undue complexity and dilute accountability.”

If more than 25 per cent of shareholders vote against an ASX-listed company’s remuneration report at consecutive AGMs, a vote on whether to spill the board is automatically triggered.

Shares in Westpac were 0.46 per cent lower at $28.10, making them the worst performing among the big four banks at 1028 AEST.

But the decline was broadly in line with that of the overall market.