Ross Greenwood speaks to NAB CEO Andrew Thorburn after after he was singled out in the final report handed down by Commissioner Kenneth Hayne.
Ross Greenwood: As I indicated to you, I spoke a little earlier in the day to Andrew Thorburn, the Chief Executive of the National Australia Bank and who personally has come in for heavy criticism from the Royal Commission in its final report. Here’s that conversation.
Andrew Thorburn, many thanks to your time. First up, do you feel any pressure to resign from the National Australia Bank after these recommendations came down from the Hayne Royal Commission?
Interview with: Andrew Thorburn, CEO, NAB
Andrew Thorburn: The recommendations I think, overall, were very comprehensive, Ross, at 76 recommendations across the board. I think they’re sound and they’ll be good for our profession. I feel more determined than ever to keep leading the change that I’ve been leading in the bank. We’ve got a lot more to do and are more committed, more determined than ever to be the leader that takes that forward.
Ross Greenwood: You’re committed, determined, did you offer your resignation to the board this morning?
Andrew Thorburn: No, I did not.
Ross Greenwood: Did the board at least talk about your future at the bank?
Andrew Thorburn: No, they did not.
Ross Greenwood: In that regard, it’s business as usual for the National Australia Bank and yet, the Hayne Royal Commission indicates that it believes the National Australia Bank showed, in particular, when it came to fees for no service, a disregard of the law. Would you agree with that assessment?
Andrew Thorburn: There was a view expressed by the Commissioner that the gap between the culture that we say is important to us and we want and the culture we have, there is a gap. I actually agree with that statement, Ross. I can see everyday that we’re not living up to the standard we want. I think we’re getting better. We’re closing that gap, but we’re not there yet.
Where I do have some disagreement with the Commissioner, he says that we are not learning the lessons from the past and we don’t know what the right thing to do is. I don’t agree with that. I don’t feel that’s true. I feel that’s a bit harsh, but I do agree with his basic conclusion and that is that we need to close the gap between the culture we have and the culture we want.
Ross Greenwood: When we go back to, say for example, some of those issues that I’ve just spoke about, the fees for no service, I just want to go to one point here and this is in regards to breach reporting. Failing to comply with the statutory breach reporting requirement showed NAB to be unwilling in that respect, at least, to obey the law. That’s a little bit more than saying that the culture had a bi of a gap in it. That was actually saying that you basically were unwilling to obey the law.
Andrew Thorburn: Yes, I think that breach reporting is a particular example, Ross, you’re right. That was not good conduct on their part, bu behind the scenes, we had a very complex system. We did not raise issues fast enough, we did not report them. A lot of them came out in 2014 where we did a look back and we brought a lot out and they came out in a particular clump and then we got progressively better. Over the last year, we have been very good, but when you look back at historical evidence, we haven’t been good enough on that and that’s something that we need to be accountable for and we have acknowledged that that was not good enough.
Ross Greenwood: The question there is whether that is systemic or whether that is something that is an accident, a slip of systems or whatever it might. The allegation, at least it seems, from Kenneth Hayne QC is that this more systemic, more planned as distinct from something that was a slip of the systems.
Andrew Thorburn: I don’t think we looked the other way or didn’t want to report things. I think we had unclear accountabilities. We didn’t have enough urgency, we took too long to determine whether we had a breach or less just not good enough. That’s the point I make, but I don’t think we deliberately withheld reporting.
Second point was, the facts are that over the last couple of years, we’ve got a lot better in terms of reporting on time, like not having a breach of the time we had to report them. I think we got a lot better. We had a big issue in ’14 and ’15, so that go back to some years for us. The ’14 months come as a result of us doing a look back over some years, finding that we hadn’t reported ones we should have and then reporting them all at once. I think out record in the last couple of years is dramatically better than what it was a few years ago.
Ross Greenwood: You went back to this point earlier on about the findings and it almost seems as though Kenneth Hayne QC is suggesting that there’s an error of arrogance in regards to some of the findings of the Royal Commission or indeed the proceedings of the Royal Commission. Do you believe that there’s an arrogance inside your bank?
Andrew Thorburn: No. What I have seen and, Ken Henry, our chairman, is that we have absolute respect for the process the commission as followed, the importance of that work, the contribution that we’ve made to that and there are witnesses appearing and now the recommendations have landed. I think it’s a very sound, very comprehensive report. I actually think it’s really going to help the industry and profession get better.
No, we welcomed it and we look forward to those recommendations being implemented. I just want to be clear, Ross, that we have made mistakes. That’s the other thing that I have seen. I think we are progressively improving and we are making a lot more focused decisions, backing customers favors now than what we were in the past, so that’s a good thing.
Ross Greenwood: Because it is important that you are accountable as the Chief Executive because of course you’ve got thousands of employees’ eyes on you setting standards, making certain that you ultimately uphold those standards because they are the benchmark by which everybody else in your organization sit.
Andrew Thorburn: Yes, you’re actually right. The CEO is the ultimate leader. I take that very seriously. This is a real challenge for me and for us, Ross, to do more, to do better, to bring about even more rapid cultural change so that these issues are not the issues that confront us in the future like confront us in the past. Also, Ross, we’ve got 33,000 people. So many of our people are doing the right thing, I love working with them, they want to serve their clients. There are so many good stories.
The things we’ve done wrong should no be ignored, but they should no be overwhelming, but we’re going to be accountable for mistakes we’ve made. I agree with your point and I want to be the leader that addresses these, not just acknowledges them.
Ross Greenwood: Given the fact there’s already a first strike against the remuneration report by shareholders at last years annual meeting, is it also a job that the company’s got to do to convince the shareholders that you’ve got the right team in place and the right strategies in place?
Andrew Thorburn: Let’s unpack those. The first thing on the strategy, we have set out a very transformative, bold, clear plan focused on our business bank, focused on becoming simpler and faster, focused on growth opportunities. I think that’s going to make us a more efficient, client-focused and growing bank in the future and we’re facing in some very big challenges, so that’s the strategy. I think we’ve go the right team. The quality of that leadership group, Ross, I think it’s never been higher. We’ve got some really excellent leaders of their businesses.
Now the remuneration, you’re absolutely right. We made some proposed changes and the shareholders comprehensively rejected them. They said it’s not the right structure, it’s not the right scheme and our Chairman at the IVM said, “We got it wrong. We need to go back and look at it again.” I think the intention was right, but clearly, we failed and we’ve got to go back and look at that again now.
Ross Greenwood: Can you explain to me why would they, after such comprehensive criticism inside the Hayne Royal Commission final report yesterday, the bank shares including National Australia Bank shares sold on the stock market today?
Andrew Thorburn: The market as you know, Ross, goes up and down and bank shareholders are not as good a position today in terms of the value as they were two three years ago.
Ross Greenwood: You know today this was something different and this was a reaction to the report?
Andrew Thorburn: What I would point to is that what markets like is clarity, some certainty and some conclusion. When you go through the 76 recommendations, I think people say, “Look, those make sense. They’re being supported by government, broadly by the opposition, by consumer groups, by banks, by the IBA. Broadly, you can see this being implemented and some of the dramatic changes that may have occurred haven’t occurred, but I think they’re very sensible and they can be implemented. I think that’s maybe why the markets are positive today.
Ross Greenwood: Andrew Thorburn, as always, I appreciate your time.
Andrew Thorburn: Thank you, Ross.
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