Sydney Morning Herald Business Day September 19, 2012
Paul Fegan, the former chief executive of St George Bank, has denied that he deliberately misled and deceived his former employees when he wrote to them asking them to stay with St George while it merged with Westpac in 2008.
Appearing in Federal Court as a witness today, Mr Fegan said news of the proposed merger could have led to the premature loss of key people and that he knew this was a risk at the time.
“I thought it was appropriate that there was some incentive scheme to retain key people,” he told the court.
Mr Fegan sent a letter to a group of employees in June 2008 telling them that they would get a bonus if they stayed with the bank and helped the bank to hit its “earnings per share [growth] target for the 2007-08 year”.
But after St George and Westpac merged those employees were made redundant and no bonuses were paid. By not paying the bonuses, the bank saved $4.1 million.
A group of former St George bankers allege Mr Fegan made misleading representations and acted deceitfully in the letter he sent to them because it later emerged that they needed to achieve earnings per share growth of 10.1 per cent for them to get their full bonuses, a figure that was not included in that letter.
The bankers say they believed their growth target was “between 8 to 10 per cent” because that was the bank’s market guidance at the time.
They did not receive their bonuses because they achieved actual earnings per share growth of 8.3 per cent.
Mr Fegan, who appeared as a witness in the case against Westpac, told court today that he would have received a $373,000 bonus under that one-off incentive scheme if the 10.1 per cent target had been reached. He said he did not get that bonus because the bank failed to reach its target.
Mr Fegan denied that a second bonus he received at the time the other payments were turned down – worth $1 million – had anything to do with his handling of the employee incentive scheme.
“I received nothing under that [first] incentive scheme … the other payment was irrelevant and had been disclosed to the stock exchange,” he said.
Mr Fegan also said he did not accept that he was not acting conscientiously by failing to take steps to communicate to his staff that their true earnings per share target was 10.1 per cent.