Catherine Livingstone has unleashed disruptive forces at CBA

CBA will need to find a new chief as soon as it can because nothing erodes the authority of an incumbent like a use-by date.

Commonwealth Bank chair Catherine Livingstone. Picture: Renee Nowytarger

Commonwealth Bank chair Catherine Livingstone will be hoping to locate a new chief executive sooner rather than later, because nothing erodes the authority of an incumbent CEO more effectively than a use-by date.

Massive bureaucracies like CBA operate under a command and control structure, and for good reason — anything else would institutionalise chaos.

But when the structure starts to break down, as with Livingstone’s announcement that Narev will retire by the end of the 2018 financial year, disruptive forces take hold.

It happened at ANZ Bank in October 2015 when the board announced that Shayne Elliott would succeed Mike Smith in January the following year.

For three months there was a leadership hiatus. While Smith retained the title of CEO, the institution began to swing behind Elliott pending his inauguration.

The same will happen at CBA, and it will be compounded by even greater uncertainty.

At least with ANZ there was an internal focal point for a realignment of loyalties.

At CBA, the succession plan has been activated but there’s no clarity about the position of internal candidates, particularly retail banking boss Matt Comyn who had executive responsibility for the rollout of the intelligent deposit machines at the heart of Austrac’s money laundering allegations.

Until two weeks ago, Comyn was the bolter in any internal succession race.

It seemed only a matter of time before his confirmation as CEO-in-waiting, but Austrac’s intervention has changed everything.

If Narev had remained as CEO for two years, new chief financial officer Rob Jesudason would have come into the picture.

As the Hong Kong-based head of CBA’s international financial services division, Jesudason, more so than most of Narev’s executive team, could have escaped the Austrac fallout.

However, the transition to a new CEO by the end of June next year is too soon for Jesudason to establish his credentials.

That’s why CBA has little choice but to go external, with the inevitable uncertainty that such a move entails.

As you’d expect, Livingstone promised yesterday a thorough search process, including internal and external candidates.

She said last week’s $9.9 billion annual cash profit had confirmed that the bank’s management bench was strong and experienced.

Further, there was no connection between the board’s clarification of the CEO succession plan and the Austrac matter — the announcement was only made because of continuing speculation about Narev’s future

Nothing had changed over the weekend, according to Livingstone, and the board continued to have full confidence in the CEO.

Narev would continue to be held to account for his performance, and would remain answerable to the four-person board subcommittee appointed to oversee the Austrac matter, of which Livingstone is a member.

The truth is that putting a timeline on Narev’s departure is the last thing the board would have wanted to do, but its hand was forced.

The extensive rap sheet of conduct issues for CBA dating back to the financial crisis, together with an ever-tightening regulatory environment and Canberra’s strident calls for accountability, meant that the board had no margin for error on disclosure.

The fact that there’s a zero tolerance regime in place for the banks was amply demonstrated by ASIC chair Greg Medcraft on Friday, when he excoriated the CBA board for its silence about the Austrac matter during a routine discussion only days before the statement of claim was lodged on August 3.

Livingstone has repeatedly said that the board only became aware of Austrac’s intention to take Federal Court action when it was served with the legal documents.

The other major banks have often complained privately that CBA’s repeated run-ins with regulators, and the way they have been handled by the bank, have done more than anything to tarnish the industry’s name.

None of them, however, will welcome the hostile environment they now face.