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| Graham Kraehe Chairman |
This was a year of unprecedented issues and change for the National, triggered by the discovery of $360 million in foreign currency options losses in January 2004.
This led to the resignations of Chairman, Charles Allen, and Managing Director and Chief Executive Officer, Frank Cicutto. This was followed by a Board dispute between Directors over the independence of the investigation into the unauthorised trading.
PricewaterhouseCoopers (PwC) and the Australian Prudential Regulation Authority (APRA) reviewed the circumstances surrounding the unauthorised trading, and the outcomes of those investigations were published in full.
As a consequence, shortly after I was elected Chairman of the National, I made three promises to shareholders:
- To be open and transparent,
- To accelerate the renewal of the Board, and
- Lead by example in creating an open culture in the organisation.
These promises were fundamentally important to building a new National and addressing issues raised by the foreign currency options matter.
Much was done to fulfil these promises.
Open and Transparent
Together with new Managing Director and Chief Executive Officer, John Stewart, I undertook a program of meetings with all our stakeholders to listen to their concerns.
From this, it became clear the National had not been open or transparent enough in the past.
To set a new standard for open and transparent behaviour, the PwC report on its investigation into the foreign currency options matter was provided to our regulators and released in full to shareholders.
This was accompanied by a media conference and briefing for share market analysts at which John Stewart and I presented the outcomes of the PwC investigation.
The appointment of legal firm Blake Dawson Waldron and accounting firm Deloitte ensured independence issues were properly managed.
The APRA report reached broadly the same conclusions as the PwC report. The National is committed to complying fully with all APRA remedial actions and subsequent enforceable undertakings agreed with the Australian Securities & Investments Commission (ASIC).
This disclosure and openness is indicative of the high level of accountability the Board intends to demonstrate and maintain.
Accelerate the renewal of the Board
Shareholders were justifiably upset about the foreign currency options losses and dispute between Directors that became the subject of public debate.
I sincerely regret the concern created and the associated damage to the National’s reputation.
As part of the subsequent Board renewal process, Directors Kenneth Moss, Edward Tweddell and Catherine Walter resigned. Due to increased commitments, Dr Brian Clark also resigned.
There was a thorough and exhaustive process involved in selecting new members of the Board.
The addition of Michael Chaney as Chairman-elect and new non-executive Directors Robert Elstone, Danny Gilbert, Paul Rizzo, Jillian Segal and Malcolm Williamson create a Board with a blend of financial services experience from Australia and the United Kingdom. It includes Directors with experience beyond the financial services sector.
Ahmed Fahour, CEO Australia, and Michael Ullmer, Chief Financial Officer, joined John Stewart as executive Directors. This will assist the relationship between Board and management.
The Board has strong credentials to lead our cultural change program and relate well to our stakeholders. We are fortunate to have people with such valuable experience to lead the building of the new National.
I have received a great deal of positive feedback from shareholders about the appointments and Board renewal program.
The Board will be participating in an externally facilitated workshop to agree on the ways in which Directors and the Board will show leadership in the cultural change program.
Chairman-elect, Michael Chaney, plans to retire as CEO of Wesfarmers in July 2005. I look forward to working with him in the transition phase prior to him assuming the Chairmanship in September 2005.
Leading by example to create an open culture
The PwC and APRA reports highlighted the need for cultural change at the National and stressed the need for Board leadership and responsibility in this area.
The Board is working with the management team to lead the cultural change program. All employees have been issued with a Statement of Corporate Principles, and the Board will lead by example in demonstrating these Principles.
The Principles have been supported by an employee awareness campaign and will also be incorporated into performance criteria.
Management committees have been reviewed as part of our review of corporate governance to ensure open and transparent reporting to the Board.
The Way Forward
I am pleased with the outcome of the Board renewal program. The level of disclosure and the culture change initiatives provide tangible evidence that we are delivering on the undertakings I first made as Chairman.
The Board is determined to lead the culture change program and work together with the Group Executive Committee to build the new National.
I would like to thank my colleagues on the Board, Managing Director and Chief Executive Officer, John Stewart, employees, shareholders, customers and the communities in which we operate for their support in the last 12 months.
Graham J Kraehe
Chairman
Click here to download a PDF of the Concise Annual Report 2004 (2,596KB)
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