Banking royal commission: arrogance sinks fortunes of NAB’s Henry and Thorburn

Arrogance and an unwillingness to take the NAB’s misconduct seriously were fatal flaws for Ken Henry and Andrew Thorburn.

NAB Chairman Ken Henry and CEO Andrew Thorburn chat with shareholders before the AGM at Melbourne Convention Centre last year. Picture: David Geraghty.

Arrogance and an unwillingness to take the bank’s misconduct seriously: these were the fatal flaws that set NAB on a pathway that seems likely to claim the jobs of its chairman, Ken Henry, and chief executive, Andrew Thorburn.

Kenneth Hayne was scathing in his criticism of the bank and its leadership yesterday, drawing on testimony from the pair when they appeared at hearings in November that the financial services royal commissioner found less than convincing.

In a bullying performance, Dr Henry showed his thin skin when asked by counsel assisting Rowena Orr QC if there was a better way to demonstrate the bank wouldn’t put up with customer rip-offs than reducing the bonus pool. “Well, we could have fired everybody, I suppose,” Dr Henry replied.

From there, it only got worse. His evidence expanded to take in snide digs at Ms Orr’s lack of understanding and a meditation on the nature of capitalism — boards should think of “future generations”, he said.

Mr Hayne’s verdict was searing: “I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues,’’ the retired High Court judge said in his report.

“I thought it telling that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies. Overall, my fear — that there may be a wide gap between the public face NAB seeks to show and what it does in practice — remains.”

The commissioner was also unimpressed to read in The Australian that, “in the very week that NAB’s CEO and chair were to give evidence before the commission, one of its staff should be emailing bankers urging them to sell at least five mortgages each before Christmas”.

In the witness box, Mr Thorburn, who is now on extended leave, was reluctant to accept the suggestion from the commission’s other star QC, Michael Hodge, that his staff had behaved in an unethical way.

“I don’t think we were — we were wanting to be unethical, or we were being unethical in our dealings here,” he said, when confronted with the bank’s choice to drag out compensation for customers charged fees for services they never got.

Mr Thorburn was more enthusiastic when explaining the purpose he and Dr Henry had cooked up for the bank, “to back the bold who move Australia forward”. “If you can have a purpose and a vision that really orientate your people from their head and their heart to living the purpose and vision, I think you start to bring the experience into play so that you serve your clients in that way and hopefully you’re an even better bank than others,” he helpfully explained.

The rocky course had been set earlier, in August, when NAB’s Andrew Hagger faced a grilling from Mr Hodge over why the bank didn’t tell Australian Securities and Investments Commission executive Greg Tanzer about the true extent of its fees-for-no-service bill, a week before its results were due to be delivered to the market.

Mr Hagger told the commission he’d “left the door open” for Tanzer to ask for the true bill.

Yesterday, Mr Hayne said this was not “open and transparent”, as Mr Hagger claimed.

“Why not just tell ASIC the truth?” he asked. Why not give the regulator NAB’s internal estimates?

“The answer to all of these questions can only be that NAB wished ASIC’s report to still show the bank’s conduct as ‘middle of the pack’ … lest news of what it had discovered overshadow its CEO’s announcement of full year results,” Mr Hayne said yesterday.

Also copping a hiding from the commissioner was NAB general counsel Sharon Cook. Not only was it troubling that NAB did not grasp that “charging for what you do not do is dishonest”, but that Ms Cook “should be complaining to ASIC, as recently as April 2018, that having to pay back what had been taken was unfair to NAB is, if anything, even more troubling”.

Hayne went out of his way to praise CBA chief executive Matt Comyn and his ANZ counterpart, Shayne Elliott, for coming to grips with the pain ahead of them as they clean up their banks. Even Westpac’s Brian Hartzer got some credit for trying to “reset” the bank’s often combative relationship with ASIC.