The query, which would seep into national business folklore, reflected the extent to which Westpac had slipped behind the arc of progress elsewhere. At the time Joss departed Wells Fargo, almost 60 per cent of its branches in the US were run by women. From this environment, he says, the transition to Westpac, where the proportion was closer to 5 per cent, “felt like going back in time”. The anachronism was not one he could tolerate much longer. As such, he looked to Sherry, who had already made waves at Australia’s Office of the Status of Women and as part of an all-female crew in the Sydney to Hobart Yacht Race, to begin oiling the wheels of change.
The historical strength of the male breadwinner model, coupled with arguments that the costs of child rearing should be borne primarily by parents and not by industry, created a recipe for political strife. Sherry’s answer was to redefine the equation in terms of commercial logic. In 1995, a mere 32 per cent of Westpac’s female staff were heading back to their jobs after maternity leave, a figure that there was a compelling business case for improving. Noel Purcell, then responsible for handling the bank’s relationships with its investors, says: “We had to show why it was value-enhancing, and we worked out that if we could get a 10 per cent rise in the return-to-work rate for female staff, then it would pay for itself.”
Through his skill for intellectualising problems, Morgan would pursue what he called a “sweet spot – a solution that was both the right thing to do and also good for business“. Supporting the predicament of working mothers offered the perfect platform, enabling Westpac to set a standard for the rest of corporate Australia to emulate. Within two years of its maternity pay scheme coming into force, 53 per cent of women resumed work post-childbirth, as the bank carved out a position as their employer of choice in the industry.
For Morgan, this was not purely a matter of hard numbers. His wife, Labor MP Ros Kelly, after all, had been the very inverse of a stay-at-home mother, taking their daughter Jessica into parliament and son Ben out on the campaign trail when both were babies. “David had a lot of influence at home on the women front,” says Helen Lynch, who studied his evolution as an executive at close quarters. “Ros was an extremely successful politician, a minister in the Keating government, no less. Most senior men at the bank did not have a wife with her own career. His daughter, Jessica, was a force, too. David was thinking along the lines of, What kinds of opportunities do I want Jessica to have?”
By degrees, the rusted-on Westpac ways were being stripped off. To accelerate this trend, Morgan made a point of surrounding himself with those who had not climbed up the bank thanks to the old “jobs for life” system. Women, especially, were elevated to positions unheard of just a decade earlier: while Sherry did all she could to stamp out sexism and misogyny in the workplace, Alex Holcomb, a graduate of Wharton Business School in Philadelphia, was enlisted as Morgan’s head of strategy. The appointments were not tokenistic or designed to hit any set quotas, but to furnish his section of the company with abilities distinct from his own. Conscious that there was nothing to be gained from an inner sanctum comprised solely of acolytes, he leant towards those who would challenge his point of view.
In 1995, after two years running the retail bank Morgan was appointed head of the institutional bank. He had baulked initially at running the institutional bank, regarding it as a dismal demotion. During a self-development exercise in 1995, he wrote: “The shift from retail was a bombshell. I realised how decisions are made that you have no control over. I was shattered, shocked, hurt and disappointed.”
He interpreted the switch as a ruse by Stuart Hornery – then Westpac’s largest shareholder as chairman of Lendlease, the multinational construction group that had taken over the Kerry Packer stake – to sideline him from any plans to find a successor to Joss. “Hornery wanted me out of retail, because he felt that I was keeping Lendlease at bay,” says Morgan, who had learnt a lesson about the dangers of alienating an influential board member. “I should have been more politically sensitive.”
So corrosive was the dynamic with Hornery that Morgan initiated a come-to-Jesus meeting between the two of them, in an effort to temper the mutual loathing. Hornery explained how the reasons for his hostility were twofold: first, he claimed, Morgan had obstructed his moves to appoint Lendlease executives to senior roles in the retail recovery program. To an extent, this was true: Morgan did not deem the mooted candidates to be of sufficient calibre and perceived anybody from Lendlease, which was also in the mortgage business, as de facto competitors likely to be used as internal spies. But Hornery’s second objection, based on allegations from one aggrieved woman whom Morgan had fired from the retail bank, was vigorously contested. Her version of the facts, Morgan demonstrated with documents at the table, was wildly at variance with reality.
From his unpleasant jousts with Hornery, a man he saw as “talented but utterly unscrupulous and very vain”, he came to appreciate the importance of not having a Rasputin in one’s camp. Hornery’s conspicuous agenda to control Westpac made it almost impossible, according to Morgan, for him to have an open and trusted dialogue with the bank’s board. One visible manifestation was the misadventure of Westpac’s $100 million mortgage-processing centre in Adelaide, without any of the normal close scrutiny such a grand project would normally have received. While such centres were common in the US, essentially the administrative back office for all mortgage processes, they were poorly suited to the Australian model.
In this period of flux, Morgan was bombarded with enough outside perspectives on his character to trigger an intense bout of self-questioning. As well as receiving guidance from Rosemary Grieve, an executive consultant, Morgan chose to digest more anonymous testimony from across the company as part of an exhaustive performance review that examined every facet of how he behaved. Although he had commissioned most of the critiques himself, many were, in short, devastating. If being manoeuvred out of retail had seemed a retrograde step in his eyes, then some blistering assessments from his own colleagues gave the sucker punch.
“The American firm that conducted it read to me verbatim for two days,” he reflects. “A few things were like stomach blows. For example, our top 40 people had all been asked to describe their best experiences with their bosses. I said that mine was with Bob Joss, but this was seen by two people as shamelessly sycophantic. Then one figure on the board claimed that I had gone into a funk at an institutional lunch, just because the guest speaker – who was hopeless, despite having my approval – had made me look bad.”
While these remarks cut him to the quick, they were equally unpalatable to Kelly, who had resigned from parliament only weeks earlier, in part to adjust to the demands that Westpac life was imposing upon the family.
“I showed her the report and she broke down crying,” Morgan reflects. “She looked at it and said, ‘You’ll never be CEO.’ I had been so focused on this massive job rescuing the bank that I had done it to the exclusion of any smart or empathetic thinking about those around me. I had been somewhere between naïve and grossly negligent in not tending to relationships more. That would be a fair charge.” Compounding the distress for Kelly was the trauma of her parliamentary exit, marked by creative if stinging headlines involving whiteboards, after it emerged that she had worked out the sports grants that proved her undoing on a giant whiteboard in her office. The distribution of sporting grants to marginal electorates held by the Labor Keating government was not adequately explained and Kelly as sports minister resigned as a result of the controversy.
In his determination to change how he came across, Morgan remembered a piece of advice offered by Harry Price, the “old-school wise guy” he had made CEO of Westpac New Zealand. “David, never assume that people understand your motives for doing what you do,” Price told him. “You need to tell them.”
Morgan also realised that the institutional portfolio – a prize that he had viewed at first as akin to a wooden spoon – could burnish his expertise. With Westpac’s operations across Asia and New Zealand bolted on to his brief, he gained, after his years in retail, a more fine-grained understanding of the bank’s many layers.
“I know that David had taken his shift to Institutional as this big, crushing blow, but he rolled up his sleeves,” Joss says. “This work was all about sophisticated transactions and large corporate finance. David had both the intellectual horsepower and the macroeconomic training to be on top of it.”
By 1996, Joss had decided that it was time for a different kind of reshuffle and appointed, essentially, three co-deputy CEOs in Morgan, Pat Handley and John Morschel, Hornery’s former second-in-command at Lendlease. The move, while not publicly spelt out, was intended as a clearer demarcation of the executive pecking order and as a first tentative draft of a succession plan. Joss, naturally, wished to give no such impression beyond this closed circle.
But the jockeying for position stirred by his shake-up was unmistakeable. Morgan’s wariness of Handley was well established, as attested by his private admission in 1995 that their relationship was “catastrophic”. With Morschel, who had taken over as chief officer in Morgan’s old realm of retail, the ambience was far more cordial on the surface, even if an intensifying rivalry bubbled beneath. As Morgan puts it: “There was never any open animosity, but we were fierce head-to-head competitors.”
Before long, the lines of this power struggle became increasingly evident. Morschel was represented in sections of the press as the favourite to replace Joss – “the heir apparent”,The Agecalled him – but come the winter of 1997 there were signs he may have overplayed his hand. On August 14, a board meeting was convened to help lift the uncertainty, and yet within barely a fortnight Morschel had left the bank as an executive, while Joss agreed, albeit without a formal contract, to a minimum three-year extension that would take him to the age of 60. “There was some speculation that Morschel may have tried to force the issue before Bob was ready to leave,” Morgan explains.
While Morschel’s exit promised to smooth the path to the hotseat for which Morgan hungered, Joss’ renewed commitment threatened another substantial delay. If this caused Morgan some anxiety, he at least had the counsel of a Canberra confidant, a certain Paul Keating, on which to fall back. “David was especially disappointed when the board reappointed Joss for a second term,” Keating says. “But I told him I would be very surprised if Joss served the full term. I said: ‘Americans are like homing pigeons. They all go back in the end.'”
Keating offered a sage and soothing voice, and so did Joss himself. Morgan, after all, was far from marginalised: he had a seat on the board, he had been granted 1 million unhurdled share options, and he had received an assurance from John Uhrig that the board would, when the time came, look for an insider to carry the flame after Joss. All of these gestures were indications, Joss insisted, of Westpac’s confidence in him.
Morgan’s moment arrived a good deal sooner than he expected. It is a story never before told that in late 1998, Westpac was actively exploring the possibility of a merger with Commonwealth Bank (CBA), a sizeable economic shift that would reduce the “Big Four” Australian banks, also including ANZ and NAB, to a “Big Three”. “There were some powerful reasons for doing so, with so much overlap and duplication between banks,” Joss says. “If you could put two of the Big Four together, you could add tremendous benefit for your shareholders and still do a great job for your customers.”
The critical day was October 1, 1998: with a federal election due, members of the two parties were poised to announce a deal at the Lodge, whether or not they had the express approval of then prime minister John Howard. But a sticking point arose when advice was received that the chances of the deal being approved might be assisted by having an Australian in charge of the combined entity. Accordingly, it was decided that David Murray, CBA’s chief executive, would be CEO, and Uhrig chairman. Joss was to be merely vice-chairman in charge of restructuring. “Bob was pretty hurt by that,” Morgan reflects. “It was a staggeringly incompetent decision.”
Joss, for his part, asks: “Would the politics have tolerated a non-Australian in that role? It was a sensitive subject at the time. I would probably have to be out to make a deal like this happen, to get the other party across the line.”
In the end, this vision of a Westpac-CBA “superbank”, one that would hold 38 per cent of all the retail deposits in Australia, never took wing. The agreement was all but sealed when CBA announced that it would not accept Morgan and Handley staying on as executive directors, demanding either that both be removed or that CBA be free to add two of its own. With that proviso, the deal disintegrated, the feuding sides poles apart on how such a behemoth of a bank should be constituted.
There was also, inescapably, a rupture between Joss and the Westpac board, even without a consummation of the mega-merger. Uhrig’s willingness to accept the accession of Murray to the overall CEO position above him had stunned Joss, to the extent that he was ready to contemplate a move elsewhere. Overtures had begun, in particular, from Barclays in London, but he and his wife, Betty’s two children were both newly married and living in California, and the homeland started to exert the emotional pull that Keating had envisaged. “We thought, ‘Do we want to retire in Australia at 65?'” Joss says. “We had a sense of being tugged back.”
Joss would be leaving behind a bank in far more robust health than the one he inherited. In 1993, he had confronted a company on its knees, humiliated by a loss larger than its shareholders’ funds. As Uhrig acknowledges: “It really doesn’t get much worse than that.”
And yet in six years under Joss’ stewardship, Westpac had not merely weathered the tempest but thrived, finding itself $1.3 billion in the black by 1999 and with a share price hovering between $10 and $11, up from $2.85 on the day he had started. A more progressive, female-friendly culture held sway, while the once-endemic politicking had been cut back almost to an irreducible minimum. “Westpac recruited an experienced, thoughtful banker, with the ability to act decisively rather than brutally,”The Sydney Morning Heraldjudged. “Joss was a builder, not a wrecker.”
In Morgan, who had meshed disparate skills across all spheres of the bank, an heir presumptive had been found.
Fresh off a short summer break, Morgan discovered early in February 1999 that he was to be only the 23rd CEO of Westpac in its 182-year history. In a sense, it was a precious surprise, given the mellowing of his habit for “managing upwards” – as one colleague acidly expressed it at the time – and his acceptance that Joss appeared to be settling in for a longer haul. “When the edge was taken off the ferocity of my ambition, my chances of getting the job improved,” Morgan says. “If ambition is too over-the-top, too naked, it gets resented. You’re seen as too sharp-elbowed, too out for yourself. Mine began to moderate once I had digested all the harsh peer reviews and got over the hurt of my own ineptitude.”
It reflected the seamlessness of the handover that Morgan’s appointment was confirmed simultaneously with Joss’ departure.
Just one day before his rise to CEO was broadcast, Morgan delivered that year’s Chris Higgins Memorial Lecture, named in honour of his late and much-lamented friend, to the Economic Society of Australia in Canberra. He was careful not to take questions afterwards, lest the story leak out early, but the speech offered a distillation of some vital learnings that had led up to this auspicious juncture in his life: the dangers of devaluing the federal bureaucracy, the importance of business-friendly economic policy, the value of a dynamic and entrepreneurial private sector to the success of a nation. “It seems clear to me that high-quality public policy is too important – and too difficult to secure – to be left to politicians and bureaucrats,” he told the audience that evening. “If we leave the task solely to government, as the velocity of economic change accelerates, we will inevitably move too slowly.”
Not even 24 hours later, Morgan was handed the keys to an office from which he could turn his words into deeds. The sense of responsibility was solemn, the rush of anticipation close to overwhelming.
“David Morgan, CEO of Westpac?” said Paul Keating, in a subsequent speech. “A technocrat, the husband of a Labor minister? That would simply not have been possible before we opened up the Australian economy.”
Luck, likewise, plays its part at these moments. As Morgan has put it: “Any chief executive of a major company who denies the role of luck is either dishonest or delusional.” Such CEO positions are rarefied, available infrequently, and coveted by just about everybody in the organisation. Any route to the pointy end of the pyramid must, by extension, rely to some degree on good fortune. Morgan was fond of an analogy of the waves rolling in at Bondi Beach: one needed luck for there to be any good waves at all, but one also had to be skilled and ready to catch them. Once caught, those waves needed to be ridden all the way to the shore.
This is an edited extract fromDavid Morgan: An Extraordinary Lifeby Oliver Brown (Hardie Grant Books).