Culture of arrogance brought Westpac executives down

The mishandling of the Austrac scandal by Westpac’s corporate affairs division has been extraordinary to watch unfold.

The blatant attempts by those who ran the bank to try to cling to their tainted reputations (and lucrative jobs) has been a most unedifying spectacle.

It’s unlikely chief executive Brian Hartzer and chairman Lindsay Maxsted were ever going to survive the mess, given the seriousness of the allegations, but the way they conducted themselves over the past week guaranteed their demise.

A very senior politician once told me that the only way to survive a crisis is “to bare all early” — confront the allegations, immediately take action and leave no questions unanswered. No opportunity for the story to grow in new directions. Doing so won’t necessarily save the situation, he stressed, but anything less guarantees the drip feed of bad stories and obfuscation that inevitably follows will make a bad situation even worse.

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When the Austrac statement of claim broke last Wednesday, rather than call a media conference and immediately offer a fulsome explanation, the CEO held a limited teleconference with the media, refusing to take responsibility. The chairman was nowhere to be seen, bobbing his head up later in the week.

The product that caused all the chaos, LitePay, wasn’t shut down until Sunday, even though executives (and the board) had been aware of the problems it had caused for many months.

At the weekend, the hubris from senior managers inside the bank was palpable.

The strategy team thought they just had to make it to the start of this parliamentary week and the media cycle would move on. It was poor advice, lapped up by desperate executives and board members.

Not everyone in the room was happy, which is how leaks to this newspaper started.

The hope in the high level weekend meetings was that the dogs would bark but the caravan would move on.

That sentiment is what led Hartzer to tell his executives and general managers on Monday afternoon “for people in mainstream Australia going about their daily lives, this is not a major issue so we don’t need to overcook this”, as broken in yesterday’s The Australian just hours before his resignation. The ultimate sign of how out of touch Westpac’s leadership group became came at the weekend via an offer from the head of consumer bank, David Lindberg, to fly to Canberra this week to smooth things over with the politicians.

The reaction to that point — from both sides of the political divide — had been extraordinary for its ferocity. Nonetheless, Lindberg thought because he’d attended the occasional National Press Club function (Westpac is the major sponsor) and met some senior politicians on the way through, he could explain to them that “this was an error no one could be responsible for”, according to a source in the Westpac high level strategy meeting.

The chutzpah was beyond belief, given the gravity of the revelations of financially enabling child exploitation. In the end, Lindberg’s trip never happened.

Big corporations spend a lot of money on public relations advice. Hartzer even promoted his head of corporate affairs, Carolyn McCann, on to his executive team. She had the ear of both Hartzer and Maxsted like few corporate affairs bosses do. Her team was largely shielded from cuts to other parts of the banks. But when Hartzer’s and Maxsted’s time of need came, she was on a study junket overseas, nowhere to be seen, and not responding to media inquiries.

McCann fostered a confidence within Westpac off the back of surveys that showed it was the most trusted of the big four banks. That confidence morphed into arrogance in sections of the bank when Westpac came out of the royal commission as the least damaged of the big four.

This culture of arrogance played into the mismanagement this past week. It may even have indirectly contributed to the cultural failures that saw Westpac inadequately respond to Austrac investigations in recent months and years.

One thing is certain in the wake of what has been one of the most disastrous weeks in the history of Australia’s oldest bank — its confidence is shattered, and its reputation is in tatters, and senior management and the board have made a bad situation much worse than it had to be. It’s unlikely Westpac is still seen as our most trusted bank.

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