Amazing scenes: Cathy Walter, an apparently mild-mannered, but
determined corporate lawyer is holding the National Australia Bank
board to ransom – unbloody-believeable. Whatever is going on on the NAB
board? Whatever it is a couple of things need to be said.

1. If
Cathy Walter had have been smart she would have departed of her own
volition after the PwC report was released. She should have fallen on
her sword and should have taken some of the responsibility. She was on
the audit committee, after all. This would have achieved two things:

(a) preserved her name and reputation: which is being damaged by the current brawl which looks unseemly and self-centred.

It would have then put the focus on the incompetents now hiding behind
their efforts to remove her: Chairman Graeme Kraehe, so-called senior
director, Dr Ken Moss (who was a moderate performer at Howard Smith)
and Peter Duncan (who came from Shell Australia which is more like the
public service and now subject in London to its own pressures on

This trio of underperformers have had a hand in
(individually or collectively) in glossing over the Homeslide debacle:
cost $4 billion; and the silly attempt to takeover the AMP, which would
have given APRA a really massive problem a year or so ago if that had
have happened, with the AMP’s implosion in Britain that could have
crippled the NAB.

These chaps were also board members or
involved in the audit committee or the so-called ‘risk management’
committee (which didn’t risk too many meetings last year). Moss and
Duncan have been promoted in the wake of the PwC report, Kraehe managed
to become chairman after Charles Allen resigned.

Both former
chairman Allen and former CEO, Frank Cicutto, are both looking
increasingly good as the brawl grows: they seemed to have had far more
understanding of the need for someone to take responsiblity in the
boardroom for the debacle. That was an option to Cathy Walter: it is no
longer, thanks to her intransigence and determination to stay on, which
has forced the rest of the board to call an extraordinary general
meeting of shareholders to remove her.

On Friday night she went
public with a three page statement explaining her thinking so this is
going to be an ugly fight. Walter alleged there was “orchestrated
vituperation and harassment during Board meetings” and “an obsessive
pursuit of a scapegoat”.

You can justify (as her friend
Terry McCrann has tried several times) why she should stay. She is
arguably no more culpable as Kraehe, Moss and Duncan for the entire
debacle: and for the bank’s culture of arrogance and ignorance that
brought about Homeslide and the forex mess.

By staying on and
forcing the meeting (presumably it will be held and she will not now
bolt after the pressure has been really applied) she thereby allows
shareholders of all sizes the chance to complain and question not only
herself, but Kraehe, Moss and Duncan.

And it was wise of new CEO
John Stewart not to publicly take sides in this dispute as he is a
fly-in newbie with no form and also has no real understanding of what
has gone on inside the bank in the past four or so years.

it is a fair bet that has thrown his lot in with the ruling junta on
the NAB board, which will be all well and good because Ms Walter will
be defeated (because the big gutless shareholders and fund managers
hate people rocking the boat); but he will have been damaged by allying
himself with some of the people who were asleep at the wheel.

for Graham Kraehe, after his brokering of the Rosemount move on
Southcorp that destroyed so much brand and shareholder value; you’d be
excused for wondering how he’s become one of our senior board members.
For the record, he did resign from the Southcorp board before the deal
was consumated so as to not be associated.

The argument
from some women’s groups and female directors that they should support
Walter for ‘solidarity’s’ stake demeans the work competent and
hard-working women directors do in public companies, government boards
and in private companies. That’s the sort of justification you see
coming from the male-only bunker on the NAB board. Solidarity chaps for
the sake of the club!

Overall Cathy Walter has failed in that
she did not perform as she should have done on the audit committee or
the board generally. She should have gone at a time of her choosing,
not that of the trio of dunderheads, plus CEO Stewart.

So what
will AFIC, Orica and the ASX do with Cathy Walter: leave her there
until the situation is cleared up at the NAB? Or move against her as
the boys club of corporate Australia closes ranks?

And what
about AFIC itself: blue-blooded Chairman and former JB Were chairman,
Bruce Teele doesn’t like activisim of the kind now being shown on the
board, nor in the public airing of dirty boardroom linen.

was AFIC’s biggest investment at the end of 2003 with around $232
million at stake. It also has a $31 million exposure to Orica but no
shares in ASX.

AFIC is a tolerant company: Stan Wallis and
Don Argus are both directors who could tell NAB shareholders a fair bit
about responsibility and transparency; and would no doubt be
interesting sounding boards for Cathy Walter in her hour of need.

Argus is also great mates with Graham Kraehe, having worked with him on
Southcorp and Brambles and brought him as the founding chairman of BHP

Kraehe is also part of the JB Were club having
resided just near Walter in JB Were space at 101 Collins Street thanks
to his directorship of AFIC’s sister company Djerriwarrh Investments.
How AFIC votes its shares at the AGM will be a very interesting issue.

Terry McCrann is right in arguing that the forex debacle wasn’t life
threatening to the NAB, it has proven more damaging to its reputation
and the standing of the various board members and managers involved:
and to the longer-term credit rating and financial standing of the bank.

days a good reputation is worth more than a solid financial
underpinning, especially if the latter is accompanied by poor
disclosure, inadequate governance and signs of boardroom incompetence.

NAB meeting, if it is held will be the big test of Australian fund
managers and their investors (especially trustees) to see if they back
the many fine words about the need for better transparency and
governance, or whether its all been bullshit. Get the shovels ready
chaps, the manure’s about the fly!

Crikey is predicting
that the incumbents will get home easily because the fund manager won’t
want to risk upsetting their huge fees flowing from NAB’s MLC division
which has a ‘manager of manager’ approach.

Peter Fray

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