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Westpac board survives shareholders' ire in wake of money laundering scandal

Westpac Banking Corp.'s board survived a vote by angry shareholders to force its re-election, at a Dec. 12 annual general meeting that was dominated by the money laundering scandal.

During the nearly six-hour long meeting, a third of shareholders voted against the bank's remuneration report despite the board touting the changes it made to the executives' pay this year, including no increase in base pay for the CEO and a 20% cut to directors' base fees. The vote constituted a "second strike" under Australia's Corporations Act, and triggered a conditional vote on whether nonexecutive directors on the board should stand for reelection. During the 2018 meeting, shareholders had delivered a "first strike" after rejecting the remuneration report.

Under Australia's Corporations Act, two consecutive shareholder votes against remuneration reports trigger a conditional vote on whether the board should stand for re-election. If a majority of shareholders back the resolution, then all directors except the managing director are required to stand for reelection.

Westpac's shareholders, however, defeated the conditional resolution with 90.80% voting against it.

Meanwhile, Peter Marriott was re-elected to the board by a narrow margin, with just 58% of votes in favor. Marriott, a former CFO of Australia & New Zealand Banking Group Ltd., has been on Westpac's board since June 2013. He is chairman of the board's audit committee and a member of each of nominations, risk and compliance and technology committees. Previous media reports said several proxy advisers were recommending against his reelection.

Westpac's shareholders recorded their protest after the Australian Transaction Reports and Analysis Centre, or AUSTRAC, sued the bank in November, alleging that it violated anti-money laundering laws in more than 23 million instances, including failing to carry out due diligence on payments linked to child exploitation. The scandal has led to the resignation of CEO Brian Hartzer and prompted Chairman Lindsay Maxsted to bring forward his retirement to the first half of 2020.

The bank's shares closed at A$24.08 on the Australia stock exchange on Dec. 12, down from the previous day's close of A$24.38. The bank's shares closed at A$26.55 on Nov. 19, a day before AUSTRAC's made its allegations and lawsuit public.

Maxsted faced criticism from shareholders over the money laundering scandal after he started the meeting with an apology to the bank's shareholders. One shareholder asked the chairman about how did the bank's executives missed millions of alleged money laundering incidents, while another shareholder said "words of apologies are cheap" and that Maxsted and the board need to "do something" to fix the issues.