Westpac’s chairman has made a series of apologies to the bank’s shareholders in a statement to the ASX accompanying the interim dividend statement.
Lindsay Maxsted began his apologies by expressing the board’s disappointment in not meeting shareholder standards on executive remuneration.
The executive remuneration was voted against by shareholders at the 2018 general meeting with a clear message that the board’s remuneration for executives should be in line with shareholder expectation.
“More specifically, the risk and reputation matters that emerged across the sector, combined with a flat financial performance in 2018, meant that many shareholders believed the board did not apply enough downward discretion to short-term variable remuneration outcomes,” said Mr Maxsted.
Mr Maxsted promised that the board was listening and the outcomes of their changes would be set out in the 2019 annual report.
“We are listening and responding to shareholder feedback and expect to make further changes this year, including more effectively capturing non-financial risk elements of performance in executive remuneration,” he said.
It was this non-financial risk that was included in Westpac’s self-assessment of culture, governance and accountability after a request from APRA following the royal commission.
The completed assessment, according to Mr Maxsted, highlighted that, in general, non-financial risks were managed well but the approach was less mature than the bank’s approach to managing financial risks.
“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,” he said.
A detailed program to implement the recommendations from the self-assessment was already underway and the bank was waiting upon direct feedback.
“At time of writing we are also waiting for direct feedback on this report from APRA and will incorporate its recommendations in our plans,” said Mr Maxsted.
The first half of 2019 has not been kind to the bank, which saw its profits down 24 per cent on the first half of 2018, with earnings down 22 per cent as well.
The group at the time said the profits were hit by $617 million due to customer refunds, repayments and associated costs.
A rest of strategy also cost the bank money, which totalled $136 million, all of which meant profits had dived by over $1 billion, but its interim dividend was still unchanged at 94 cents per share.
“Despite the lower earnings, our capital and balance sheet are in good shape, which allowed us to hold the interim dividend steady at 94 cents per share,” said Mr Maxsted.
The provisions were a reflection that Westpac was taking action and dealing with the major outstanding issues as quickly as possible, said Mr Maxsted.
“These actions, along with our royal commission and CGA self-assessment response plans, will ultimately make us a stronger organisation and help us to deliver a more consistent experience for customers,” said Mr Maxsted.
Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).
You can email him on: [email protected]