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Inside NAB's preparations for the banking royal commission

NAB chief legal counsel Sharon Cook: "What I am really interested in is change, transformation and customer-centricity." James Brickwood NAB chief legal counsel Sharon Cook: "What I am really interested in is change, transformation and customer-centricity." James Brickwood

National Australia Bank chief legal and commercial counsel Sharon Cook has been overseeing a flurry of activity by lawyers, media and bank executives in the bank’s “situation room” as they prepare their 50-page report for royal commissioner Kenneth Hayne.

Cook, who is heading up NAB’s response to the royal commission, has enlisted law firm Herbert Smith Freehills and barristers Neil Young, QC and Wendy Harris, QC. As the inquiry progresses, she plans to bring various NAB executives into their “war room”, which will be buzzing with phones, heated debate and a live feed of the hearings, which begin on February 12.

“We have had a lot of people working very hard ever since this letter [from Hayne seeking a 50-page report] arrived,” says Cook from NAB’s Melbourne Docklands headquarters, where she describes to BOSS how the bank has been preparing for the massive inquiry.

Hayne’s letter asked the banks, insurers and super funds to identify any misconduct, and whether they have engaged in any conduct, practice or business activity that has fallen below community standards and expectations, as far back as a decade.

Sharon Cook, left with NAB CEO Andrew Thorburn and former NSW premier Mike Baird. Pat Scala

“A broad range of people have been identifying where those things have occurred, looking at all the litigation brought against the bank since 2008; looking at minutes of meeting of the GRMC [Group Risk Management Committee] going back 10 years – that is where a lot of the business of the bank is done; having a look at the FOS [Financial Ombudsman] reports to identify systemic issues. We are flushing all of that out to develop categories to form the basis of a table to give to the commission,” Cook says.

It has been a baptism of fire for NAB’s legal counsel since joining the bank last April in a role that oversees government relations, corporate communications and customer complaints, as well as the traditional legal function.

Irresistible challenge

Since NAB chief executive Andrew Thorburn met Cook last year and convinced her to leave her job as managing partner of clients at King & Wood Mallesons, Cook has led the bank’s response to a barrage of shocks – the federal government’s $6.2 billion bank tax, ASIC’s bank bill swap rate court case, simplification of business contracts, and the royal commission.

“I flew to Melbourne for a secret meeting having never met Andrew before, and after speaking to him for 10 minutes I was ready to leave an excellent job I was enjoying immensely,” says Cook, who had been managing partner of law firm Henry Davis York. “He wanted me to assist in the transformation of NAB. What I am really interested in is change, transformation and customer-centricity – so his job offer was music to my ears.

Sharon Cook (right) with Penny Bingham-Hall. Cook rejects the charge that the Haynes inquiry could be overly legalistic. Rick Stevens

“It’s easy as a lawyer for everyone to look at you as a problem-solver, but the reason I am here is to try and grow the business. It is not the traditional, purely legal role. For the last eight years I’ve been running law firms, businesses, and [been] involved in transformation and in the people side of recruitment, retention and reward strategies. He chose me because I am a lawyer second but commercial person first.”

The challenge for all the major banks when they reveal their past misconduct will be to strike a balance between ensuring that aggrieved customers get a fair hearing without exposing themselves to legal liabilities or prompting a regulatory or political backlash. It explains why all four banks have “lawyered-up” so heavily in preparation. No one wants to open a new can of worms.

Critics warn the $75 million royal commission, armed with coercive powers to gather evidence including compelling witnesses to give testimony, seize documents and records, waive legal privilege and hold private hearings with whistleblowers, is already shaping up as a “lawyers’ picnic”. Those with experience of royal commissions say many onlookers will be surprised at the court-room-like manner in which proceedings will be run, especially by a black-letter former High Court judge like Hayne.

‘The right people, the right skills’

Sue Kench (right) and Sharon Cook. Cook has had a baptism of fire since joining NAB last April. Ryan Stuart

Many of the law firms and Melbourne-based QCs enlisted in ASIC’s epic battle with the banks over the BBSW are being recalled, with Hayne using the Australian Government Solicitor and naming ASIC’s counsel in the BBSW case Michael Borsky, along with silk Rowena Orr and Mark Costello and Eloise Dias as his counsel assisting.

Westpac’s head of compliance and legal, Rebecca Lim, has engaged its BBSW lawyer Richard Harris, who has moved to law firm Gilbert + Tobin, with Matthew Darke, SC and Steven Finch, SC to play lead roles and KPMG to provide strategic advice.

ANZ’s BBSW team, group general counsel Bob Santamaria and Alan Archibald, QC, who acted in the BBSW case, will also team up again with ANZ’s newly appointed general manager of communications and public affairs, Tony Warren, another key player.

CBA’s group general counsel and group executive, group corporate affairs, Anna Lenahan, will oversee its response unit with CBA, which is now also facing allegations of manipulating the BBSW after ASIC launched proceedings this month, have engaged Clayton Utz, with panel law firm Freehills, accounting firm PwC and PR firm Newgate Communications giving advice.

The banks emphasise that communications professionals will also play a lead role, and are acutely aware of the potential for lawyers to mishandle a crisis.

Experts point to the board of Dreamworld’s owner Ardent Leisure, where insiders claim the board, fearing legal liability, took an overly legalistic approach and rejected crisis specialists Newgate Communications’ advice, which led to key mistakes in the first 48 hours after 2016’s tragic accident and public relations disaster.

In contrast, BHP Billiton chief executive Andrew Mackenzie was commended after 2015’s Samarco disaster for immediately fronting the media, apologising to the families affected, and flying straight to the scene of the disaster in Brazil. He later gave up his $US4 million bonus over the incident.

“Lawyers typically play a key role, but you have to make sure you have the right people with the right skills and capabilities to get you through,” PwC’s global crisis centre lead Rick Crethar says. “You need others in there as well with subject matter expertise, to help you work through the situation or crisis; it is multidisciplined and multifaceted and no two crises are the same.”

Banks ‘walk the line’

Cook rejects the charge the commission could be overly legalistic. The banks understand they will be treading a fine line. If their lawyers appear to be clobbering aggrieved customers too badly at the commission hearings, it will result in more bad press. But the banks must ensure that customers are given a say without getting themselves into too much legal, regulatory or political trouble.

“You need to have a process and structure and rules of evidence, so there is a framework that is legal. But most of the people who will appear will be from the business to talk about what they have and haven’t done about customers,” Cook says.

“You need to have the framework and the sort of forensic thinking that someone like Ken Hayne and the barristers have, and in that regard I think it will be more effective than House of Representatives appearances, where politicians probably aren’t all that good at asking the hard questions. I think it provides an intellectual rigour by having Ken Hayne and four counsel assisting asking the questions and trying to get to the bottom of the issues.”

Cook says her own transformation from conventional lawyer to commercial manager came from running HDY at a time when every business was claiming to be customer-centric, but few were.

“Everyone says they are customer-centric but it’s really hard for lawyers and some of them are just not very good at it, because they think that they know everything and they just want to tell rather than listen,” she says. “I had a revelation that the way to make that firm successful was to become much more customer-centric than our competitors. I did the leading professional services course at Harvard and learnt some of the techniques from around the world, and in particular a case study of law firm Adelshaw Goddard, who made that firm much more customer-centric to huge success.

“I used the same experts called Ohten Group and brought them to Australia. That involved totally shifting the way you think about your relationship with your client and selling your wares. Rather than going in and saying, ‘I am Sharon Cook, an expert in directors’ insurance liability,’ you say, ‘Tell me about your business’ and you deeply understand it, you do Porter’s five forces and use a range of business tools, and after many months of learning, without asking for work, you develop a deep relationship which naturally results in a fruitful partnership.”

Cook believes the major challenge for Hayne will be to ensure that victims and customers are given a voice and have their moment to avoid further political or public backlash.

“He [Hayne] is going to have to work out the hot issues for consumers and what issues haven’t been investigated, because there have already been 51 investigations since the GFC. The big challenge will be how to get the customer voice into the royal commission.

"How those aggrieved customers are going to get their moment in the royal commission is something that I expect Ken Hayne is going to spend some time thinking about and as a bank we are keen to have that customer voice coming to the royal commission because that is why we are having the royal commission to respond to customer complaints. So how it is that they are going to get that flavour in the royal commission is going to be interesting especially as in a royal commission there is no entitlement to compensation for aggrieved customers".

This article was first published by
Author: by Patrick Durkin
Last modified onMonday, 19 March 2018 22:31

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