NAB Chair Philip Chronican has urged directors to leave the sanctity of the boardroom and develop an understanding from customers and staff about “what’s really going on” in the business.
In a panel discussion at the 2024 Australian Shareholders Association investor conference, Mr Chronican said NAB had created a customer committee in direct response to findings in the Financial Services Royal Commission that the bank lacked an understanding of the impact it has on customers.
“We’ve had cases where we’ve been told a new initiative has been really well received and you go and spend half an hour driving around with a business banking customer in western Queensland and start to think: ‘Maybe it’s not quite as slick as somebody’s been telling me’,” he said.
“So you go back and have a further look at it. I think board members need to stay connected with your customers and your people to get an understanding of what’s really going on.
“You then triangulate between all sources of information you get, but certainly you can’t just sit in the boardroom and read reports. That’s never going to work.”
Boards, he said, did not set the culture at their companies; instead, they acted as role models.
Generally, they knew the type of culture they wanted to create and commissioned regular surveys to assess progress.
“But the lived-in experience of the culture should be consistent with the way you were trying to articulate it,” the NAB Chair said.
“And that’s very important for businesses that take big risks because we know from organisations which get lost – and I don’t want to pick on anyone – that it’s because people were afraid to step up and raise concerns.
“So the question I always zero in on in our surveys is whether it’s safe to speak up. That question tells you so much in and of itself.”
NAB, for more than 20 years, was afflicted by a series of well-documented misadventures.
More recently, however, the bank’s market capitalisation has grown to $107bn, improving its ranking from fourth to second among the nation’s big four lenders.
Mr Chronican said it was also possible to gain cultural insights from boardroom interactions.
“If people come in and say I have a complex problem and I think this is the answer but there are upside and downside issues and I’m worried about this particular issue, then you know you’re dealing with someone who’s open to input as opposed to someone who turns up with everything tied in a bow and says: ‘Here’s the answer’.
“That’s frustrating when you’re on a board – you’re not quite sure what you’re meant to do because if your management team knows everything, why are we there?”
Mr Chronican, who is a Woolworths director as well as NAB Chair, said the ASA’s policy of a maximum of two chairs and five non-executive directorships was “not unhelpful but probably over-prescriptive” because not all boards were created equal.
While the ASA formula suggested he had spare capacity and could do another significant role, the status quo enabled him to “do other things and not create a full-time job like I had.”
“(The NAB Chair) is about half a full-time job – by the time you organise a board meeting, which are typically three days, and you do the clean-up day with the company secretary afterwards, your week’s done,” he said.
“And then there’s the representation where you come to events like this, meeting with foreign bankers, going to see the regulators.
“By the time you’ve done all that and worked with the CEO on succession planning, it’s a lot of work.”
“So I think you have to look at the totality of the directors’ workload and then make an assessment.”
Asked if large corporations had misread the position of their customers and workforces by supporting a “yes” vote in the Voice referendum, Mr Chronican noted that initially there was bipartisan support for the reform.
“I don’t feel compelled to have a view on everything that comes up; you need to draw a thread to your business and your business purpose,” he said.
“We’re the biggest bank in rural and regional Australia and probably bank 30 per cent of agriculture in Australia, so we’re much bigger outside metropolitan areas than most of our competitors.
“We took the whole board up to the Northern Territory, trying to understand first-hand what some of these issues were, we engaged with various people, and like many companies we had a reconciliation action plan, and therefore there was an expectation from a large group of people that we would be supportive of it.
“We didn’t throw a lot of money at it but we did give some money; I don’t walk away from that.
“It’s possible that as the political issue heated up, large corporates might have been a negative rather than a positive, but we just felt we owed it to the people we said we’d support.”
Mr Chronican said the widespread support from large corporations for the Voice appeared to have become a negative for the whole campaign.
This was part of the growing distrust of large institutions in Australia, not just corporations.
