The rest of the nation’s bank chairmen and executives would have counted themselves lucky last night after they learned that National Australia Bank’s Ken Henry and Andrew Thorburn had been punted from two of the plushest gigs in corporate Australia.
Indeed, they should be thankful that they still have their jobs, because if Thorburn and Henry had to go, then they all should have gone.
A clean-out of the top echelons of the biggest banks was what the public deserved after the consistent poor behaviour unearthed by the royal commission.
If the resignations of these two men, and a few other previously unknown executives last year, is the pointy end of the royal commission, then the latter has been an abject failure. Where is the structural reform?
Thorburn earned $10.9 million in pay and bonuses over the past two years, or $105,000 a week. What is the point of such pay if not to take responsibility in the event of the type of corporate behaviour that triggered this royal commission.
The same logic applies to executives at the other three banks.
For this reason, royal commissioner Kenneth Hayne was wrong to single out Henry aggressively in his report.
If Henry’s performance in the chair at the royal commission was didactic or “arrogant”, so what? That’s not relevant to his ability as chairman. Henry, a distinguished economist and former head of Treasury, had moved to realign pay with customer outcomes, and slashed the number of bonus pools to one.
He knew the level of pay in banking arose from an array of government subsidies, licences and the information gulf between customers and bankers.
His background probably made him better placed to change NAB than any other chairman.
The big four banks are massive, unwieldy, quasi-government departments, with little freedom of action and tens of thousands of employees each.
They have veered into what economists call “diseconomies of scale”, where bloat undermines senior managers’ ability to know what’s going on.
The commission has highlighted how the big four are as too big to manage as they are too big to fail.
Arbitrarily requiring some executives to quit does nothing to change the system; if anything, it will lead to even higher pay for the rest.
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