Terry McCrann: Costello right that Henry can’t have a say in new NAB chief

Outgoing chairman Ken Henry has no place in choosing the next chief executive of National Australia Bank, writes Terry McCrann.

Peter Costello is exactly right — current National Australia Bank chairman Ken Henry cannot pick the next CEO to replace the departing Andrew Thorburn.

At the same time, they both cannot just “leave the building” by the same elevator; it’s bad enough they have announced their departures at the same time.

NAB CHIEF ANDREW THORBURN, CHAIR KEN HENRY OUSTED

NAB BOSS KEN HENRY TELLS 7.30: ‘I DID NOT PERFORM WELL’

Either way it’s an exercise of at least inept if not outright bad governance — supposedly, LOL, to achieve good governance. At a minimum it raises fundamental questions over Henry’s leadership capabilities.

Indeed, after the cringingly embarrassing entirety of last week, culminating in what was to me a cringingly awful appearance on the ABC’s 7.30, the sooner Henry is now gone (and indeed, specifically “sooner” than Thorburn) the better for everyone.

Once again I am in disagreement with the media mob — of sheep.

Future Fund chairman and former federal treasurer Peter Costello. Picture: Aaron Francis

They all praised his “humbling” performance on the ABC. I thought it was pathetic.

Almost to a woman and man, the media mob had previously castigated his idiosyncratic “day in court”.

The media was as outraged as Commissioner Kenneth Hayne that Henry had dared to speak openly and honestly; that he hadn’t prostrated himself at least figuratively if not indeed preferably literally as well.

That he hadn’t — quite literally — told Commissioner Hayne what he wanted to hear: indeed, that was the precise condemnation of Henry (and Thorburn) from Hayne.

So Henry has to go before a new CEO is selected; as I argued last week there is an easy, seamless and indeed first best alternative.

TERRY MCCRANN: KEN HAD TO GO AND PHIL HAD TO STEP UP

This is to persuade the proposed temporary-CEO-in-waiting, NAB board member Phil Chronican, to stay as the “permanent” if interim, CEO.

I would prefer he stayed for two years. That would best “calm the ship” — both to achieve the best possible post-Hayne transition, but also to best implement the massive and really fundamental Thorburn restructuring program, signed off indeed by Chronican as a non-executive director, along with the rest of the board.

I could understand if he would only want to stay for one year and it could be made to work in that sort of time frame.

This would enable NAB to first get the chairman right and then get the right long-term CEO. Of course, hopefully.

Departing NAB chairman Ken Henry appearing on the ABC’s 7.30.

There is a rather basic problem with the CEO-first, chairman-second model pushed by Henry, which has gone totally unremarked.

If someone is prepared to become CEO of NAB without knowing who will be the chairman he or she will work with and under — and even more critically, had the chance to engage in some seriously deep pre-appointment interfacing — they disqualify themselves upfront from being CEO.

It is critically important that NAB first gets the chairman “right” — and then that chairman, arguably with a very different board, then gets the long-term CEO.

This is an absolutely seminal pivot point for NAB — which makes it very, very different from the circumstances of 2004 when it also lost both a CEO and a chairman in rapid succession (and then the new chairman not long after that!).

The fact that the rest of the board doesn’t understand this rather vividly demonstrates that it is just as much in need of fundamental overhaul as the two job jobs.

In fact, in a very basic sense the board as a collective was even worse than Henry and Thorburn last week.

Yes, Henry and Thorburn issued their most unfortunate and even more unwise rushed joint response last Tuesday to the Hayne report criticisms — a combination of “we rebut it” and “we ain’t going anywhere”.

But it was the board which self-evidently approved it.

Andrew Thorburn has resigned as chief of the National Australia Bank. Picture: AAP

There was not one dissenting voice.

Then two days later, while yes, it was a joint chair-CEO exercise in bad-to-worse governance to both go, but Henry just not yet — all very Augustinian: God make me pure, but just not yet.

But again, it was the board which self-evidently approved it.

What appropriate person would become CEO without knowing who the chairman was going to be?

Exactly the same goes for future board members — which, to repeat, have to be found almost as quickly as a new chairman.

Apart from anything else, at least one of David Armstrong and Anne Loveridge has to go.

Indeed one of them should never have been appointed.

I am not making any judgment on either of their capabilities to be a board member, far less their performance as board members, simply the choice — and acceptance — was inappropriate and in my view unacceptable.

Why? Because they both came from 30 years at the same accounting firm, PwC. In my view that is just not on.

YES TO FUTURE FUND FOR ALL

The issue of opening Costello’s Future Fund to retail superannuation investors is far more nuanced.

He is absolutely right that it should not — it must not — become some sort of “government super fund”.

The only thing worse would be if it became the default, or even one of the default funds (that the Productivity Commission wants).

As Costello said, it doesn’t have the functionality; while making it the/a default fund would create expectations of a government guarantee of performance.

Enabling retail savers to access its investment skills, its investment access, and — the bottom line — its superb (importantly) risk-weighted returns, is a very, very different matter.

You don’t need to turn it into a super fund; simply allow it (or a wholesaler) to issue one or more ETFs, so a saver could invest $10,000, $100,000 — maybe, a maximum of $1 million — into it.