WESTPAC AGM
(Image: AAP/Joel Carrett)

If you’re wondering just how profoundly out of touch Australia’s business elite is, or whether its members have actually learnt anything from the wholesale collapse of their collective reputation over the last year, Westpac’s AGM yesterday gave a pretty clear answer: they don’t have a damn clue.

Westpac set a new record for corporate Australia with a stunning vote of no confidence in its board and management beyond any previously seen. A poor vote on the bank’s remuneration report was expected, but the 64.16% vote against is one of the largest votes against any company’s remuneration report. 

It was a dramatic demonstration of the depth of feeling shareholders have against the bank, and banks in general, as a result of the disclosures from the royal commission.

This is just the beginning

The guts of Westpac’s remuneration report included a relatively minor cut in bonuses for its executives (an average of 25%), despite it having to put aside nearly $300 million in provisions for various forms of misconduct revealed by the royal commission and beforehand.

Chair Lindsay Maxsted reckoned that executives keeping 75% of their massive bonuses was fair, because people were tarring Westpac with the brush of royal commission wrongdoing more fairly used on the other banks and AMP, and they should look at “total outcomes for the year”. Maxsted’s astonishing defence even infuriated royal commission opponent Tony Boyd at the Financial Review.

NAB and ANZ get their turn next Wednesday. By next week we will have had the unprecedented censuring of three of the country’s bluest of blue chips by shareholders, over an issue that pushes the buttons of ordinary Australians: the ridiculous remuneration of corporate executives.

The ANZ probably deserves the bigger whack for being particularly clueless. Take a look at this ASX announcement two weeks ago:

At ANZ’s 2018 Annual General Meeting, shareholders will be asked to approve the grant of Performance Rights to the Company’s CEO, Mr Shayne Elliott on the terms set out in the 2018 Notice of Meeting… the actual number of Performance Rights proposed to be allocated to Mr Elliott is 82,774 for Tranche 1 (Relative TSR Hurdle) and 27,591 for Tranche 2 (Absolute CAGR TSR Hurdle), summing to a total allocation of 110,365 Performance Rights.

Those performance rights have a value of $2.8 million. Why should he get them? The board argues:

The proposed granting of Performance Rights is appropriate and is in the best interests of the Company and its shareholders, as the grant strengthens the alignment of Mr Elliott’s interests with shareholders, and the Performance Rights provide a strong link between the reward for Mr Elliott’s performance and total shareholder returns over the next four-year period.

No mention of the $800+ million that has to be set aside to compensate the thousands of customers the bank ripped off, or the roughly $10 billion wiped out of the bank market capitalisation this year, or the customers themselves, or the wider Australian community. 

Why don’t they get it, even after all this time?

These are the beneficiaries of a structure of power that operated for many years. They paid large donations to both sides of politics, but particularly the Liberal Party, and in return, the Liberals provided extensive political protection: gutting ASIC, trying to repeal FOFA, trying to stop a royal commission, relentlessly attacking industry super funds, proposing a massive cut in tax for large companies that would have delivered a windfall to the banks.

After the 2016 election, the Liberals slowly began realising the massive political cost of being the hired guardians of the banks wasn’t worth it, and bit by bit have turned on the banks. Electoral reality bit them hard.

For the banks and the cream of Australia’s corporate elites, there have been no elections and no polls to deliver a similar jolt. Only the slow process of shareholder anger, much of which is about falling share prices and large provisions, rather than misconduct itself.

It will be some time before the penny drops, if it ever does.

Peter Fray

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