Shock, horror! An extremely wealthy CEO has been using chauffeur services, and the bank that he runs has been paying for it. Furthermore, that bank has been paying for the storage of his wine in Australia because they re-located him to New Zealand to be the CEO of their local operations here.
In the press conference held by ANZ's New Zealand chairman, Sir John Key and acting CEO Antonia Watson to explain Hisco's departure Key said "Hisco believed he had authority from the previous chief executive to spend money on the cars, but because this was 'oral authority' it was difficult to prove or disprove."
For the full details of the downfall of ANZ CEO David Hisco, see RNZ's ANZ CEO leaves due to 'blind spot' on recording expenses – John Key.
According to Key, the outgoing CEO would be paid the rest of his year's salary but will "forfeit unused options to buy shares in ANZ, worth about $6.4 million."
What is perhaps the most interesting and revealing aspect of this scandal is that it's a scandal at all. It certainly should be, but it simply wouldn't have been in the past. The idea of a CEO hitting the headlines and being forced out for relatively minor expenses being "mischaracterised in ANZ's books" would have hardly been conceivable a decade or two ago.
What's more, this is the CEO of New Zealand's biggest bank, and the most profitable company in the country – last year ANZ made a record $1.98 billion. By all accounts, Hisco was a high-performing leader, which is why he was on a salary of $3.8m a year. That salary might go some way to explaining why Hisco might have thought that his expenses of something like $5,000 a year for chauffeur services and wine storage wouldn't be a big issue for ANZ.
But the world has changed so much. Especially since the huge upheaval of the 2008 global financial crisis, there has been a whole new way of looking at wealth, power and elites. Suddenly it has all come under scrutiny, and the wider public has become much more sceptical and attuned to the problems of inequality, corruption, and general unfairness. The age of anti-elitism means that "privilege" and "discrimination" are now the watchwords in democracies like New Zealand. And matching this is a significant decline in levels of public trust in business (and other elites such as politicians).
Many commentators are actually surprised to see this happening. For example, today The Spinoff's Alex Braae labels it an "extraordinarily unusual departure", saying "I'll admit, I wasn't aware that was a sackable offence for highly paid CEOs, as opposed to just being standard practice" – see: Key rolls back the years with presser performance.
But there's no doubt Hisco's downfall is a huge deal, and it's fuelling further criticism of others in the banking industry. For example, banking critic (and founder of a not-for-profit KiwiSaver provider) Sam Stubbs, argues this scandal again shows the need for a clean-up of the whole industry. He's put forward his "cockroach theory", which "says that if you find one under the fridge, there is rarely just one. And so it seems with ANZ" – see: ANZ's David Hisco debacle shows New Zealand needs a banking Royal Commission now.
Stubbs suggests others might also be responsible for Hisco's incorrect expenses not being discovered, and that further action is needed: "That's also shareholders' money, and we also want it back. And if Hisco won't pay it, perhaps the board of the ANZ should, because for nine years this went on under their watch. A question also needs to be asked of the Reserve Bank and Financial Markets Authority regarding their recent inquiry into the conduct and culture of the banks. How did they miss this?"
As a sign of how much public sensitivity there is to the role of elites, there is now a greater inclination in the media to report how ordinary people feel about scandals. For the best example of this, see Susan Edmunds' How do ANZ customers feel about financing the cars and wine CEO David Hisco put on the tab?.
This article cites a marketing academic at the University of Auckland, Bodo Lang, discussing the likely reaction of ANZ customers: "He says many consumers already struggle with how much bank bosses are paid. There's definitely something about being stung $12 for paying a credit card bill late when the boss of the company is putting a wine 'collection' on the tab."
The wider point of the article, however, is that the public has become very distrusting of the banks in general: "If you asked most people what they think of the banks, the answers probably wouldn't be complimentary. As the big-four banks record profit after record profit, many New Zealanders think it's coming at their expense. Consumer NZ found this year only 35 per cent of consumers think banks have their best interest at heart. Almost half said they couldn't be trusted."
There is also a much greater inclination for the media to report on the economic inequality aspect of scandals like this, and the view of workers. For the best example of this, see Michael Cropp's ANZ staff outraged at boss's expenses, says union. This reports that "ANZ staff are said to be outraged by their chief executive's luxury lifestyle while they've struggled for a pay rise… First Union general secretary Dennis Maga said Mr Hisco's actions were especially galling when members worried about staffing levels and pay were told the bank was trying to cut costs."
The same article also reports the analysis of Consumer NZ's head of research Jessica Wilson, who explains how ANZ customers would view the scandal: "It indicates there was some sort of culture of excess going on, that a chief executive thought that this is what he should be entitled to as well as a very generous salary - that other expenses such as this should be covered as well."
Furthermore, there will now be a greater suspicion of the banks: "Wilson said consumers were rightly asking questions about the banking industry's bumper profits, why charges were so high and, now, whether that was going into banking products, or luxury pastimes. This would do little for their trust in banks, for which ANZ ranks among the worst, she said."
Even the Institute of Directors has spoken out against the practices that ANZ directors were arguably complicit in, with general manager Felicity Caird being reported saying that "It was up to the board to make sure the chief executive's expenses were closely and regularly scrutinised". She also "said organisations must have clear rules for reasonable expenses, rather than what Sir John described as an oral agreement between Mr Hisco and a former chief executive."
In explaining Hisco's departure, John Key gave some reasons that are very much in sync with the Zeitgeist: that the elite have to be subject to the same rules as those at the bottom, and that transparency and process are of vital importance – all the type of arguments that might have been de-emphasised in the past if a company board really wanted to retain its CEO.
For example, Key said "We have got to be consistent with the standards we set, from the freshly minted teller to the CEO", and "His departure demonstrates that when people don't do the right thing, we hold them to account no matter the status or position in the organisation" – see the Herald's: Health concerns and 'delicate employment matters' reason David Hisco departure was delayed for weeks.
Of course, Key himself is also under intense scrutiny for his role in relation to Hisco. On one level, there is increased interest in whether Key has had untoward dealings with the CEO, as seen in this article by Anne Gibson: Ex-PM John Key sold ex-ANZ NZ chief Hisco his beachfront holiday house last year.
But it's bigger than this. As the Herald's Liam Dann argues, "it is Key as chairman who is responsible for the issues emerging under his watch. The highly unusual nature of this departure puts more pressure on the former Prime Minister" – see: Pressure mounts on Sir John Key as ANZ turmoil grows.
This article, and others, also draws attention to Key's role in another recent scandal with the ANZ bank: "Last month, the Reserve Bank of New Zealand revoked ANZ Bank New Zealand's accreditation to model its own operational risk capital requirement due to a 'persistent failure' to properly calculate risk. It was ordered to increase the capital it holds as a safety net to absorb possible losses, by 60 per cent to $760 million. That prompted former BNZ chairman Kerry McDonald to write to Reserve Bank governor Adrian Orr, saying he was 'amazed' at the limited penalty imposed on the bank. He called for ANZ chief executive David Hisco and Key to resign."
This issue is well explained by business journalist Rebecca Stevenson in her excellent opinion piece, Why Sir John Key won't resign: there's different rules for the rich and powerful.
However, I took a slightly different view on this, suggesting that Key's elite status would mean he would attract more scrutiny than he would have in the past – see Chris Keall's ANZ resignation call: Knighthood puts target on Sir John Key's back: academic.
Finally, for a sense of how the new mood for questioning the status quo is filtering through to a public demand for understanding the role of banks and business elites in our democracies, see the trailer for a new movie which has its premiere in New Zealand next month:
Capital in the 21st Century – Official Trailer
This film – which is a New Zealand-French production – is an adaptation of French economist Thomas Piketty's ground-breaking book of the same name, which looks at power, inequality and wealth. (And I have a small role in it too).