CBA rot set in under David Turner’s watch

Former CBA chairman David Turner was a key man when CBA slid into the mire being exposed at the royal commission.

History is not going to be kind to former Commonwealth Bank chairman David Turner — and rightly so.

The British-born former head of industrial services group Brambles, who became a director of CBA in 2006 and served as chairman for seven years, is one of many witnesses to escape scrutiny in the financial services royal commission who should have been caught in its net.

Culture is created at the top, and there was no higher officer than Turner in the critical period from 2010 until late 2016 when CBA became trapped in a recurring governance nightmare.

As the issues piled up, any examination of underlying causes was abandoned amid extreme pressure for quick fixes.

This column identified Turner’s tin ear and remoteness from the business as a big problem in 2015, when he told shareholders he envisioned CBA as a leader in trust and ethics. The lack of awareness was astonishing and it didn’t augur well for the high level of risk discipline required at a large, complex institution.

CBA chair Catherine Livingstone yesterday told the royal commission her predecessor was asked to return 40 per cent of the fees he’d earned in his final year at the bank. Turner was paid $427,289 for six months work in the 2017 financial year, and $874,195 for the full year in 2016.

It would have been the honourable thing to do, given the wreckage that the new board is now cleaning up, but Turner refused.

Not only that, the former chairman said he didn’t recognise the CBA described last May in the damning culture and governance report penned by an independent, APRA-appointed panel.

The culture set by Turner valued loyalty above most other things, with the APRA report finding the board had implicit trust in management. Management returned the compliment.

When this column took the chairman to task for setting CBA up as a future industry leader in ethical behaviour and trust, arguing it was a claim only his successor could make if everything went right, the empire hit back.

A senior executive objected in an email to the criticism, pointing to the bank’s leading levels of customer satisfaction, industry-leading investor returns and a rating as Australia’s second most admired company in the Hay Group survey, which focused on culture.

It was a fairly mild rebuke, but it spoke volumes about the group’s culture.

Word on the street

Ian Narev’s instruction to Matt Comyn in May 2015 that he should temper his sense of justice over Commonwealth Bank’s sale of junk consumer insurance products has gone viral, offering a rare insight into the toxic, profit-driven culture of a large institution.

The word on the street is it also highlights the former CBA chief executive’s aversion to conflict when resolving the inevitable disputes between his direct reports.

“Ian was always reluctant to intervene in any argument between executives,” a bank insider says.

Granted, we only have Comyn’s sworn account of his repeated efforts to warn Narev about the likely regulatory backlash from selling worthless insurance to unsuspecting customers.

Narev has said it would be improper to comment during the royal commission.

Annabel Spring, whose wealth division manufactured the insurance products sold through Comyn’s retail bank, has also been tight-lipped, despite Comyn speculating she was opposed to losing a valuable profit stream.

Comyn’s account, however, is compelling.

He took the issue up with Narev on a number of occasions, and was effectively told to pull his head in.

In 2016, before Narev was due to discuss the issue with ASIC, Comyn said he and his boss agreed that the bank’s chief legal counsel, David Cohen, would conduct an independent review of the products in question.

Narev also agreed to meet with Comyn and Spring.

Cohen, though, never did the review, possibly because he was covering for the chief risk officer at the time and doing two jobs.

Comyn then offered to send Narev a list of questions on the issue, which Comyn and Spring would then answer.

That never happened either, with Narev failing to respond to Comyn’s email.

“Why?” Comyn was asked in the royal commission.

“I don’t know,” he replied, later adding that he was never involved in any interactions between Narev and Spring.

The fact is that no one relishes confrontation.

A big part of CBA’s problem was that its then-chairman David Turner was also averse to adult conversations, as former BHP Billiton chairman Don Argus describes them.

The collaboration management model was pushed through all levels of CBA.

Comyn told the royal commission that, if he had outflanked Narev and approached Turner, it was likely the chairman would have relied solely on Narev’s recommendation.

Now, as CBA chief executive himself, he said his obligation would be to bring the two competing views together and “make a clear decision”.

Comyn said he had given an undertaking to current chair Catherine Livingstone during his interview process that the board or the risk committee would hear both sides of important debates, particularly where the issue had a huge reputational impact.

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