Transcript of 2001 ANZ AGM exchanges

Chairman Charles Goode: Number four.

Number four: Mr Chairman I would like to introduce Stephen Mayne.

Stephen Mayne: Morning Chairman.

Charles Goode: Morning Mr Mayne.

Stephen Mayne: I'm a proxy holder. I'd like at the outset congratulate the bank on a terrific performance. It was good to see the video with the Managing Director dancing in his Sunday civies up there. Just one quick early point, it's very annoying that the banks all tend to organise for their AGMs to clash so if you want to go to St George and ANZ you can't. Yesterday we had NAB and Westpac clashing so in future years would it be possible for the banking industry to get together and just make sure that the AGMs don't clash?
I've got two broad issues I'd like to explore at first. The first relates to ANZ and Air New Zealand and the second relates to the audit process. I can't see who the deputy chairman is so it might be a better question for someone else other than yourself to answer Chairman.

Charles Goode: I'll pass it on if necessary.

Stephen Mayne: OK. We saw during the year with Mark Rainer that he was chairman of Pasminco, Pasminco collapsed, he was chairman of NAB, NAB had an exposure and he resigned from the board of NAB as a result. We've heard that we've had a 13 million dollar exposure to Ansett. I understand there was also a slightly larger exposure to Air New Zealand of which you are or were a director. Now, Air New Zealand lost 1.3 billion. It was a pretty dramatic collapse. It tried to walk away from its responsibilities in Australia and you had everyone from the Prime Minister down condemning the board of which you were a member.

Now we've seen that the Chief Executive of Air New Zealand Gary Toomey has seen fit to resign from the ANZ board so I think it would be worth hearing from someone as to how your relationship was managed through this process. Why it was felt appropriate for him to go and for you to stay and how large the commercial relationship was between the ANZ and Air New Zealand. And just relating to the departure of Mr Toomey I notice that he took leave of absence on September 20 but didn't formally resign until October the 8th which conveniently fell outside of the financial year so we don't get to see the size of his retirement payout.

Now Mr Dahlsen who's a director would know about retirement payouts. I think he got 1.1 million when resigning from the Woolworths board this year and Mr Rainer at NAB got 1.47 million when resigning from NAB this year. So can you tell us in a timely manner now as opposed to us having to wait twelve months, how much Mr Toomey got and what the retirement package is for directors? Is it three years pay? Is it five years pay or what the format is?

Second issue on the audit relationship. Now, firstly I notice that we've got the same auditor as the National Australia Bank which I find a little troubling given that we're the two giant Melbourne based banks can have the same accounting firm auditing. Now yesterday the NAB annual meeting there was a discussion about a gentleman called Chris Lewis who signed the audit for NAB in 2000 and said they were clear of material mis-statement. Nine months later 3.6 billion is written-off on Homeside and clearly they weren't free of material mis-statement. Now it turns out that Mr Lewis when NAB bought Homeside was Chairman of the due diligence committee sent over by NAB on behalf of KPMG and in July this year joins the bank as an executive general manager of risk worldwide.

So you've got massive conflicts of interest running with KPMG where they're at one level advising on acquisitions, at the same level he then comes in as the auditor and then jumps out and goes off back to the bank as an executive. So I'd like to hear from our Auditor Peter Nash on how that issue is managed through in relation to conflicts of interest. And I guess specifically I have a concern about the Chairman or our audit committee who's Mr John Dahlsen. Now Mr Dahlsen was part of a three member committee who recommended the neutering of the Victorian Auditor General which was probably the most notorious thing that Jeff Kennett did and restoring the powers of the Auditor General was the thing that Steve Bracks said he was most proud of.

So I guess I'm concerned that we would have someone who appears to not hold the independence of Auditors in very high regard, ie. recommending at one level the neutering of the Victorian Auditor Genera, chairing our audit committee and dealing with KPMG. And I'd like to site one example of an issue where I think an independent auditor is very important. And this year I think there was reports in the press that there'd been some telephone banking fraud and the partners of Corrs Chambers Westgarth the legal firm were suffering a loss of 1.5 million. Now Mr Dahlsen hails from Corrs.

Then there was some discussion in the press about whether the bank, ANZ, would pick up the loss. So you've got a situation where there's fraud, will one of the directors suffer or will his legal firm suffer or will the bank suffer and you've got the person involved chairing the audit committee so I guess it would be important to hear how that sort of process would be managed through. And I guess in an argument on good corporate disclosure that would appear to possibly be a related party transaction if the bank has taken a hit on a situation like occurred with the Corrs super fund. So could Mr Nash and perhaps yourself, Chairman, just take us through those issues. Thanks very much.

Charles Goode: Sure. The first issue you raised Mr Mayne was whether we could have our annual general meetings at different times for different banks. Well we're the first of the major banks to announce their results and then we set our annual general meeting date so perhaps it's up to the others. We could talk to them. I'm not sure if Dr Fells would allow us to talk and collude on having separate days.

It is a problem in that most of the banks finish their financial year on the 30th of September and people want to have the annual meeting before Christmas so you've got a limit to getting the accounts out and proper notice and finishing not the two or three days before Christmas when shareholders would complain that it wasn't convenient to come to a meeting. I think there's some problem that's inherent actually but perhaps we can look into it further.

You then raised the question of a conflict of interest in a number of areas and the first area you touched on was my position on the Air New Zealand board. I went on the Air New Zealand board only twelve months ago for one year. It's a board of 13 people. I wasn't on the audit committee. I wasn't on the finance committee. It was appointment by Singapore Airlines who saw themselves as part of the solution not the problem. The company was on losses when I went on. The reconstruction and putting in of capital which they were wishing to do was not allowed by government and so at the end of that I resigned but that was a short period. It was on losses when I went on and in the end the government put the money in.

Our position on that is that if a matter comes up where a board member is involved you leave the room and you take no part in the discussion. Actually loans to companies rarely come up before the board. The management have a committee and they make the loans. The credit committee really reviews the portfolio of risk - how much we have in large names, how much we have in particular industries, what would happen to our portfolio if there was a recession, what would happen if the interest rates went up one percent or down one percent, what would happen if the currency changed.

So the board credit committee is really a very much an over-arching committee of major risk scenarios. And so it probably come up to that committee if it got into default and I'd leave the room. I don't think during the 12 months I was on our facilities to that particular corporation changed. And they weren't increased. When it became somewhat of a public issue I resigned. But the basis of all these is the robustness of the conflict of interest arrangements within the bank. Given that we have a board of business people who come from diverse interests, there'll always be from time to time conflicts of interest and it's important that the bank's systems be able to handle that and I think they do.

Your next question was about the auditor. KPMG are one of the large accounting firms. They tend to specialise in banking. They have different partners for different banks so we really have no concern that any confidentiality information that they receive from this bank will be available to one of the other banks they may audit. Nor do we receive any information because they audit other banks.

So we're comfortable with that relationship. It's a very professional relationship, gets reviewed annually. I think it's of great benefit to the bank actually. They're very experienced. They have quite a reputation and they need to defend that and they do. I can't comment greatly on the Victorian Auditors Report that Mr Dahlsen was part of a committee on but I imagine the role of a government auditor and whether it be internally handled within a government department, specialised government department or put out to tender there'd be two views on. And it's not a related type of situation to that of the ANZ bank.

On the Pavco matter where there was a movement of cheques involving I think about 1.6 million which were put into accounts and moved to other accounts when they shouldn't have been, and this was a superannuation fund of Corrs Pavey Westgarth, Mr Dahlsen's not a part of that firm now, he's a consultant and he did not participate or have a beneficial interest in that superannuation fund and had no involvement therefore in the outcome. Nevertheless he disclosed his interest and offered to excuse himself from any discussion on it. But discussion actually didn't take place at the board level. It was handled by management.

You asked if Peter Nash who is the partner in charge of auditing could comment. The auditors, under the companies act, are authorised to comment on the conduct of their audit, not on particular items they account but I invite Mr Nash to make a few comments.

Auditer Mr Nash: Thanks Mr Chairman. Just a few comments. Clearly the focus of the audit is on the financial statements. They're prepared by management, they're approved by the board and it's the role of the independent auditor to conduct an audit of those and to report to the shareholders. KPMG's relationship, or involvement with, the National Australia Bank or any other bank for that matter in no way impairs our capacity to do that. In fact, it's quite common for audit firms to audit a number of companies in the one industry. The audit process went smoothly and as you would mostly be aware and unqualified audit report was issued at the conclusion of our audit.

Charles Goode: Thank you Mr Nash.

You further asked about what the retirement arrangements are with regard to payments for retiring directors and in particular how much Mr Toomey received. Mr Toomey on retirement received 98 thousand dollars. Our arrangements were authorised by shareholders in 1980 and they are that you on retirement get three times or get the equivalent of the last three years director's fees you received. So it's kind of three times. You have to serve three years to eligible and you have to serve for eight years to get the full three times and it's pro rata in between. That three times can be compared with five times in respect to the National Australia Bank and five times for Westpac. So ours are quite historical and quite modest.


Go here for a full chronological list of edited AGM transcripts available from the past decade of shareholder activism.

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