LUNCH WITH MALEY: Peter Hunt's social vision

The Caliburn co-founder discusses the social challenges of our times, investment banking's distorted focus on short-term profits and how government red tape is stifling the not-for-profit sector.

For the past few decades, Peter Hunt has been a familiar presence in the country’s top boardrooms. He was the person that former AMP boss Andrew Mohl turned to when he wanted to spin off the insurance and fund management group’s troubled UK businesses. He was at the side of Westpac boss, Gail Kelly, when she launched her audacious $18 billion takeover bid for St George Bank in 2008, and he advised the federal government on its $24 billion sell-down of Telstra.

But even while he was working 12-hour-plus days advising the titans of the corporate world, Hunt found himself increasingly preoccupied with the country’s major social problems.

As we settle down to lunch in the bustling third-floor dining room of Sydney’s Republic Hotel, I have to ask how a wealthy and successful investment banker, accustomed to rubbing shoulders with the country’s business and political elite, came to develop such a strong interest in gritty social issues such as homelessness, the empowerment of indigenous people and domestic violence.

It was, Hunt says, a gradual process. "But I found it every bit as interesting as investment banking. In fact, it’s probably more interesting, because you’re dealing with real social outcomes.

"In business, you’re usually dealing with an individual’s business persona at the end of the day. You’re dealing with the person in their role as a chief executive, chairman, company director or chief financial officer. There is always a risk for people in those positions that the real person becomes hidden, that they become immersed in their position and the respect and sense of worth that it gives to them.”

Last year, Caliburn, the corporate advisory group that Hunt co-founded, was sold to US investment bank Greenhill for more than $200 million. Hunt decided to move from being Caliburn’s executive chairman to its non-executive chairman, so that he could devote even more time and energy to tackling major social issues.

It’s a path that he encourages other successful business people to think about taking.

"We live in a society that has all sorts of entrenched social problems. By way of example, the recent report from the Brotherhood of St Lawrence showed that a large proportion of the Australian population are unable to afford proper dental treatment. Can you believe that in a country as wealthy as ours? How can we have 100,000 homeless people? Why do we accept high levels of domestic violence against women?"

At the same time, he says, governments around the country are under pressure to cut spending to reduce budget deficits. "We really need a paradigm shift, otherwise we are never going to solve these entrenched social problems. Business people have the ability to use their problem-solving abilities, and their discipline and dynamism, to help tackle these issues. We need to see more of them working alongside people from the not-for-profit sector and from the government sector.”

In addition, Hunt points out there are huge personal rewards from becoming involved in charitable works. "The reality is that if you start caring about the broader community, you become much happier as a person. You drop all the pretence and feelings of self-importance that business can give to you because you realise how shallow that is. Working in the social sector is also incredibly stimulating.”

Ultimately, he warns, we’re likely to witness some dangerous social and political upheavals in a number of Western countries if people who are lucky enough to enjoy a privileged economic position don’t start rolling up their sleeves and showing a far greater commitment to solving entrenched social problems.

"There’s such a huge polarity in western society between the rich and the poor and it’s getting worse. Something’s got to happen. If you look at the Occupy Wall Street movement, people can laugh and say that it’s ineffective, but it could prove to be the vanguard of future developments that are much more troubling.

"Our entire human history shows that people who continue to be marginalised eventually react badly. The crime rate goes up, there are more thefts and the level of violence in a community increases. Wealthy people are privileged people and the system only works over a long period of time if wealth brings with it a clear sense of responsibility to help the marginalised.”

But with governments around the country looking to trim their spending on social programs, aren’t social tensions bound to rise?

"It's not inevitable” says Hunt. "We just have to be more intelligent and lateral in the way that we approach these problems. There’s enough money in the system to do a lot more than we are doing at present."

In the first place, he says, we need to look at how governments spend their money. "If you introduced government processes into a corporate environment, I guarantee that most businesses would go bankrupt. The only reason these processes are tolerated is that governments have an amazing and largely captive funding source. There’s enough money in the system to solve many entrenched social issues if you change these processes and you make government an outcomes-based system rather than a process-driven system.”

He points out that not-for-profit organisations often have to write lengthy submissions before they receive any government funding. In the private sector, a much more focused approach is taken. "The amount of useless paper work NGOs have to do to get government support is draining and what happens is that people try to avoid going to government because it’s simply too exhausting. You want governments to work in a business-like way with the not-for-profit sector, but they’ve created a system that’s taken them over.”

In the past, Hunt has rankled some of his investment banking peers by criticising the conflicts of interest endemic in the industry. So I’m interested to hear whether his attitude towards the industry has softened. Hunt explains that behaviour in the industry remains distorted by the focus on short-term profits.

"The investment banking industry that we have seen in the last decade is very different from the industry that I joined in the early 1980s.

"Bonuses ballooned. When I started, bonuses were nice, but they weren’t going to change your life. In contrast, before the GFC top people in the industry could retire after just a few years of good bonuses. So short-term thinking for many bankers became the norm. A first-year executive got paid way more than an experienced teacher or a senior nurse. It got out of control.”

But, he adds, "in some parts of the industry, this led people to think that what was good for them was good for their bank and for their client. Most people don’t go out deliberately to deceive a client (although there appear to be many examples in the United States where this occurred) but they can lose their sense of perspective and their ability to be honest.”

As we finish our coffees, I’m curious to know whether Hunt thinks enough has been done to avoid another major financial crisis.

"Regulators are trying hard to deal with the problem. But in reality they have only dealt superficially with the conduct that played a large part in causing the GFC. Just think of the derivative deal that was done with Greece. It had a huge impact on Greece’s accounts and created so many problems for Europe and the rest of the world. But we still don’t know the people who did that deal, the risk committee that approved it or why they thought their conduct was acceptable.

"Despite the severity of the GFC and the role bankers played in creating it, very few bankers have been banned from the industry and even fewer have gone to jail. Until that happens, the financial incentives for the same bad conduct to re-emerge in the future will neutralise all the hard work that the regulators are doing.”

Not surprisingly, Hunt is acutely conscious of the social injustice involved. "The guy who steals from a shop because he is poor is taken away in handcuffs, humiliated and put in jail. But the guys who make themselves rich by risking the livelihoods of everyone else get away with it.”

And he’s deeply pessimistic that the world will avoid another financial meltdown. "Unless regulators put very clear boundaries on what constitutes acceptable conduct in the banking system, it’s going to happen again. We live in a world of market bubbles.”

To read the inaugural LUNCH WITH MALEY column featuring Andrew Mohl, click here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles