The world according to Norris

IT WAS just on a year ago. Commonwealth Bank boss Ralph Norris started his daily wog as he calls it (walk meets jog) around his locale, the top-notch Sydney suburb of Darling Point, when he was confronted with the unusual sight of nasty graffiti. The wall of his multimillion-dollar home had been plastered with spray can abuse.

It was an unwelcome introduction to community venting against banks and, in particular, a personal message in response to Norris' decision to lift the bank's interest rate on mortgages more than the Reserve Bank of Australia increase in the cash rate.

Fortuitously, Norris happened on a council worker who agreed to clean the painted protest. By the time Norris arrived home, evidence of the spray attack had been removed.

Spurred by headline-grabbing attacks from the government and opposition, Norris had become a public enemy forced to use a secret second entrance to his home to avoid the glare of infamy. "It's not easy when your house is being graffitied," he recalls with a grimace.

While the physical imprint of the abuse was easily erased, the psychological impact remains. Norris says he is not a good hater but has a good memory, is renowned for being tough and admits to a fair temper.

He crossed the Tasman ditch in 2004 from New Zealand. One of a handful of Kiwi businessmen who had taken the big jobs in Australia, Norris was always going to raise eyebrows among those with a sense of the natural pecking order.

But the chief executive of the Commonwealth Bank, who retires from the job after six years on Wednesday, is a force to be reckoned with and, with a sufficient touch of Maori heritage, was always up for a battle.

He also leaves with the spoils of victory a $16 million pay package last year and another $8 million in 2011 a figure that would have been even larger if he had "blown the lights out on performance".

Norris readily admits it's a haul that by most people's standards looks large. But it's a touchy subject.

"I'm not going to get overly defensive about it but most of this [debates about pay] has been focused on bank chief executives," he says.

"If you look at other [listed] companies in Australia with smaller businesses [and profits] they have paid their executives disproportionately larger remuneration." He mentions one particular, underperforming company but thinks better of allowing me to print it.

Sitting in his expansive office on level 18 of the bank's head office above Darling Harbour on the edge of Sydney's central business district, Norris is reflective of his years at the top and the legacy of his command.

It's been a rugged few years a global banking meltdown in the US, a sovereign debt crisis in Europe, periods of frozen credit markets and now much lower borrowing by local consumers and business.

He sees his stamp on the bank as having turned it from a bureaucracy that cared little about customers to one that is approachable and customer-friendly.

When asked about the highlights of his stint as head of the country's largest bank (it now has a market capitalisation of $72 billion compared to $53 billion when he took the job in 2005) Norris talks in a folksy kind of way about testimonial letters from customers and their wonderful experiences at branch level, the sort of things that would make anyone feel warm inside.

But he also had a commercial and personal financial interest in better service. Part of Norris' remuneration package was tied to customer satisfaction levels the glue that makes clients sticky and profitable. He almost got there.

When he signs off next week he will have ticked a box that measures customer satisfaction, having taken the bank from bottom in the class to one that is challenging ANZ for best in show.

He will have also left the bank with the best technology footprint in the business the envy of its industry peers.

But when he hands the keys to his successor, Ian Narev, he will do so battle-weary from the rigours of running a major retail bank in a country where tradition says "banks are bastards", no matter what the customer satisfaction polls say.

Norris agreed to this interview with a degree of trepidation. He professes, "I don't know whether I wanted to do it," given the plan for his retirement was to "slide out gracefully".

But this is not an option for a man who has done several rounds with the public, regulators and the government. Better that he exits stage left having articulated the world according to Norris.

He makes no bones about the low point in his time at CBA, which was the backlash from the out-of-cycle interest rate increase and the public shellacking by the Gillard government.

It was Melbourne Cup day last year. But the race that stops the nation didn't stop the Commonwealth from its controversial interest rate hike (that lifted home loan costs by 0.45 per cent when the RBA went up 0.25 per cent), nor politicians from slamming Norris for doing it.

"Australians deserve a lot better especially on Melbourne Cup day" screamed Treasurer Wayne Swan. But the public pillorying was only the beginning. Swan had plenty of barbs that he saved for private phone calls to Norris.

"They were personal attacks that I had to take on the jaw . . . The thing I find amazing is that we are supposed to be in an open society and should encourage debate. But I found that politicians are very thin-skinned and if you come out with a statement they don't like they will be on your back and abusive," Norris says. "That's the style of interactions these days and one of the reasons business and government are finding it difficult to get along with one another.'

Despite the backlash Norris said he would not baulk from doing it again if the circumstances warranted it.

The government was playing to its constituents, while Norris was busy looking after his priorities the bank's profit and dividend-hungry shareholders.

What ensued was an ugly public relations battle in which the government vowed to increase control over the banks and CBA investors quietly hoped that Norris' decision would enhance rather than retard profits.

There was a degree of customer backlash and market share of the CBA's retail bank took a blow, one from which it has since recovered. But the experience clearly left Norris with hardened views that government agendas will put populism ahead of policy. No clearer example in Norris' view is the contentious two-strike rule on executive remuneration.

"It's interesting that politicians put these kinds of rules in place," he says. "[Imagine] if politicians were to take the view that if they didn't get a certain level of support in the latest polls they would be spilled . . . I have never seen a politician get over 75 per cent [approval].

"Companies can be prosecuted for misleading and deceptive behaviour . . . it would be interesting to see [what would happen] if politicians were subject to the same benchmark or the same standards. They have a different moral code [and] they are good at deflecting onto others."

As evidence of the government's form on misleading statements Norris points to the proposed minerals tax, which he says "is not going to deliver anywhere near the amount of revenue that has been suggested".

So what would happen if there was a yawning gap between revenue and expenditure commitments for the Commonwealth Bank? "I wouldn't be here very long. I would have been fired," he comments bluntly.

Here is additional advice for Australian governments from Norris: "Beware of falling into the same power-at-all-costs trap that the Europeans have fallen into."

Norris is one of the growing number of experts who don't believe that the global financial crisis ended in 2009, rather that the latest crisis in Europe is an extension of the same problem a movement in the deckchairs.

"I don't think the GFC ever finished. We have had elevated funding costs since 2007 and now they are as high as they were at the height of the crisis."

But he goes even further. He reckons the European sovereign debt issues have the potential to be significantly worse than the Lehman Brothers collapse and the subprime crisis because the world is now talking about nation states.

Not that Norris or his successor needs to go through again the desperate times that were prompted by Lehman's failure. It was a highly stressful situation, Norris recalls, but it was important that political and key business leaders kept their heads. "There is nothing worse for an organisation than to have its leadership looking as if it's out of control," he says of a situation that provoked a domino effect and took down some of the world's best-known banks.

Despite those pressures, it was important to keep matters in perspective. "I am not the sort of person that goes home and kicks the cat might go home and have a healthy glass of red wine," he says. "I have got a great wife I can go home and talk to that's very important. Someone that cares and is a ready listener."

That will become a greater role for Mrs Norris given that by this time next week her husband will no longer be in the thick of things. Having been responsible for 46,000 people, day in, day out, Norris will have only his immediate family to worry about.

But it doesn't mean he will stop thinking or talking about the issues of the day.

For instance, he believes no one is prepared in Europe to take a leadership role in the debt crisis and make a decision when there is a problem and it has got to be fixed.

"This comes back to politicians who find it really hard to make the tough decisions when they need to be made," he says.

"In my view the European Union and single currency was much more of a political construct than an economic construct. So when you had a situation where economies that were not well managed or competitive but, given the opportunity with the euro to borrow at significantly lower rates than they would have been able to get in their own stand-alone states, then there was a problem just waiting for a disaster to happen."

As an elder business statesman he has just stepped down as chairman of the Australian Bankers Association Norris clearly feels qualified to pass on his musings to domestic governments in danger of doing the same thing.

"We should take this as a very instructive lesson of what happens when you get into a situation when you put into place so many different transfer payments and you end up in a situation where you live beyond your means.

"When you get into a situation where you have a minority government that is having to do deals, the danger is that you start to get a bit of this European disease where you are doing minority deals in order to maintain the Treasury benches, which in normal times you wouldn't consider doing."

Despite his forthright views, or perhaps because of them, Norris has no political ambitions.

Few doubt he would easily find a berth within the ranks of the Key government in New Zealand, which goes to the polls today with the ruling conservative administration looking good for a second term.

But Norris, who was the recipient of an honorary knighthood in 2009, is a businessman first and foremost.

Before the Commonwealth Bank, he ran Air New Zealand, revitalising what was considered to be a flying basket case after the collapse of Ansett.

To that end, he believes at the age of 62 he still has a lot to offer albeit not in an executive role. He is already talking with a number of Australian companies about board seats and he intends to spend 25 per cent of his time in his adopted country, which is why he has no plans to sell his Darling Point house.

But New Zealand will become home again. He has a main residence and two holiday homes there.

It also means that he'll have more time to spend with his wife, children and grandchildren, something he is genuinely looking forward to.

That and his daily "wog".