By Monday evening Maxsted understood he was holding an impossible hand.
A wall of shareholders were in violent agreement: Hartzer, Maxsted and Westpac’s second-most-senior director, Ewen Crouch, had to go. Nothing less than governance annihilation would satisfy investors’ thirst for accountability.
By late Monday afternoon shareholders were confident Maxsted had folded and they were expecting a response from Westpac far bigger than the “action plan” it had delivered last Sunday.
They didn’t have to wait long. After a marathon board meeting on Monday night that lasted until the early hours of the morning, Westpac delivered its explosive news at 8am on Tuesday morning.
Since last Wednesday, when AUSTRAC released court documents alleging horrific breaches of money laundering laws and a failure to capture the financing of child sexual exploitation, the clock began ticking for Harzter and Maxsted.
Such a monumental compliance and governance oversight and such repugnant ramifications couldn’t be ignored by the company’s major shareholders, who themselves have strict rules about how they treat governance issues in the companies in which they invest.
Until Monday afternoon, neither Maxsted nor Hartzer appeared to appreciate the gravity of the situation.
A flurry of text messages between Westpac and shareholders went back and forth over the weekend as the bank defended its position.
Maxsted briefed journalists from major newspapers – and was even quoted saying that his discussions in recent days had shown that, on balance, shareholders remained supportive.
The pair seemed unable to comprehend that investors were angry. Monday’s meetings must have come as a very rude shock.
Some investors were so angry that, by Monday, they were threatening to vote against Maxsted’s reappointment to other boards, including BHP and Transurban, if he didn’t resign from Westpac.
Nothing less than governance annihilation would satisfy investors’ thirst for accountability.
There were ultimatums issued that there would be a vote against all five Westpac directors up for re-election to the board at next month’s annual meeting unless executives and board members suffered appropriate consequences.
During one of Maxsted’s Monday meetings, an influential proxy firm responded to Maxsted’s protestations about what they knew and when by reading a paragraph from AUSTRAC’s statement of claim: “Since at least 2013 Westpac was aware of the heightened child exploitation risks associated with frequent low value payments to the Philippines and south-east Asia both from AUSTRAC guidance and its own risks assessments. In June 2016 senior management within Westpac was specifically briefed on these risks with respect to the LitePay channel.”
And while Maxsted was engaged in Monday’s battle with shareholders, Hartzer was calling major corporate clients in a bid to win over potential defectors.
Meanwhile, Hartzer’s astonishing comments to senior Westpac management suggesting the backlash from the AUSTRAC scandal was just a media-looking-for-a-headline issue and wasn’t felt by the broader public were leaked to The Australian only hours after his briefing ended.
These ill-conceived comments ultimately had no bearing on the board’s decision that Hartzer would go. By the time the online version of this story hit late on Monday evening, the directors had already cast their unanimous vote sealing Hartzer’s fate. The CEO would now move onto dealing with drawing up the details of his interim replacement Peter King’s contract.
While we now have some clarity on who is leaving and when, there is a very real chance the battle is not over.
There is a strong chance that, regardless of Tuesday’s action, the company will still receive a second strike against its remuneration report.
Meanwhile, the head of the Australian Council of Superannuation Investors, Louise Davidson, has noted: “We believe that this crisis warrants further board renewal in the new year to support rebuilding public trust.”
It appears we still have some way to run.
Elizabeth Knight comments on companies, markets and the economy.