Editorial: What Westpac pays chief is its own business

George Frazis, Westpac New Zealand chief executive. Photo / Steven McNicholl

Opinion

Bashing the banks has become an ever more popular pastime of late.

Anger greets their profit statements and their every utterance is met with querulousness or distrust.

The news that George Frazis, the boss of Westpac New Zealand, has a yearly package of $5.59 million, making him the country's highest-paid executive ever, will have done nothing to lessen the populist loathing.

The more so when politicians of all persuasions are taking the opportunity to jump on the bandwagon.

Finance Minister Bill English suggested this week that Westpac needed to front up to its customers and explain why it was paying Mr Frazis so much in tough times.

He was singing from much the same sheet as Finsec, the bank workers' union, which, much more predictably, said the chief executive's package was "unethical", not only because of the economic climate but because Westpac was covered by the Government's deposit guarantee scheme.

It is always tempting for politicians to exploit populism's irrational and emotive forces.

Easy and non-consequential points can be scored through cynical appeals in the name of popular equality.

Banks have become the whipping boy for the global recession even though in this part of the world their strength and security played a major role in mitigating its impact.

No banks failed or had to be nationalised or heavily subsidised by the taxpayer.

That, however, has not stopped a feeding frenzy, particularly across the Tasman, where the banks' rude health, controversial mortgage-rate rises and the $20 million salary of New Zealander Sir Ralph Norris, the head of the Commonwealth Bank, have become the subject of popular abhorrence.

His package has led the Australian Treasurer, Wayne Swan, to suggest a cap on bank executive salaries, as part of a number of reforms.

More surprisingly, the Liberal Party's Treasury spokesman, Joe Hockey, was moved to call for legislative controls on the interest banks charge.

Coming from a conservative politician, this suggestion, which would mean, inevitably, that credit would be harder to get, was as astonishing as it was foolish. It was quickly rescinded.

At least Mr English is not calling for such radical steps. But his please explain message had no more substance.

It is up to Westpac to decide how much it wants to pay Mr Frazis. Indeed, his package must be viewed in the context of its recent chequered history in this country.

Mr Frazis inherited a bank that was trying to turn around its performance after a series of poor results. He is paid for his record in achieving results, much as Paul Reynolds was offered an attractive package to come from Britain to the troubled Telecom.

This month Westpac NZ reported after-tax profit of $322 million, up 36 per cent.

If there needs to be any explaining or, indeed, reining in of Mr Frazis' package, that should be at the behest of Westpac shareholders. It is their role to scrutinise its size, bonus content, how it is linked to performance and suchlike.

There is no clear need for the bank to explain itself to its customers, as Mr English suggests, even if the Government is one. Affronted customers, as always, have the recourse of taking their business to one of Westpac's competitors.