When I recently reread the obituary of Don Sanders, who died in November 2020, I reflected on an amazing but largely unheralded career. Don lived to a good age of 93 after retiring at 65 and was as humble in retirement as in work. He didn’t gradually fade away; he left the financial markets stage entirely for his final 28 years.
I asked myself where Don ranks in the banking pantheon. Then it struck me that there really is no such memory place for bankers. Bankers as CEOs in Australia’s banking oligopoly are normally given a licence to print money, a de facto guaranteed franchise. Their job is to collect their economic rents, not to impatiently rev the place up.
For regulators, yes, there has been the occasional deserved pantheon placeholder. Central bankers are sometimes called to put out the raging fire of inflation, and Paul Volker was my hero as Chairman of the US Federal Reserve from 1979 to 1987. He possessed the ability to be incredibly tough while avoiding the hubris.
Sanders was of this ilk. Humble, learned and vastly experienced, he straddled both central banking and commercial banking, and I nominate him as the most distinguished banker in Australia’s history.
His career path
Sanders first joined the Commonwealth Bank in 1943 as a teller in Wollongong, at a time when the Bank also functioned as Australia’s central bank. After completing an economics degree, he moved to Canberra for a stint in Treasury, then spent a year at the Bank of England and on to the Reserve Bank of Australia in 1960 under its first Governor, Nugget Coombs. He stayed at the Reserve Bank for the next 27 years where for the last 12 years, he was Deputy Chairman and Deputy Governor.
Sanders was therefore perfectly qualified to become the Reserve Bank Governor, and his chance came in 1982. John Howard was then Treasurer and John Hewson his principal adviser but there may have been some appeal to Howard in having a Governor of lesser status and grounding than Sanders. Further, I suspect there were professional and personal differences in style between Hewson and Sanders and so, to the profound shock and dismay of many at the Reserve Bank, the role went to Bob Johnston.
This decision must have been a terrible disappointment to Sanders, but he soldiered on, although at the age of 55, his opportunity for Governorship had gone. He stayed at the Reserve Bank for another five years.
CBA comes calling
In 1987, aged 60, he was offered the role of Managing Director and CEO of the Commonwealth Bank. He was instantly tempted but he knew the appointment would be received with mixed feelings in some quarters. Early in the deregulated era, the Commonwealth Bank was a bloated and protected species, and more out of touch with the real world than its private sector bank competitors.
Bernie Fraser was Secretary of the Treasury beginning in 1984, and he told me:
“I always had a soft spot for Don. He was tough but he didn’t outwardly display that toughness. In fact, he covered it with a facade’.
Fraser was also a director of the Commonwealth Bank and was aware of the magnitude of the task for the new CEO. He said that prior to the appointment of Sanders, he saw presentations by management at board meetings that were “unbelievably bad” to the point of being “bloody hopeless”.
Two of my favourite paragraphs on banking deregulation, written by Al Wojnilower, formerly of First Boston, say:
“The system pre-deregulation is correctly described as a well-kept and orderly zoo. Different species such as banks, brokers and insurance companies were neatly housed and fed in separate cages divided for function and geographic scope. The bars between the cages prevented the various species from preying on one another. Within each cage to be sure there was, as in a real zoo, competition as respect the pecking order, the best food, and so forth, but the vigilant keepers made sure this never led to serious injury or death. Relations between the animals and the visitors, between the financial institutions and their clientele, were sober and sedate.
Deregulation of the 70s and 80s destroyed this idyllic arrangement … this was unfortunate for the prosperous inhabitants of the gilded cages who naturally tended to attribute their own wellbeing to their own efforts, and believe they could do even better, if set free to forage on others turf … Most of the caged animals had enjoyed a sheltered existence like that of farm animals or even house pets. Now they were freed to become both predator and prey in an unfamiliar jungle that offered reduced nourishment …”
How CBA transformed under Sanders
When Sanders took the reins at the Bank he had joined in 1943, after 44 years in the wings, he knew he had only six years till statutory retirement and much to do. Fraser saw first-hand Sander’s wonderful bedside manner, sitting down and chatting with private sector CEOs and how ‘the organisation really blossomed under his lead’.
Sanders was ably assisted by young tyros like David Murray and Ian Payne and an older head like Bruce Asprey, who knew where the bodies were buried. David Murray remembers a bank trying to catch up to its trudging fellow cage dwellers, out in the jungle now.
The Commonwealth Bank’s biggest handicap was the longstanding issue of the Board and the Government not seeing eye-to-eye, like Bureaucracy A versus Bureaucracy B, and the enemies within included unions, position holders and seniority rules.
According to Murray, ‘Don quickly found a way.’ The two big issues were dividend policy and capital shortage. After all, if the Bank was the only Australian bank with a government guarantee, why did it need capital? Sanders put himself in the shoes of the politicians and argued back to his armour-wearing board colleagues and bridged the divide.
Things started to get sorted. At management level internally, fiefdoms were common, especially in Staff Department. It existed more for the industrial relations to satisfy unions and the Canberra bureaucracy than managing human resources.
His management style
To sum up Murrays’ views on Sanders, he said:
“He was a one-off special, he had such a soft nature, but on matters of intellectual or administrative importance he was very, very, tough. It’s a rare combination and it comes with the best people I have learnt from.”
Other glimpses come from Tony Aveling, a BT colleague who worked on corporate matters with Sanders, including the acquisition of State Bank of Victoria (SBV). It was a particularly difficult transaction, signed after months of negotiations with a reluctant Victorian Government. The Victorian opposition, perceiving political opportunity, threatened to block completion of the deal. Aveling and Sanders met the opportunists, and after hearing their concerns, Sanders underwent a metamorphosis into a gentle professor, eyes half-closed, seemingly musing to himself, in an academic matter, along these lines:
“Well, SBVs customers have been told they will shortly become depositors in the Commonwealth Bank, at which time they will become my responsibility. But if you fellows block this you could see a run on the bank. I suppose Bernie Fraser would have to step up … No, no, I am forgetting … state banks are not regulated by the Reserve Bank, are they? So it’s not Bernie’s problem. I guess it would become your problem.”
Message received.
Garry Mackrell, a strategist and member of the Commonwealth Bank Executive Committee for many years, worked almost his entire career in the Bank. He tells a story where a pushy investment banker was seeking a last-minute spot on the underwriting panel for the prized Commonwealth Bank float. He lobbied the politicians successfully, to Sanders’ annoyance, and so stood to present his case. Sanders swivelled his chair, took out his pocketknife and nail file, and proceeded to manicure his nails, filing away for 20 minutes with no eye contact. Then he called time and out the door trudged the banker with not a sausage.
Sanders was as old-fashioned as anybody born in 1927, and operating in the 1990s, would be. David Murray tells how one day, Sanders confided that he would retire on a seemingly undistinguished date. The date fitted no plan, no calendar, nothing, just a random date. Murray asked its significance and Don replied, “It’s my 65th birthday.”
From a distance, I observed how Sanders avoided the nonsense and hubris, especially sorting out bank credit problems of the late 1980s. Former Reserve Bank Governor, Ian Macfarlane, was also a fan of Sanders, and he commented to me that,
“Two state banks failed, and two of the Commonwealth Banks’ three big competitors made losses and had to be recapitalised.”
But Sanders focused closer to home, on making the Commonwealth Bank worldly and ready to compete. He avoided the excess while picking up one of his fallen competitors, SBV. Over a 52-year career, Sanders only really worked in one place, finishing his amazing career as CEO of the Commonwealth Bank. Once passed over for the Reserve Bank Governor role on a political whim, Paul Keating eventually righted a wrong. Speaking at the funeral of Sanders, Keating said,
“Don was fundamentally a great public servant, he was very important figure, he was central … in the transformation of Australia from a closed economy to an open economy.”
So true.
Rob Ferguson was Chief Executive Officer of BT Australia from 1985 to 1999, and after chairing several large, listed entities, he co-owned Magic Millions and is now retired.