Sealed February 2

NAB CEO Frank Cicutto has succumbed to a ferocious campaign by the
press, fund managers and analysts and resigned. The new CEO is Scot
John Stewart. Read the NAB announcement here.

Cicutto will go down in history as the only CEO to report profits of
$15.5 billion over five years whilst being regarded as having down a
bad job.

The last full year result that his predecessor Don Argus reported was a
$2 billion profit for the year to September 30, 1998. This is what
Cicutto delivered in the following five years.

1999: $2.82 billion
2000: $3.24 billion
2001: $2.08 billion
2002: $3.38 billion
2003: $3.95 billion

Total net profit for the 5 years: $15.47 billion

If Cicutto had continued the Argus performance, NAB’s five year net
profit would have only been $10 billion. And don’t forget that the net
profit might exceed $4 billion this year, although there’s a good
chance that John Stewart will do the traditional “clear the decks”
write-offs and that might include plugging a $1 billion-plus unfunded
superannuation black hole.

Crikey is heading in to a press conference with chairman Charles Allen
and new CEO John Stewart, the former number two at Barclays who only
started as head of NAB’s European operations last August. (Read below)

Listen closely for Stewart’s thick Scottish accent. Who would have ever
thought that the two Melbourne-based trading banks, NAB and ANZ, would
both be headed by a Scot?

And it looks like the number of foreigners running our largest companies is on the rise again.

The two most recent appointments before Stewart are Chip Goodyear at
BHP-Billiton and Greg Clarke at Lend Lease, although it remains below
the peak of a few years ago when six of Australia’s top 10 companies
were run by foreigners.

Finally, it is good to see the NAB board has claimed they are still
looking for new directors with banking experience. They probably need
to lose three directors to satisfy the markets and that includes
chairman Charles Allen and audit committee chair Catherine Walter.

They’ll no doubt be hoping the sacrifice of Cicutto takes the heat off them. It shouldn’t.

Second sealed February 2

Did media intrusion push Frank Cicutto over the edge and trigger his
resignation on Friday? That is clearly the line being pushed by NAB
chairman Charles Allen at a press conference before about 70 media on
level 36 of the National Australia Bank’s head office in Melbourne this

The heavyhitters of the media had gathered to put Charles Allen through
his paces and hear from Frank Cicutto’s replacement as CEO, Scotsman
John Stewart.

When asked why Cicutto suddenly changed his mind and wanted to end his
three year contract after just 15 weeks, Charles Allen said: “The
photos of his house were very upsetting to him so he has had a lot of
personal pressure.”

It was Andrew Main in the Fin Review’s Rear Window column where that
photo was first published but Charles Slade from Channel Nine, who was
firing questions in today, also did a highly dubious stand-up in front
of the house speculating whether it would be paid for out of Cicutto’s
salary or his termination payout.

Cicutto had already resigned by the time Alan Kohler’s Saturday column
appeared attacking him being unNational in ostentatiously building such
an extravagant home.

The new NAB CEO boss performed well in front of the biggest press pack
for a corporate story that we can recall in Melbourne for several
years. He appears to be a real goer who had a terrific record building
up the old Woolwich Building Society in the UK, selling it to Barclays
for a 34 per cent premium and then delivering on all the merger
benefits promised in the subsequent two years.

Stewart retired a wealthy man at the start of 2003 but then was lured
back to work by his mate Frank Cicutto because he regarded the NAB’s
hotch-potch of sub-scale regional UK banks as the biggest turnaround
opportunity in the UK banking market.

Stewart didn’t mince his words in saying NAB had substantial
“reputational issues”, “is not fulfilling its potential” and had to
deal with “confidence in the bank”.

Despite talking to Cicutto every day during the recent crisis, Stewart
said the offer from Charles Allen on Saturday “came as a complete
shock”. Cicutto never spoke about resigning either.

He arrived this morning (three days earlier than a scheduled visit) and
has absolutely no idea what he’ll be paid, which is quite an amazing
situation and shows how desperate

the board was to act. Since when does a top ten company announce it has
a new CEO without any form of contract? However, he has committed to
move to Melbourne.

Charles Allen was pushed by several journalists to reveal details of
how Cicutto’s resignation came to pass. It turns out that Frank walked
into his chairman’s office on the 35th floor of the bank on Friday and
said he wanted to resign.

Whilst it was initiated by Cicutto, the beleagured CEO clearly asked
that the financial terms of his departure be as if he was terminated.

Afterall, his contract states that if he is terminated he gets six
months notice and 12 months base base. That comes to about $2.9 million
yet he’s getting a termination benefit of $3.27 million. It will be
interesting to know if he also gets the 12-month base salary for not
working with a competitor over the coming year. That would be another
$2 million.

Allen said he would only get the options that had vested from 1999 and
2000 so they’re not repeating the mistake made with Don Argus being
able to keep all his options.

Allen also said his superannuation was worth less than $2 million as it
only comprised what Frank had tipped in over 37 years with the bank.

Once the board had agreed to Frank’s termination request, they then
discussed it amongst themselves and decided to go for the internal
candidate straight away rather than initiate a global search which is
what companies like CSR and BHP did when they fired their CEOs.

Charles Allen defended the quickfire decision saying they had an
excellent and proven internal candidate and that the controversies
engulfing the bank required an immediate appointment.

Today’s 46c rise in the NAB share price to $31.02 would suggest this was a good move.

Of the 20 different journalists who asked questions over the first 45
minutes, the Fin Review dominated with John Durie, Trevor Sykes
(introduced from Sydney on the phone as Trevor Skyes), Tony Boyd and
Andrew Cornell all having a crack. Durie asked the most questions and
put the most pressure on suggesting that some non-executive director
heads should also roll.

Allen tersely responded at one point that “the board’s responsibility is to put in place management ro run the organisation”.

That might be the statement that finishes his tenure as NAB chairman.
The board’s role is to oversee the governance of the bank on behalf of
shareholders. Allen seemed completely unable to accept the notion of
board responsibility and is clearly hoping today’s changes will
preclude any main board resignations.

Crikey suspects the market won’t be happy until Allen is gone along
with at least one other director. At 67 he is the oldest NAB director
and the longest serving having joined in 1992. The second longest
serving director is also the youngest, 51 year old Catherine Walter,
who should also be given the chop given her long stint as chairman of
the ill-fated audit committee.

There were television cameras aplenty as Aunty had three crews on hand
(two for 7.30 Report) and Seven and Nine both had two crews to ensure
they didn’t miss an angle.

Terry McCrann is finally back from holiday and fired in two batches of
questions to finish second only to Durie. Robert Gottliebsen, Michael
Pascoe (from Sydney for Sunday Sunrise and Sky Business Report) and
7.30’s Tim Lester were some of the other heavy hitters on hand.

It certainly saved Charles Allen’s bacon to have John Stewart on hand
to deal with half of the questions. Maybe this is why he was announced
as the CEO without a contract. He’ll certainly be able to ask for more
based on today’s performance but there is a big issue as to whether
Allen should lead the negotiations when he is arguably about to fall on
his own sword.