Westpac is having a second go in a few months in overhauling the way it calculates executive pay.
The move, revealed in a letter to shareholders released yesterday, is in response to last year’s protest vote by shareholders and an admission the first revamp was light on and didn’t go far enough.
The letter accompanies an update on the bank’s first-half result and the interim dividend.
The country’s second-largest bank said on Monday that it recognised last year’s cuts to executive bonuses did not go far enough, with 64% of shareholders voting against the bank’s remuneration report at December’s annual general meeting.
Chairman Lindsay Maxsted acknowledged that Westpac had not given sufficient weight to the reputational damage caused by revelations of misconduct at the financial services royal commission.
He said an internal inquiry had shown Westpac needed to improve its approach to managing non-financial risks and said work was already underway.
“While our culture, governance and accountability settings in their totality generally support the sound management of non-financial risks, our approach is less mature than our approach to managing financial risks,” Mr. Maxsted said.
“At the same time, the report confirmed that we have an analytical and consultative culture that can slow down decision making, create undue complexity and dilute accountability.”
If more than 25% of shareholders vote against an ASX-listed company’s remuneration report at consecutive AGMs, a vote on whether to spill the board is automatically triggered.
“The Board is disappointed we did not meet your expectations on executive remuneration and we are determined to do so in 2019,” Mr. Maxsted said in the letter.
“We are listening and responding to shareholder feedback and expect to make further changes this year, including more effectively capturing non-financial risk elements of performance in executive remuneration, improving the transparency of remuneration decisions, and applying discretion where circumstances warrant.
“The remuneration outcomes from this very detailed process will be set out in our 2019 Annual Report which will be published in early November,” Mr. Maxsted said.
Westpac shares ended up 0.1% at $28.26 after dipping to an early low of $28.
