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Sorry won’t cut it when banks don’t recognise the problem

Westpac chief executive Brian Hartzer speaks during the bank’s AGM in Perth on Wednesday.Picture: AAP Westpac chief executive Brian Hartzer speaks during the bank’s AGM in Perth on Wednesday.Picture: AAP

Behind the public mea culpas, it’s clear that plenty of very smart but disconnected people just don’t get it. There was nothing Ken Henry about Westpac chairman Lindsay Maxsted when he fronted this week’s annual meeting of the bank in Perth.

Henry, the National Australia Bank chairman, has been heavily criticised for his at times combative and seemingly disdainful appearance in front of the banking royal commission last month.

Maxsted was measured and restrained but a touch condescending as he mounted a jarring defence of Westpac and the banking sector at the AGM, which began with him putting the royal commission “into context”.

The defence went along the lines of: given the inquiry is focused on misconduct, it only captures a fraction of the activities within banks. So, let’s be careful about generalising the issues identified at certain institutions because it is not reflective of the culture of the banking sector.

It’s a flawed argument that fails to recognise the extent of the misconduct and corporate governance shortcomings exposed by the inquiry.

At the moment, if the big banks are not being defined by the dodgy behaviour exposed by the commission, they’re certainly being judged on the failure of management and directors to promptly rein in the misconduct.

Customers, not banks, chief executives or directors, are the victims here.

Ironically, Maxsted commented that shareholders “may feel a disconnect between the vision and values of Westpac and the actual or alleged misconduct highlighted by the royal commission”.

A “disconnect” was certainly on display later in the meeting as he attempted to explain the rationale for this year’s executive bonuses in the face of what was a near-record 64 per cent “first strike” against Westpac’s remuneration report.

Staggeringly, the banks have yet to truly grasp the extent of the customer and shareholder anger over their conduct.

Other prominent business voices continue to suggest that the public scrutiny and criticism of the leadership and board failures will deter experienced candidates from taking up directorships.

It’s a flawed argument that fails to recognise the extent of the misconduct and corporate governance shortcomings exposed by the inquiry.

But there has never been more people interested in directorships. Many may not yet be ready for major for-profit companies, but the pool of experienced directors is growing and it is more diverse than it has ever been.

They just need to be given a chance.

Most serious observers recognise the importance of the big banks to Australia’s economic wellbeing, but a failure of regulation has given them too much rein. And let’s not forget, they have had it good in Australia for a long time.

The staff are not to blame. This was a failure of management and directors, and there should be consequences.

No, directors are not expected to be across everything in their company, but the minimum expectation is that they ask questions.

The royal commission has been a wake-up call for the banking sector. But to fix culture, you have to start from a position of recognising that there really is a problem.

This article was first published by https://thewest.com.au/
Author: Sean Smith
Last modified onSunday, 16 December 2018 00:23

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