The Weekend Financial Review’s fantastic Prince column revealed a concerning fact for ANZ shareholders last week. With the bank’s recent move to the largest office building in Australia, right in the heart of Melbourne’s Docklands, it was revealed that ANZ’s chief executive Mike Smith has moved into an office that takes up more than 100 square metres of space. As a comparison — that is larger than most three-bedroom/two-bathroom apartments in one of those plush nearby apartment buildings across the river. Most offices would tend to be about 120 square metres in size. Exactly why Smith needs half a basketball court is somewhat mysterious.

This isn’t the first instance of Smith benefiting from the generosity of ANZ. The bank initially lured him from HSBC in 2007 with a “sign-on award” of $9 million as compensation in consideration for remuneration foregone from [Smith’s] previous employer. The $9 million was in addition to Smith’s $3 million annual base salary and millions of dollars in bonus payments. Even worse, had ANZ shareholders rejected the generous sign-on payment (which did not require Smith actually perform anything), the company noted that they would have paid him $9 million in cash anyway.

But it appears the ANZ directors are not only happy to spend shareholders’ monies on their CEO, they also spend it on themselves. Prince also reported that ANZ acquired stone from Turkey for its boardroom walls and floors and spent upwards of $500,000 on a leather table. At that price, it is fair to assume that it wasn’t purchased from the local Fantastic Furniture.

All this is an example of what corporate governance types refer to as “agency costs” — that is, the costs incurred by shareholders, which result from having to hire employees to run the company for them (admittedly, directors tend to forget that they really are employees spending shareholders’ capital).  Whether a $500,000 table and 100 square metre office will prevent ANZ from debacles of the scale of Opes Prime is yet to be answered, however, given Smith’s predecessor John McFarlane had never heard of Australia’s most infamous margin lender, arguably things couldn’t get much worse at ANZ.

Another reason for ANZ shareholders (which would include most Australians who own an interest in an Australian equities managed fund) is that companies that lavish monies on their executives’ fine tastes tend to deliver somewhat disappointing returns. The most noteworthy example would be the somewhat expensive showering tastes of T Dennis Kozlowski, the jailed former CEO of Tyco, who spent $6000 of his company’s money on a shower curtain, and another million on a Roman orgy-themed birthday party for his second wife. Shortly after Kozlowski’ rule, Tyco’s share price slumped 94%.

Or there is former CEO of Merrill Lynch, John Thain, who used $US1.2 million of shareholder funds to redecorate his office, including spending $1400 on the world’s most famous rubbish bin. Under Thain’s watchful eye, Merrill Lynch, which had been around since the turn of the 20th century, was forced to merge with Bank of America after losing $20 billion the previous year.

The list certainly doesn’t stop there (listing every example of executive largesse would be far beyond the scope of this article), however, ANZ shareholders will be hoping that their $500,000 boardroom table is a better investment than Thain’s rubbish bin.