However, there were also warning the bank’s performance could suffer in the short term due to a period of uncertainty over its leadership and long-term strategy. Some predicted there would likely be more senior executive departures and the potential for more changes on the board.
It also remains unknown whether the bank has defused the risk of a further investor backlash on executive pay. While some proxy advisers are expected to support the changes, head of research at Institutional Shareholder Services (ISS), Vas Kolesnikoff, said the changes on Tuesday were different to its ongoing concerns about bonuses. ISS was expected to publish its recommendation to investors on Tuesday night.
While Mr King said on Tuesday he remained committed to the bank’s strategy, the changes mean Westpac is changing chair and CEO within a short period of time. There is also uncertainty over the long-term chief financial officer, with current chief operating officer Gary Thursby acting in the role.
Principal at fund manager Alphinity, Andrew Martin, said it would be “very hard” for the market to get an idea of where profits were going without a clear picture of the bank’s long-term strategy.
“It might bring stability to the situation, I’m not sure it’s going to bring stability to the bank,” Mr Martin said.
“If you have that big a change, it’s going to be pretty disruptive for the bank for some time until a new team is in place. They are going to be very internally focused for some time.”
Chief executive of Clime Asset Management, Rod Bristow, said the change in leadership was positive in the medium term but could also potentially be disruptive to the business. The fund manager expected more senior executive departures in the coming months.
“I think that this sort of scandal will remain with the business for a long period of time,” Mr Bristow said.
The changes come as Westpac is trying to stave off a second “strike” on executive pay – a vote against of 25 per cent or more – at next month’s annual meeting.
Chief executive of proxy advisor the Australian Council for Superannuation Investors (ACSI), Louise Davidson, welcomed the leadership shake-up. But she also signalled ACSI wanted more in the way of board renewal. “We believe that this crisis warrants further board renewal in the new year to support rebuilding public trust,” she said.
Mr Maxsted rejected the idea of more board changes as “very dangerous,” saying there was a “very fine balance” in having accountability without disrupting the business. “We don’t want to go too far so that it’s very disruptive to the business. So we think we’ve got the right balance,” he said.
Senior investment officer at Westpac shareholder Argo Investments, Andy Forster, said Mr Hartzer’s position at the bank had become “rather untenable” and a change had been “inevitable”.
“Until they find out who is the new CEO and chairman it will create a period of uncertainty,” he said.
While many analysts said Mr Hartzer’s departure was predictable, White Funds Management’s managing director Angus Gluskie said he thought it was “extreme”.
“I thought it was a really extreme move, maybe a move that was a bit too quick. But I think they wanted to clear the air and take some visible action,” he said.
Clancy Yeates is a business reporter.
Charlotte is a reporter for The Age.