The story of the resignation from NAB of its chief executive Andrew Thorburn and its chairman Ken Henry after the Hayne royal commission is instructive.
It reveals just how hopeless the boards of directors are of most big businesses in Australia. What happened at NAB demonstrates that, these days, directors are more likely to make the easy and supposedly popular decision rather than the right decision.
NAB got it the wrong way around. Thorburn and Henry should have stayed and it should have been the board that quit.
The board of NAB caved into pressure from two sources – politicians wanting a scalp from the royal commission and the media lynch mob.
This is exactly the sort of pressure that shareholders pay company directors to resist. In the long run, appeasement never works. The NAB board should have refused to accept the resignations of Thorburn and Henry and given them their full and public support – any director who felt unable to do so should have stepped down.
There may be reasons for their resignations not yet publicly disclosed, but for all intents and purposes it looks like the NAB board felt it had to accept the resignations because Thorburn and Henry were singled out in a few sentences in the final report of the royal commission.
According to Commissioner Kenneth Hayne: “Having heard from both the CEO, Mr Thorburn, and the chair, Dr Henry, I am not as confident as I would wish to be that the lessons of the past have been learnt. More particularly, I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly.”
The commissioner is entitled to his opinion – and Thorburn and Henry are entitled to challenge that opinion. Whether the commissioner was going beyond his terms of reference in stating his feelings as to whether NAB executives had demonstrated sufficient guilt and remorse for their own and their predecessors’ misdeeds is another question.
Thorburn and Henry did absolutely nothing wrong when they gave their evidence to the royal commission. In this country (at least for the time being), you’re allowed to defend yourself when you’re in the witness box, whether at a royal commission or in a court of law. Likewise, witnesses are under no obligation to accept the assumptions of the questions from the lawyers interrogating them.
In his evidence, Henry acknowledged his own and the bank’s failings – but at the same time he made it clear he wasn’t willing to endorse the imputation that the bank as an entire organisation and the bank’s staff as a whole were to blame for the mistakes of a few. He was widely criticised for the manner and tone in which he defended the bank and its staff. While Henry’s supposed ‘arrogance’ was minutely dissected in the media, the substance of what he said, namely that the overwhelming majority of the bank’s employees were good people trying to do the right thing, was almost entirely ignored.
The NAB board has set a dangerous precedent for every other bank – and indeed for every other big business in Australia. What the NAB board has effectively said is if you’re an executive and you upset the government and its regulators by having the courage to defend yourself and your staff against them, then your job is at risk.
The fight between big business and government is only just beginning. New legislation imposes jail of up to 15 years for individuals guilty of corporate crimes, and penalties of up to $525 million for companies guilty of civil offences.
The Coalition has spent the past few years bashing big business, and if Bill Shorten wins the federal election big business will be bashed even harder. What could happen under a Labor government will be bad for Australia, but if company boards follow the precedent set by NAB, those boards will only have themselves to blame for what happens to their businesses.