Westpac’s culture gives Canberra a run for the money

It’s time Liberals gave corporate Australia the same treatment they reserve for the trade union movement.

Illustration: Eric Lobbecke

Listening to the words being uttered by outgoing Westpac chairman Lindsay Maxsted at the company’s annual general meeting on Thursday, all you could do was shake your head.

Finally, contrition shone through. How could it not? One of Australia’s largest businesses has been brought to its knees in a shocking scandal involving the facil­itation of child exploitation.

But his speech and board reactions to questions and comments from shareholders once again gave rise to the impression of a group of overpaid, out-of-touch executives and dir­ectors who failed to comprehend just how on the nose they really were.

The chairman has pledged to step down sometime in the first half of next year (my tip is 11.59pm on June 30, to eke out his tenure as long as possible).

He still won’t resign immediately because he wants to “oversee” new board appointments, and presumably new executive appointments too.

That’s just what the bank needs — let those at the top now oversee who takes over next. But the high-end corporate world isn’t a club — don’t ever accuse it of that!

Former Keating government minister turned shareholder activist Chris Schacht summed up the mood in the room at the AGM when, exasperated, he asked: “How the hell did this go on for five years?” The room erupted in applause. The point Westpac senior leaders keep trying to paper over is the reality that risks (at least of a general nature) were reported to the board and to executive meetings years before this scandal broke.

Yet actions in response were thin on the ground.

Because the Austrac investigation is ongoing and the bank, while largely falling on its sword, is contesting some of the claims against it, management has the excuse it needs right now to not answer questions properly.

But Westpac insiders are adamant that the problems with LitePay (alongside other areas of ongoing remediation) were well known. The problem was, and is, a cultural one — and the culture of organisations is set from the top. The bank prioritised short-term profits over adequate checks and bal­ances to ensure long-term safe practices.

Of the big four banks, the information technology settings at Westpac are easily the worst: the oldest, the least updated, the most cumbersome to operate and the most in need of an overhaul.

And the culture of the organisation — as revealed in its own cultural review — was one that discouraged employees from speaking up. Messengers were shot. Managing up was more important than successfully managing one’s team.

Put all of that together and you have inadequate systems, out-of-touch leadership and a culture that works against anyone who delivers home truths that need to be heard. Yet at this point only the chief executive has gone. Yes, Brian Hartzer deserved his punishment. But Westpac, as a nearly $90bn business, needs more than a sacrificial lamb — even when it’s the boss.

Did Hartzer really run Westpac or did Westpac run him? It’s a problem very large businesses often can face. There are so many moving parts it’s hard for leaders to put systems in place that develop proper reporting lines, overcome cultural failures and ensure adequate accountability.

One of the ironies of the decision by the Westpac board and group executives to put profits ahead of everything else is that they didn’t even deliver on that scorecard. This year Westpac’s profits slumped 15 per cent and it cut its dividend for the first time since 2009. Its share price is the worst performing of the big four.

Some of the biggest problems were within the business bank, yet — in one of Hartzer’s last acts before being shown the door — the head of that division, David Lindberg, was promoted to run the consumer bank, which had outperformed the business bank.

Getting back to the Austrac scandal, as the Australian Prudential Regulation Authority looks into possible criminal ­charges at the request of Josh Frydenberg, the spin continues. Not from a refreshed corporate and media affairs team. Oh no; those doing the spinning and the “repair work” are the same ones who mismanaged the Austrac response in the first place. Even though developing a better relationship with government is a necessary part of the process from here for a business as tarnished as Westpac, the corporate affairs team still has yet to hire a single former insider from the government to help out.

Acting chief executive Peter King still hasn’t offloaded corporate affairs head Carolyn McCann, who was overseas when the scandal broke. The head of institutional banking, Lyn Cobley, where most of the Austrac problems originated, still hasn’t been shown the door.

When a cultural review nominates problems within an organisation, you’d think the human resources department might need to have a fresh broom run through it too. Seems obvious. No, not at Australia’s second largest bank. The same leaders who authorised changes to the way they categorised senior managers — which happened to help the bank (albeit briefly) hit 50 per cent women in leadership to coincide with its 200th anniversary celebrations — still run HR at Westpac.

My area of expertise is politics. I’ve only occasionally delved into what goes on in corporate Australia. I’ve been a critic of the culture that exists within political parties and to some extent within the parliament more broadly. Observing corporate Australia from afar, I always thought it stood up well compared with the political class. My political contacts always challenged that assumption.

Having had the opportunity to look into the failures within Westpac in the context of the Austrac scandal, I have been staggered to see how much worse the culture and practices there have been compared with what goes on in Canberra.

I only hope Westpac is the exception, not the rule in corporate Australia. Because if it’s not then it’s time Liberals cast a much closer eye over the goings-on in corporate Australia, just as they do with the trade union movement.

Peter van Onselen is a professor of politics at the University of Western Australia and Griffith University.