Here he speaks to ANZ bluenotes’ Andrew Cornell.
David, thanks for speaking with us and providing your perspective on these extraordinary times. How, as a chairman of diverse institutions and a director, [do you] respond to such events? Do boards need to shift their approach?
David Gonski: This is an unprecedented crisis. It is a health crisis but it is also an extraordinary and evolving financial crisis and shock to the real economy.
Many of my fellow directors, whether at the University of NSW, the Art Gallery of New South Wales or here at ANZ are of an age that they have seen many financial crises. That is certainly true of someone of my age. None of us have lived through a true health crisis, the last great health crisis being in 1918.
In my view, despite our inexperience with health crises we have to treat this crisis first as a health crisis, then an economic crisis. Not the other way around.
We need to fully interpret what the health crisis means and then work from there to the economic crisis. I know many people might think the other way around but we can see the evidence – and even look at the modelling – that tells us the economic impact, in the long run, will be far worse if we don’t address the health crisis as a priority.
This realisation leads to decisions which are both unprecedented and difficult for any director. I find it hard to think that our university library, the heart of the university, where people come together, has had to be closed. The art gallery I chair, a cultural heart for Sydney, is also closed. These are decisions which are of a kind which have kept me awake at night in a way business decisions never have.
The impact of this crisis has been incredibly rapid. Parts of the economy have simply stopped. Other parts, be they supermarkets or, more drastically, the health system risked being swamped. What is your perspective on that?
DG: In my experience, crises bring out both the best and worst in people and in companies. Some of what emerges from the intensity of a crisis is priceless and wonderful. Companies do amazing things for their society, they change and facilitate change in very, very constructive ways. They do things that in non-crisis situations might have taken a long time to achieve and maybe not have been achieved at all.
It is the role of directors, executives - business people generally - to not just look at what has happened but rather to interpret what is happening and where that could lead. We need to think through the ups and downs to best position the business but also support the community.
The other unique thing about this crisis – and Shayne Elliott and others have made the same observation – is we can see an end date. And that is basically when we have a vaccine. Now that may not be certain, the timing unknown, but that is different to an economic or financial crisis like the Asian crisis or the global financial crisis where the end was totally unknown until near to it.
That makes a difference to how we think about it because it means we must plan now for coming through the other side and make decisions today in that knowledge.
I do not want to make light of this crisis in any way, the severity is undeniable and the health challenges pre-eminent. But we need to ensure we don’t make decisions in the crisis that would disable an effective reopening, decisions which might compromise us being in the best position we can be when we do re-open.
With such momentous decisions being made, you rightly note the medical response must come first. But that doesn’t mean there are not costs elsewhere, for shareholders, for example.
DG: Our job as directors is to engage with our organisations to make those judgements and indeed balance their impacts. Now some might say that at the moment, with some of the actions we are taking, shareholders in the short term may have to bear the cost and it is my job to act in the interests of shareholders.
But to act in the long-term interests of shareholders – and I stress long term – we must act in the interest of other stakeholders, of staff, of the community. In my view to take a short-term view in a crises like this would be very dangerous. It is difficult to balance these stakeholders in a crisis, but we must. Everybody is paying, unfortunately.
As I mentioned earlier I have had (particularly in my roles as chancellor of the university and as president of an art gallery) to make decisions of a nature I've never had to make previously and which have tested my thinking way beyond questions of profitability, way beyond projections of money. I've had to make decisions based on the understanding of health experts. I've had to make decisions on whether I'd prefer one health expert’s view to another. These are critical decisions but they must be made.
How then are you making those decisions?
DG: I was not around in 1918, none of us were so we haven't seen a whole situation like this. But you bring what intellect you can bring to bear. You bring an openness of mind. You rely on your management. Some will thrive in this situation. And I’ve got to say I have enormous pride in how Shayne and our management team at ANZ have handled this.
I would also put on the record that I am absolutely unshaken in the view that the bank, in seeking to do what it considers best, is consistent with our duty to all stakeholders. We must try and do the right thing by people, try and tide them over, try and get them to the other side. This is truly what we are here for and we must step up.
One of ANZ’s directors, Jane Halton, following a long career in the public service, has been since 2018 part of the Coalition for Epidemic Preparedness Innovation. She is now a member of the Prime Minister’s National COVID-19 Coordination Committee. What role is she playing?
DG: At ANZ we have been incredibly fortunate to have Jane on our board. Apart from her many years as a very senior public servant, Jane has worked with the World Health Organisation and been on key medical committees. Now she is on the Prime Minister’s COVID-19 committee.
The average person looking at a bank would say bankers should run banks and be on bank boards. But I knew Jane from a previous office. I knew the way her mind works. I knew her colossal appetite for digesting the subtleties of a sector and then coming out with a very reasonable way through. She had an immediate impact on our board.
But obviously, in the recent crisis, her understanding of pandemic planning for viruses and her involvement at the highest levels, and now her appointment to the Prime Minister's committee, has been absolutely wonderful for us because we have somebody sitting around our table who has thought a lot about this area and the required response before.
How are the day-to-day board mechanics working in this crisis? Is there a different philosophy?
DG: As a board during this crisis we are meeting much more often – and remotely. We meet as a board every Wednesday morning.
Previously, I had an absolute rule that I would talk to my CEO at the very least once a week. Now, if I speak to Shayne only once a day, that's rare. That’s also a reflection on Shayne as a CEO, he is prepared to ensure the board comes with him in what he's doing. But also it is a reflection of our times – boards need to keep up to date. And this crisis is evolving not only on a monthly or yearly basis. This is evolving on a daily or even hourly basis.
When I consider the role of a board – in normal times – I believe the role of a board is to challenge and ask questions but not in an adversarial way unless there is good cause for that. The job of a good board is to ask questions and bring their outside involvements and judgments and experience to be inherent in those questions and the guidance they give from that questioning and the resultant discussion. A board must seek to open a window for management so as to make sure that management doesn't become insular in the way they make their decisions.
We are a team, the board is there to add value and assist. We all want to make the company better, we’re not just there to joust. And that attitude very much continues during the crisis. Everybody has a view and that's good. The philosophy hasn’t changed.
Can we talk a bit more of the balance between health and economic costs? They are obviously intertwined.
DG: Again I would stress this is not an either/or choice. Achieving the best health outcome will deliver us a better long-term economic outcome but we must realise there is a balance.
In our society we accept certain trade-offs every day. We don’t ban driving because of the road toll, we don’t lockdown business because of the influenza season, we don’t send everyone with a sniffle home. We try to manage those costs with crucial interventions, lifesaving ones like vaccinations or seat belts.
But before we get to that point with the coronavirus, we need to understand this disease much more than we do now. We are not in a position to make those decisions today and so the medical outcomes must come first. We do know with this virus that social distancing works, we can see the data around the impact on the health system and mortality rates if we let the virus escape into the community. We have seen that in Spain and Italy and now the US.
These are decisions rightly left to government and the advice of their medical experts. My view is they are getting the balance right, they are building up the resources of the medical sector, they are supporting the community with enormous fiscal measures. The business community has a role to play and I believe is on board.
I know the lockdowns are very difficult and the social distancing quite unnatural. I am very privileged, we have a nice house and garden, but I am a grandfather and I miss the hugs with my 3 year old and 1 year old grandchildren. It is heartbreaking when the 1 year old runs around behind the laptop to see where Grandpa is. Yet I am very fortunate, so many people are in a far worse predicament.
How do you see ANZ placed? And what will be the bank’s longer term role?
DG: From the perspective of ANZ, as our CEO has stressed on several occasions, we are in a strong position, we are resilient, we are in a position to help our customers. I agree with Shayne that we – the banks in general – are like intensive care units, hopefully managing the vulnerable through to recovery. The reality is not everyone can be saved and that’s why our priority is to keep the banks strong because in the long term that will allow us to come to the assistance of many more.
We have to make sure the economic ICU centre continues for lots and lots of people should they need it over time. We have to prudentially run our bank in a compassionate and very well thought through manner. As Shayne says we need to help cushion the community through these terrible times affecting many businesses.
But at the same time, we can't take on just any loan that's requested of us. We can't make every dispensation that's asked of us. We have to ensure that we are there and strong in the long term. And I have every confidence our staff are doing that.
It's hard work but I think the leadership shown by our CEO is permeating through and I'm proud to be a small part of it.