NAB Chairman Graham Kraehe’s view from the NAB bridge might be fine,
but well informed senior sources inside the bank say there are
damaging and dangerous fires burning in the ‘tween decks.
Senior NAB divisional managers are struggling to meet budget targets
set by now departed CEO Frank Cicutto. In fact struggling seems to be
an understatement. Cicutto’s targets are apparently simply not
being met according to senior bank insiders. This is perhaps not
surprising because it tallies with last week’s profit downgrade
delivered by outgoing Chief Financial Officer, Richard McKinnon.

What is surprising though is that Cicutto’s divisional budget targets
remain unchanged since Cicutto’s departure, according to senior
insiders in the bank.

And to compound things, in a move that suggests that Graham Kraehe and
his gang of seven are gun shy of further disasters and losses,
the divisional managers have now apparently been instructed to meet
Cicutto’s old budget targets, but wait for it, without taking any risk.

According to the insiders, the result has been the emergence of extreme
levels of distrust at senior levels throughout the bank, organizational
chaos, fomentation and a highly destructive atmosphere that the senior
managers see as damaging and dangerous to the future of the bank.

This state of affairs at the NAB will not be welcome to the bank’s
institutional shareholders who Kraehe is trying to massage to see
things his way this week.

The NAB is no corner milk bar. APRA has a responsibility to get in
there and find out what is going on and whether the apparently
desperate atmosphere in the senior management ranks is transforming
into a major banking risk.

Right now, the majority board of the bank, the gang of seven, is in no
condition to direct anything while they play board games and the
Chairman is on an election road show against fellow board member
Catherine Walter. It’s totally unfair to expect the new CEO John
Stewart to plug the management and revenue gaps and supervise the board
kindergarten as well.

And ASIC has a responsibility to ensure that anything Kraehe intends to
say this week and next behind closed doors to key institutional
shareholders on behalf of his gang of seven is fully and publicly
communicated to all shareholders, beforehand. Then he won’t even have
to spend his time waltzing round the market place talking up his game
and can spend it at 500 Bourke Street earning his keep.

As for the market place, there are suggestions emerging that Kraehe’s
gang of seven’s mass resignation ultimatum has been seen as nothing
more than a ransom demand. The big institutional shareholders
apparently have their own ideas about a new chairman and a couple of
new directors to preside over the board rebuild.

The long and short of it is that Kraehe and his gang can probably save
their breath. The word in the market is that they grossly miscalculated
and the die is cast. It won’t surprise anyone if their days as
directors of the NAB already have 21 May 2004 written on their employee
pink slips. After all, what institutional investor would invest in a
company whose CEO or Board even thinks of bowing to such threats from
employees and Kraehe and friends are just employees of the bank, albeit
senior ones. Employ me or else indeed!

It is a lesson that the rest corporate Australia could learn well.
Don’t issue ultimatums that are seen as straight ransom demands and
that make the alternative choice for institutions easy even if things
might be a little untidy for a short time. Governments around the world
learnt that lesson long ago. It saves lives and money in the end
for the greater good.

Peter Fray

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