Westpac chief executive Brian Hartzer was asked to justify his $5.5 million pay packet to a Parliament committee after the appropriateness of the sum was disputed.
Mr Hartzer took the stand in the second half of the hearing before the House of Representatives standing committee on economics, which drilled into the ways Westpac pays its executives.
The Greens’ Adam Bandt questioned Mr Hartzer over his $5.5 million earnings in 2016, asking if he believed he “deserved to get paid as much as” he collected.
“A lot of people would say $5 [million] to $6 million is a lot of money to receive full stop, let alone when there’s been so many findings of wrongdoing,” he said.
Mr Bandt pressed the point that two-thirds of Mr Hartzer’s remuneration – that of all Westac executives, in fact – is variable and based on a number of factors linked to the bank’s performance.
The interim report released by banking royal commissioner Kenneth Hayne found that most instances of misconduct occurred where the bank employee responsible stood to benefit financially, Mr Bandt noted. If that principle is true for frontline staff, he said it would be reasonable to believe the same incentive exerts a similar influence at the executive level.
Mr Hartzer accepted that money was a factor in many of the cases brought to the royal commission’s attention, but said the problem goes deeper and that there are “multiple factors” at play.
The back-and-forth followed an earlier line of questioning from committee deputy chair Matt Thistlethwait, who asked why the bank felt it was appropriate to allow executives to earn bonuses if the same payment model was being phased out at lower levels out of fear it encouraged inappropriate behaviour.
These executive bonus schemes are under an “ongoing process” to better align them with customers’ interests, Mr Hartzer said. The bonuses for growth and profitability aren’t necessarily linked to sales targets, he continued, but also include expense management and other internal factors.
Mr Thistlethwait however drilled into the matter.
“You’ve done a bit of window-dressing, but those bonuses are still there,” he said.
Executive accountability critical
The committee asked on several occasions about executive accountability, wondering why executives had often walked away from instances of misconduct with little or no disciplinary action taken.
Committee member Matt Keogh flagged what he saw as “systemic” failures within Westpac that had resulted in customers suffering losses, and he further questioned if there was “any reason why executives … shouldn’t be held personally responsible” for those breakdowns.
Mr Hartzer said the government’s Banking Executive Accountability Regime (BEAR) has been a “valuable” tool for establishing who should be ultimately responsible for what, and how to address problems.
However, Mr Hartzer also said shared accountability is a useful feature of banking, with customers expecting different parts of the business to collaborate. Splitting up responsibilities, he said, was “not quite as neat” a solution as might be hoped for by committee members.
Despite this, Westpac has now established clear lines of accountability within the organisation, Mr Hartzer assured the committee.
Issues of accountability also were brought up earlier in the day’s proceedings, when Commonwealth Bank chief executive Matt Comyn went before the committee.
Shared accountability between different parts of Commonwealth Bank’s business was also a problem in Mr Comyn’s estimation and for similar reasons to those given by Mr Hartzer.
Mr Comyn was also asked about a number of other issues raised during the royal commission, but his answers were frequently met with laughter (and sometimes heckling) from members of the public.
The House of Representatives standing committee on economics will continue its review of Australia’s banks on Friday