I came across an HBR article from 2002 entitled ‘What Makes Great Boards Great?’ and it opens with the following –“ In the wake of the meltdowns of such once great companies as Adelphia, Enron, Tyco, and WorldCom, enormous attention has been focused on the companies’ boards. Were the directors asleep at the wheel? In cahoots with corrupt management teams? Simply incompetent? It seems inconceivable that business disasters of such magnitude could happen without gross or even criminal negligence on the part of board members.”
Yet this last week AUSTRAC released its statement of claim including allegations that Westpac facilitated transactions enabling child exploitation in the Philippines. More than 23 million transactions are alleged to have breached anti-money laundering and counter-terrorism finance laws, and the bank is facing the prospect of fines that may total more than $1 billion.
On November 4, when the bank announced a full-year profit of $6.78 billion, it went to shareholders seeking a $2.5 billion capital raising. Mr Hartzer noted at the time that “the raising also creates flexibility for changes in capital rules and for potential litigation or regulatory action”.
However, shareholders were left in the dark, completely unaware of the storm that was about to hit. Now, massive shareholder lawsuits are likely. There’s been the announcement of a potential class action (and others may soon follow) by law firm Phi Finney McDonald. There’s been a warning of a possible ratings downgrade from Moody’s.
Is this good corporate governance? Surely the Board were aware of this?
If you would enjoy discussing this scenario (and possibly your own Board’s dilemmas), with a select group of current and aspiring directors, join us in the new year for our series of interactive workshops on Boardroom Excellence. For full details and to purchase tickets click here. Bookings are now open and with places limited to 12, book your place today.