Westpac is staring down the barrel of a protest vote on pay at its annual general meeting this week

Westpac faces the risk of a board spill at its annual general meeting on Thursday, with the bank likely to suffer a protest vote on pay that would trigger a second 'strike' and a vote on whether to put the directors up for re-election.

However, the directors are expected to avoid being ousted, with a deal believed to have been done with key players in industry super to ensure the next chief executive and chairman are external appointments.

Bank sources denied they had ruled out the possibility of an internal appointment.

The big four bank also faces more public relations pain, with The Australian Financial Review understanding several senior staff have been called in for compulsory interviews with the Australian Securities and Investments Commission in the wake of money laundering claims.

Outgoing Westpac chairman Lindsay Maxsted and head of investor relations Andrew Bowden have been meeting major investors ahead of Thursday's AGM to head off a potential bloodbath.

Both bank and investor sources agreed any spill motion – which requires 50 per cent or more support – triggered by a second 'strike' of 25 per cent or more would easily be defeated with the directors safely re-elected, despite director Peter Marriott facing the largest protest vote.

"We will definitely be voting against the spill resolutions," fund manager Geoff Wilson said. "It is clear the board and management have taken responsibility for what occurred."

The bank appears to have avoided an AGM disaster, with sources in the industry super sector claiming the bulk of the growing $700 billion-plus voting bloc had decided against further bloodletting at Thursday's meeting.

The bank had been keen to quickly accelerate an internal succession, with directors Steve Harker or Peter Nash as possible chairman and acting CEO Peter King a frontrunner to head the bank.

But key players in the industry super sector are believed to have made it clear the next CEO and chairman must be external appointments, leaving a slim hope a strike vote of 25 per cent or more could be avoided.

"They rightly deserve a strike," said Vas Kolesnikoff at proxy adviser ISS, which has recommended a vote against the remuneration report and directors Mr Marriott and Nerida Caesar, but in favour of Margaret Seale and Steven Harker.

"They have frozen the bonuses pending the AUSTRAC investigation but they should never have been granted in the first place," he said.

"They are completely inconsistent with reality because they have been paid on the basis of customer satisfaction and culture."

ISS is largely followed by the large offshore index fund and can itself trigger a vote of more than 20 per cent.

Proxy advisory house Ownership Matters and the Australian Council of Superannuation Investors, which advises major super funds such as AustralianSuper, are backing the Westpac board and the remuneration report, which puts the possibility of a second 'strike' in the balance.

The third major proxy adviser, CGI Glass Lewis, is also backing the bank and only recommending a vote against Mr Marriott's re-election.

Retail investors represented by the Australian Shareholders' Association are voting against the remuneration and Mr Marriott, a former ANZ chief financial officer and KPMG partner, due to his role as chair of the Westpac board's audit committee and a member of its risk committee.

Despite the backing by ACSI, AustralianSuper and others, a number of industry super funds have indicated they would be willing to break away from ACSI's recommendation.

First Super, TWU Super and Sunsuper are among those pushing for more executive accountability, despite the departure of CEO Brian Hartzer, chairman Mr Maxsted and Ewen Crouch, the chairman of the bank's risk committee.

The bank faces the historic second 'strike' and board spill after a record 64.2 per cent protest vote last year.

The key proxy advisors are also supporting both ANZ and NAB resolutions ahead of their AGMs this month, which will ensure they are safe from a second strike after both suffered historic first 'strikes' last year.

ASIC interviews

Westpac faces more trouble with regulators, with several senior staff understood to be facing compulsory interviews as part of an ongoing investigation in the wake of AUSTRAC's money laundering case.

The Financial Review has already reported that ASIC is investigating Westpac's disclosure as part of the bank's $2 billion capital raising on November 4.

However, the interviews with senior staff are understood to be exploring possible breaches of directors' duties and the bank's general obligations under their financial services licence.

Much of the investigation is said to centre on AUSTRAC's claims of "indifference by senior management and inadequate oversight by the board".

The ASIC investigations comes as APRA continues to examine implications under the Banking Executive Accountability Regime for Westpac executives from the AUSTRAC investigation. However, because the regime only stretches back 18 months, any action under BEAR is hamstrung.

"In terms of the investigation that we were doing on an AML issue related to BEAR, Westpac is the only case where we are currently investigating BEAR obligations," APRA deputy chair John Lonsdale told a parliamentary committee this month.

"But there are other obligations that are non AML related; is that what you are saying?" committee chairman Tim Wilson asked.

"There could well be, there could well be", he said.

This story was originally published in the Australian Financial Review. Read the original story here.