The fall of ANZ chief executive David Hisco

Friday, 21 June 2019

ANZ purchased a $7.5m home for former CEO David Hisco, which it then sold to his wife for a loss.

ANALYSIS: David Hisco was in the top job at New Zealand's biggest bank for eight full financial years.

But he won't be remembered for managing the ANZ New Zealand merger with National Bank, or guiding the bank to become one of the few companies in New Zealand history with a $2 billion annual profit.

Instead, he'll most likely be known for taking the fall over about $50,000 spent on wine storage and 'corporate chauffeured cars' used by Hisco and his family.

Pocket change for someone paid more than $3 million a year and who was rumoured to have eight parking spaces set aside to assure him space in the carpark, at a rate of $500 per month per park.

From the outset, the way Hisco's departure was handled was unusual and provoked a swirl of gossip.

* ANZ's former boss David Hisco clocked up nearly $450k a year in expenses

ANZ CEO David Hisco has gone from the bank after spending thousands of dollars on corporate cars and wine storage.

* ANZ completed probe into Hisco's expenses before staff were told of sick leave**

From the outset, the way his departure was handled was unusual and provoked a swirl of gossip. On May 29, as many journalists were preoccupied with that day's Voyager Media Awards, staff were told he was taking a leave of absence due to ill health but that it was hoped he would return soon.

No public release was issued but staff were sent an email from acting chief executive Antonia Watson saying: 'His doctor says the prognosis is good, so long as he slows down and takes some time off to recover. David has told me he's keen to get back to work as soon as possible but realises how important his health is. We obviously all wish David a speedy recovery… We have a great team and the second half of the financial year is going well, so I'm sure we'll all keep the ship running smoothly until David returns.'

But we now know that an investigation had already finished into Hisco's personal expenses, and that staff had been asked by Watson to 'speak up' if they had any concerns about the business.

On the same day, ANZ informed the Reserve Bank and the Australian Prudential Regulation Authority (APRA) about the expense issue, having already 'thoroughly investigated' the 'potential discrepancies'.

'When ANZ was sure via its investigation that it sufficiently understood the issues involved, it promptly informed APRA and the [Reserve Bank] on 29 May,' an ANZ spokesman said.

Sir John Key told media the bank's board held concerns about the 'characterisation of certain transactions' following an internal review of personal expenses.

But it was not until June 17 that anyone got around to telling the New Zealand public.

On that morning, ANZ sent out a press release saying it had confirmed the appointment of Watson in the acting role and that Hisco had 'departed'.

'Mr Hisco's departure follows ongoing health issues as well as board concern about the characterisation of certain transactions following an internal review of personal expenses.

A company owned by ANZ NZ purchased this $7.5m St Heliers home for former chief executive David Hisco. It then sold the home to his wife at a loss.

'While Mr Hisco does not accept all of the concerns raised by the board, he accepts accountability given his leadership position and agrees the characterisation of the expenses falls short of the standards required.'

Media were called to a downtown Auckland press conference, where board chairman Sir John Key laid out the allegations against Hisco in detail.

He hadn't adhered to the standards expected, acting chief executive Antonia Watson said. Neither would confirm whether Hisco had walked or had been pushed. He would get 12 months' notice but would give up $6.4m in equity.

Many watched this spectacle in astonishment. There was disbelief among reporters at the press conference when Key denied there was a link between Hisco finding his head on the block and the severe embarrassment the bank and its board suffered at the hands of the Reserve Bank just a week before Hisco initially went on leave.

Hisco held one of the biggest jobs in the country and was being taken down publicly, humiliatingly, over a relatively small expense when compared with his hefty yearly expense claim and salary. Key went so far as to speak on Hisco's behalf, airily claiming that, 'David would say he did not meet the standards he set for the rest of our staff and for himself'.

Legal commentators said it was unusual. Usually these sensitive matters are dealt with quietly to avoid the potential reputational damage to both parties.

The Omaha beach house Hisco and associates purchased from ANZ NZ chairman Sir John Key.

But here was Key, not stabbing Hisco quietly in the back and sliding him off into early retirement, rather parading Hisco's failure around like a trophy, only missing Hisco himself to fully complete the public flogging.

Hisco had big expenses compared to other bank bosses, of that there is no doubt. His non-monetary benefits have averaged $441,116 a year over his career in ANZ NZ's top job.

Compared to Shayne Elliott, chief executive of ANZ Banking Group, with expenses of A$17,321 (NZ$18,199) in 2018, it seems a huge amount.

He was bought a house to live in. And was wealthy enough, and reportedly friendly enough, with Key to buy from the board chairman an Omaha beach house worth more than $3.8m.

Why the outrage over a little extra?

ANZ says Hisco didn't accept all of the concerns raised by the board.

The truth is that there had been dissent bubbling away at ANZ NZ for some time, and for the chairman it was attracting significant, personal, negative attention.

The bank was censured for incorrectly attesting to risk compliance over five years. The Reserve Bank requires banks to maintain a minimum amount of operational risk capital, which is determined relative to the risk of each bank's business. ANZ's right to use its own risk model was removed.

This was an embarrassment for the bank's board and chairman Key who had signed an attestation saying the bank complied with regulations, only to discover it had not.

Behind the scenes, the bank's public relations team was jumpy about the criticism, defending the bank's process and disputing the Reserve's Bank's version of events although when offered the opportunity to do so publicly, it backed away from the denials.

There were high-profile calls for Key to resign, that weren't dying down, although Hisco conveniently remained hidden — apparently holed up back in Australia, reportedly in one of the most exclusive suburbs in Sydney.

Instead of Key, the consummate decisive politician resigning from his trophy banking role, it appears attention turned to Hisco, who, hired under former chief executive Mike Smith, may have lost some of the support he initially had in the governance ranks of the bank.

Now, it seems to have created yet more issues for the bank to confront.

Although ANZ said it had acted transparently on the issue, Finance Minister Grant Robertson said it had questions to answer around whether it had kept the regulator, the Reserve Bank, properly informed.

The Reserve Bank said it would not comment on ANZ's employment issues.

So where does this leave Hisco, who had been with ANZ for more than 30 years?

Bill Hodge, honorary academic at the University of Auckland said he was unlikely to return to the bank in any capacity. But, provided his health recovered, he could still make a contribution in another role, perhaps a not-for-profit.

Hodge said it was likely that his lawyers had urged him to take the millions on offer and focus on making a difference somewhere else.

'I would think he has a great future, he's a tremendous talent and has a great deal to contribute. Most [lawyers] would say take the money and do something useful with the rest of your life.'