The banking royal commission report has claimed its first high-profile victims, with National Australia Bank’s chief executive officer Andrew Thorburn and chairman Ken Henry quitting their positions.
The two were subject to scathing assessments in the report from commissioner Kenneth Hayne.
Hayne said that after having heard from both men he was “not as confident as I would wish to be that the lessons of the past have been learned.
More particularly, I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly. I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues.
I thought it telling that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies … Overall, my fear – that there may be a wide gap between the public face NAB seeks to show and what it does in practice – remains.
In a statement late Thursday, NAB said Thorburn would finish at the end of this month while Henry would leave the board once a new CEO had been appointed.
The board will search internationally for a CEO while also considering internal candidates, the statement said.
Philip Chronican, a NAB director with extensive banking experience will act as CEO from March 1 until a replacement is found.
It has been speculated that Mike Baird, former NSW premier, a senior executive at NAB could get the CEO post.
Thorburn, who has been CEO since 2005, said he had had a number of conversations with Henry this week.
"I acknowledge that the bank has sustained damage as a result of its past practices and comments in the royal commission’s final report about them.
"As CEO, I understand accountability. I have always sought to act in the best interests of the bank and customers and I know that I have always acted with integrity. However, I recognise there is a desire for change.”
Sydney Morning Herald journalist Bevan Shields tweeted: “NAB boss Andrew Thorburn effectively says in a call just now that he was sacked by the board and didn’t voluntarily resign”.
Thornburn appeared to be fighting for his job early this week, cancelling leave, but he admitted on Tuesday that he could not guarantee he would still have his position on Friday.
Henry, a former secretary of the federal treasury, said he and the board had recognised change was needed.
“The timing of my departure will minimise disruption for customers, employees and shareholders,” he said.
He said the board should have the opportunity to appoint a new chair as NAB “seeks to reset its culture and ensure all decisions are made on behalf of customers.
"I am enormously proud of what the bank has achieved and equally disappointed about what the royal commission has brought to light in areas where we have not met customer expectations.
"Andrew and I are deeply sorry for this. My decision is not made in reaction to any specific event, but more broadly looking at the bank’s needs in coming months and years.”
The Board is to recruit new non-executive directors “to increase diversity of thinking and experience”. It will also establish a board committee for customer outcomes.
Chronican, who joined the NAB board in 2016, said he was “confident in our existing strategy to transform the bank to be better for customers”.
“Our strategy and the self-assessment we completed into our culture, governance and accountability set out clearly the steps we need to take to change and we are committed to them,” he said.
In a mea culpa interview on Thursday night, Henry told the ABC that what had changed since the indications on Tuesday that he and Thorburn would stay on was that “we’ve had further time for reflection.
"And we came to the view jointly really that it was in the best interests of NAB that we take the decision together to step down from our respective roles.”
He said the enduring legacy of the commission’s report “will be that intense scrutiny that it has shone on financial institutions and the way it’s forced senior people in those organisations to confront some really challenging things”.
Asked whether there was as wide a gap as Hayne said between the public face the NAB sought to present and what was does in practice, Henry said: “There is a big gap.
"The gap as I see it is NAB does aspire to do the right thing by every customer every time and everywhere. And we’re a long way from that. We’ve got an absolute mountain to climb in NAB in order to achieve our aspiration for the bank”, although it was on the right path.
“We’ve not been able to satisfy customer expectations, nor community expectations … For that, we’re deeply sorry”.
He and Thorburn hoped their departures would “contribute to the development of a better industry that’s capable of delivering better outcomes for customers”.
Quizzed about his performance at the commission, which was widely criticised as looking defensive and contemptuous, Henry said he was initially surprised by that commentary.
“And I was upset by it. The more I thought about it - and I can’t tell you how many times I’ve relived that appearance - I understand the criticism. I did not perform well. I really should have performed quite differently. I should have been much more open”.
He said he believed he was leaving NAB in better shape than he found it. “And yet… I also believe that we are not much closer yet to delivering on community expectations. So the gap that was there, that gap still remains. We’ve closed it a bit. We have an intention to close it completely with the investments we’re making and the changes that are under way in the bank.
"That remains the aspiration. I’m confident within a few years, hopefully much sooner than that, NAB will be a much stronger institution than when I joined it”.
Michelle Grattan owns shares in banks and other financial institutions.
Authors: Michelle Grattan, Professorial Fellow, University of Canberra