“What’s this about a royal commission or there’s a huge problem in banks? There’s no culture problem in banks”
– Lindsay Maxsted, Westpac Chairman, Boss Magazine May 2016
I hate to tell you this Lindsay but there is. It’s deep, it’s pervasive and if you don’t do something about it, the government should.
Last week’s Boss Magazine, a monthly liftout from the AFR, made for depressing reading. The Chairmen of all four big banks were interviewed about their organisations and their efforts to manage conflicts of interest. Some of the comments are extraordinary.
Maxsted is quoted saying: “We are all disappointed that people look at the sector the way they do”. He doesn’t seem the slightest bit disappointed about the way the sector has behaved, only the way it is perceived.
The sector’s response to the Labor Party’s call for a royal commission is to get their own association, the Australian Bankers’ Association (ABA) to do its own review. The purpose will be to find out whether “commissions and incentives paid to brokers and others are in the best interests of customers”. Really? Is that the starting point? I thought that question had been answered when Fred Schwed wrote Where are the Customers’ Yachts in 1940.
These people are either wilfully ignorant or genuinely don’t know how much animosity exists towards their organisations. And it’s not just from the general public. It is from their own staff more than anyone.
How do you think it feels to be an employee at Westpac reading that your chairman says all staff should be putting the client first, when your whole remuneration set-up is completely at odds with this objective? Telling someone that they need to put the client first, but that they won’t be getting a bonus when they do so, is placing them in an impossibly conflicted situation. Imagine being a Commonwealth Bank employee and reading that the company is going to put 40,000 staff though “ethics training”? Thank you, CBA, but it’s not me who needs to learn what ethics are.
The problem is not a few rotten apples, but a lot of good apples trying to survive in a rotten barrel.
I’m not one for government intervention but, judging by this interview, it is nigh on impossible to see the banks fixing the conflicts themselves. Defending Westpac’s vertically integrated model, Maxsted laughably says customers “get far better outcomes” from Westpac’s own products that those sold “off the shelf elsewhere”.
If that is really his genuine view of the world, his board will only have themselves to blame when a government forces change upon them. Surely that is only a few more crises away.
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