Money Finance News Westpac CEO Brian Hartzer’s $7 million pay cheque is bank business as usual
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Westpac CEO Brian Hartzer’s $7 million pay cheque is bank business as usual

brian hartzer westpac
Mega-salaries like those of Brian Hartzer 'offend community standards'. Photo: AAP
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Bank customers who dared to hope that this was the year in which the big banks finally got the message that they need to rebuild community trust will be sorely disappointed by details of Westpac CEO Brian Hartzer’s mouth-watering remuneration.

After all, this was the year in which each of the big-four banks dropped unpopular ATM fees, signalling a new era of responsiveness to the concerns of their customers.

Big deal.

There has long been disquiet about super-sized salaries paid to big-bank CEOs, but this week’s news that Mr Hartzer’s remuneration for the year to September 30 was $6.68 million shows the hearing aid has been turned off again.

Mega-salaries offend community standards for two principal reasons, particularly when it comes to the banks: first, their grotesque proportions, and second because banks are paying these huge salaries as they fend off community anger over egregious corporate conduct.

Nothing says “we’re not listening” like a $7 million pay cheque for the CEO.

Watch a summary of Westpac’s results:

There is one positive, such as it is, to be gleaned from Mr Hartzer’s bonanza: his remuneration is well below that of his predecessor Gail Kelly, who retired as CEO in February 2015. Her annual remuneration peaked at $12.8 million.

When Ms Kelly announced her retirement after seven years at the helm, Westpac chairman Lindsay Maxsted admitted her retirement was an opportunity to “reset executive remuneration” at the bank.

“[Executive] remuneration has moved so much since Gail was appointed in 2008,” he said.

“There’s an understanding in the investor community and the public generally that the levels of salaries within financial services did get out of kilter.”

Many Australians would find it hard to believe that a $7 million salary represents a return to kilter.

Mr Hartzer’s fixed salary was $2.7 million, a tolerable figure in the context of running one of the world’s biggest banks. But complex bonuses and incentive payments take CEO salaries – including Mr Hartzer’s – into the stratosphere.

Westpac investors have good reason to be happy with Mr Hartzer’s performance. The bank’s profit this year was up 3 per cent to a whopping $8.06 billion. But most Australians would reasonably ask why a CEO on $3 million a year should be additionally rewarded for doing his or her job?

Most Australians get to keep their jobs if they do them well, and even that has become a lottery. In the meantime, wages growth has been at an all-time low. It’s hard to be magnanimous about big CEO salaries in those circumstances.

The timing of announcements about Westpac’s bumper profits and executive remuneration has not been entirely propitious.

brian hartzer
Westpac CEO Brian Hartzer. Photo: AAP

Westpac is currently before the Federal Court to answer allegations brought by the Australian Securities and Investments Commission (ASIC) alleging contraventions of the law including attempts to rig the “bank-bill swap rate” or BBSR (market manipulation) and attempted unconscionable conduct between 2010 and 2012.

ASIC’s case includes tapes and transcripts of expletive-laden conversations between Westpac traders. Ethical conduct is not the first thought that comes to mind.

The bank, which has unsuccessfully sought to restrict the scope of the charges brought by ASIC, argues that the colourful language and, what to the untutored ear might sound like confirmation of market manipulation, in fact showed the bank’s highly skilled professionals executing complex trades in a high-pressure environment.

When it comes to people’s perceptions of the big-four banks there is no doubt that the banks are their own worst enemies.

Westpac is just the latest big bank to demonstrate that whatever its PR spin might suggest there is still a vast disconnect between banks’ behaviour and the expectations of consumers and the broader community.

The Commonwealth Bank (CBA) has come closest to showing that it gets public misgivings about bad behaviour by the big banks and in particular the relationship between that behaviour and executive remuneration.

In response to the money-laundering scandal which has beset CBA, chairman Catherine Livingstone sent a clear message when she ordered the cancellation of short-term bonuses for bank executives following revelations that the bank had failed to report suspicious transactions to financial intelligence agency AUSTRAC.

CEO Ian Narev’s remuneration for 2016-17 was reduced from $8.8 million to $5.7 million. (When including long-term bonuses that vested that year his remuneration for the year was $12.3 million.)

Remuneration of almost $6 million is still up there, but Ms Livingstone’s action was welcome acknowledgement that executive remuneration – and especially CEO remuneration – have to be transparent if community trust is to be restored.

That lesson seems not to have resonated with Westpac.

Leo D’Angelo Fisher is a former associate editor and columnist with BRW and columnist for the Australian Financial Review. He was also a senior writer at The Bulletin magazine.

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