What ADI Directors

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• What ADI Directors Officers Need to Know and
  Must Do in Todays Economic Environment
• Professor Tyrone M Carlin

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Overview

• The Legal Frame
• Very Far From Normal
• A Challenging Transition
• Some Common Responses to Challenge
• An Alternative Agenda

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The Legal Frame
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Paradise

• If you have five directorships it is total
  heaven, like having a permanent hot bath. No
  effort of any kind is called for. You go to a
  meeting once a month in a car supplied by the
  company, you look grave and sage and on two
  occasions say, I agree, say I dont think so
  once, and if all goes well you get 500 pounds a
  year.
• Lord Boothby, British Life Peer, Circa 1962

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Court Sanctioned Paradise

• The Marquis of Bute took no part in the conduct
  of the business of the bank. It may be that he
  neglected, as he certainly omitted, to attend the
  meetings to which he was summoned. But neglect or
  omission to attend meetings is not, in my
  opinion, the same thing as neglect or omission of
  a duty which ought to be performed at those
  meetings.
• Re Cardiff Savings Bank (1892) 2 Ch. 100 at 109

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Paradise Lost

• Daniels v Anderson (1995) 13 ACLC 615
• ASIC v Adler (No.3) (2002) 20 ACLC 576
• Vines v ASIC (2007) 25 ACLC 448

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Very Far From Normal
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No Garden Variety Event!
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Change Pre Crisis to July 2009
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Fiscal Stimulus Selected Jurisdictions
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Central Bank Assets, Weekly
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July 2009, Change from Previous Month
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Australian Net Equity Raisings
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A Challenging Transition
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KeyJurisdictionReal GDPGrowth
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Contributions to Growth Y/E March Qtr 2009
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Negative Real Cash Rates
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Credit By Sector Y/E Change
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Employment
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A Deluge of Regulatory Change

• Competition
• Energy / Carbon
• Telecommunications
• Taxation
• Prudential Oversight
• Market Surveillance Integrity
• Executive Compensation
• Financial Reporting

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Synthesis
Legal Climate
Regulatory Climate
Economic/Commercial Climate

• Persistent ratcheting
• of director and officer
• obligations

• Greater complexity
• Fewer unregulated
• niches
• Greater vigour in
• surveillance/ enforcement

• Heightened ambiguity
• Greater competition
• Realignment of key
• competitive advantage
• vectors

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A Highly Challenging Policy Transition

• Substantial uncertainty in relation to
• Timing
• Magnitude
• Coordination
• Impact
• of economic management policy transition.

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Some Common Responses to Challenge
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Response?
Business as Usual
Restructure
Or
Cost Stripping Drive
The Usual Suspects
Pursuit of Scale
Brand / Image Refresh
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Restructure

• Frequently reactive and not embedded in clear
  strategy.
• Often driven by ill defined objectives (where
  objectives have been set at all).
• Can represent a substantial and costly
  distraction.

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Cost Stripping Drive

• Reactive cost carving is sometimes necessary and
  justified but more often the business equivalent
  of palliative care.
• Complicated by a lack of clear cost structure /
  driver understanding within organisations.
• Not joined to strategy.
• Good cost management is a cultural discipline and
  a strategic rather than tactical / reactive
  phenomenon.

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Pursuit of Scale

• Sometimes driven by a misreading of basic micro
  economic theory strategy formulations such as
  the Porter competitive advantage theorem.
• Transaction driven growth must be understood to
  be subject to high risk.
• In most businesses, scale, or lack thereof will
  not be the key determinant of success /
  competitive advantage.
• Rather, scale may assist to leverage true drivers
  of value / advantage.

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Brand / Image Refresh

• Costly, distracting and potentially dangerous.
• Gaps may still remain between revised message and
  actual customer / market proposition.
• Beware logo consultants.

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An Alternative Agenda
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What Does This Really Mean?

• Choice survey published during the week shows
• Comparatively low levels of customer satisfaction
  with big banks
• Comparatively high levels of customer
  satisfaction with credit unions.
• Is this as bad for the banks as it might at first
  look?

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Satisfaction May Mislead
Search Costs
Customer/ Member
Switching Costs
Stickiness Factors
Competitor Lures
Value Proposition
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A Concluding Proposition

• At the level of the firm, customers are the
  direct drivers of operational and financial
  stress / success.
• Stress results from a mismatch between a firms
  anticipated and actual customer behaviour.
• It is imperative that organisational strategy be
  anchored on an awareness and understanding of
  customers.

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