Brian Hartzer knew it was over the second he picked up his phone. Yesterday, as CEO of Westpac, Hartzer had called his senior executives into a room for the we-can-survive-this-speech, an attempt to rally the troops after the money laundering scandal of the past few days. The front page of this morning’s Australian newspaper contains the contents of that conversation word-for-word.
With quotes like “It’s not a major issue so we don’t need to over cook this” and “this is not an Enron or Lehman Brothers”, it doesn’t read well. Hartzer’s resignation, announced this morning, was a fait accompli, if it wasn’t already.
Every man for himself
Yet there is something more alarming about this than the contents of Hartzer’s speech. There was someone sitting in that room yesterday, in a time of crisis for the bank, who saw an opportunity to knife his (or her) boss in the back and took it.
Hartzer probably wasn’t surprised. Every man for himself is the culture that thrives at Australia’s domestic banks, and Hartzer probably did his own fair share of knifing to make his way to the top.
No easy fix
This culture is causing a lot of problems. Not just at Westpac. Across the whole Australian banking sector. It is not possible to design systems and processes that detect every piece of misbehaviour in an organisation of tens of thousands of employees. Your only hope is to build an organisation where the employees want the best for the company and its customers.
That’s clearly not what we have in our banks.
I’m not suggesting for a second that this is an easy problem to fix. These are giant institutions, the culture is well entrenched and the senior layers of management are stacked with people who thrived under the current system.
But recognising that there is an entrenched problem is surely the first step. Hartzer clearly had to go. So does Lindsay Maxsted. This is the same chairman who had this to say to the AFR’s Boss Magazine back in 2016:
“What’s this about a royal commission or there’s a huge problem in banks? There’s no culture problem in banks”
After everything that has happened over the past three years, he still doesn’t get it.
Time for some outside thinking
Most importantly, their replacements need to be outsiders. Hoping that someone who has been part of the establishment can fix it is like expecting Lance Armstrong to change the culture of doping in cycling.
Thousands of good people work for Australia’s banks. I know quite a few of them personally. Until they see significant change at the top, though, they will remain sceptical, dispirited and frustrated. And that’s an environment where the scandals will keep on coming.
6 thoughts on “Why Westpac’s next CEO needs to be an outsider”
Spent 15 years at the banks. Culture problems are rife. A lot of messages from senior execs about doing the right thing, then when a commercial decision is to be made, the right thing is done only for shareholders. Don’t get me started on the knifing of each other in the scramble to the top. It was hideous, whole senior leadership teams who hated each other.
Needless to say I’m happily out of there now. If only they didn’t pay so well I’m sure there would be thousands behind me at the exit gates.
on top of much needed cultural change, the industry structure looks challenging to me with 4 major banks plus regionals. Australia is a small/sparse market and in many other sectors can only support two majors plus second tiers (e.g. airlines, groceries, etc). Banking has had a few decades of tailwinds, but now they face ultra low interest rates, household debt hitting limits, technology disruption, woeful reputation and compliance scrutiny. They are shrinking and cutting. Surely at some point there needs to be some merger/consolidation? In this aspect too, outside leadership is more likely to think outside the box.
CEO’s of banks – and other large organizations – are paid almost ‘obscene remunerations’. You would think that as such they would be for ever vigilant that unethical practices are not prevalent in their organizations above everything else. But as the Royal Commission found that they are willing to let all sorts of unethical practices exist as long as they can make money for shareholders – and, of course, themselves. Thankfully, the community is waking up to their behaviour and won’t tolerate it.
This has happen before to Westpac. In the early 1990’s after Westpac made an unprecedented $2 billion loss, Westpac appointed the American Bob Joss as its CEO.
He appointed some new executives and helped turn the bank’s fortune around. So, it is possible to turn the culture around with the right appointments.
The next CEO has to be good at establishing and maintaining relationships.
What our big four banks would give to have CEO’s of the calibre of Nobby Clark.
“Every man for himself is the culture that thrives at Australia’s domestic banks, and Hartzer probably did his own fair share of knifing to make his way to the top.” That says a lot about the criteria to be a CEO in an Australian bank doesn’t it?
Didn’t the CBA Chair say something like this in relation to finding a new (bank) CEO:
“To find an external person globally at that level who has not been involved in some regulatory event is almost impossible… and I don’t mean that as a joke.”