Lindsay Maxsted, a hero to remember before Westpac saga

Westpac chairman Lindsay Maxsted at his office in Melbourne. Picture: David Geraghty

Most of the Westpac attention has been on its chief executive, Brian Hartzer, but the fact that next year Lindsay Maxsted will step down as Westpac chairman is a major milestone in the banking industry.

In most areas of Australia’s large corporate community, Maxsted is a hero, because until the latest Westpac saga, he rarely put a foot wrong.

But for old timers in the property development industry, the name Maxsted still creates memories of horror and fear.

At the end of the 1980s and the beginning of 1990s, banks decided to sell the property of overextended developers on a massive basis.

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With few buyers around, prices were decimated, leading to enormous bank losses particularly at Westpac, ANZ and the State Bank of Victoria, which later merged with Commonwealth Bank.

A name to remember

Maxsted, at the time at KPMG, was one of the executioners via the firm’s liquidation business. Most of those developers learned from the tough times and went on and made fortunes. But they never forgot the name of Lindsay Philip Maxsted. Indeed on Tuesday, a small commemoration took place in Melbourne after the Westpac news.

But Maxsted and the banks have also learned from that experience, and in more recent crisis times the banks have been much more restrained. While there have been some very bad actions in rural property and in WA, overall they have not again engaged in mass sell downs.

I suspect Maxsted, as a director and later chairman of Westpac, played an important role in that transformation.

Maxsted was born and educated in Geelong and joined KPMG as a junior. He was later sent to Birmingham where, at the time, there were extensive corporate financial problems given the decline in the local car industry.

He was soon into liquidations and receiverships. When he returned to Australia, he was thrust into the brutality of what was probably our most severe recession in the second half of the 20th century.

CEO of Westpac, Brian Hartzer (left), and chairman of Westpac, Lindsay Maxsted. Picture: AAP

When outgoing Westpac CEO Brian Hartzer addressed his executives on Monday, claiming the whole Westpac saga was a “storm in a teacup” and that Westpac was “no Enron”, he was unlikely to have recognised the historic significance of that remark.

Enron, of course, was Houston-based, but it had activities in Australia and its demise affected its auditor Arthur Andersen, which in turn hit hard Andersen partners in Australia. Maxsted was thrust into sorting out that mess.

In the aftermath of the collapses, Maxsted went on to be CEO of KPMG for seven years and became a strong believer in corporate recoveries as opposed to liquidations.

When he retired from KPMG, he took up two board posts: Westpac and Transurban. Three years later, he joined the board of BHP. At BHP and all his boards, his colleagues never ceased to be amazed at his grasp of the detail presented at board meetings. Of course it is that sort of detailed analysis that top accountants learn to undertake.

In his liquidation days, Maxsted had done considerable work for Westpac and watched the bank go perilously close to financial collapse.

At the time, Westpac had a finance offshoot called Australian Guarantee and both Westpac and Australian Guarantee separately loaned large sums to either the same companies or companies with very similar risk.

It was not until the market turned sour that Westpac realised its exposure. Kerry Packer and his henchman, Al “Chainsaw” Dunlap, almost took control of the struggling bank.

But the chairman of Westpac at the time, John Uhrig, stood up to Packer and he failed.

Fascinatingly, a key reason why Westpac hit troubles was that there was not enough communication between its various arms and in the case of the dispute with Austrac, the problems that were being encountered in the foreign exchange transaction area did not get to the CEO and certainly did not get to the board.

So it is perhaps ironic that the same basic mistake took place some three decades earlier.

But as I pointed out yesterday all chief executives and chairmen need to look closely at the Westpac situation.

Banks and other organisations are going to be more and more computer driven enterprises and chief executives and boards will need to enmesh themselves in a lot of the detail because, unless they do, they will not understand the implications of many of the decisions they are going to make.

Just as the Maxsted role in the liquidation of property helped change the face of banking, so this Westpac saga will hopefully be a wake-up call for Australian companies both big and small.

Some years ago, Maxsted was quoted in a magazine article about what he was passionate about. His answer was doing things well, getting it right first time and learning. The Westpac saga was about learning.