Interview: Simon Powerby Guyon Espiner
More than a year after quitting politics, Simon Power is in the banking business and is keen to see corporate New Zealand contributing to “thought leadership” debates.
Simon Power quit Parliament at the last election and he’s looked back only once. He tuned in to Parliament TV to watch the first-reading debate on the bill to give legal status to same-sex marriage.
There was a personal connection there, he says, and it’s the one mistake he admits to: he voted against civil unions back in 2004.
Power’s marriage to politics ended in an abrupt divorce. He refers to his former occupation the way some people refer to a “dreaded ex-partner – by scrupulously avoiding mentioning its name. He calls it his “past role” or his “last life”.
Power has very deliberately shut politics out. He had to. “It’s not my world any more,” he says. “I didn’t want to be one of those guys who were turning up to functions after the fact, and actually I haven’t set foot back in the place.”
It’s not that he didn’t like being an MP. “I loved it, thoroughly enjoyed it, threw my heart and soul into it. And now I am doing the same here.”
“Here” is a senior management job in private banking for Westpac. And asked whether he rules out a return to politics, he employs the language of his new life: “I don’t think it is an option which would have any currency in any part of the market.”
But there are traces of the politician. Just ask him whether he’s aiming for the CEO spot at the bank. “Look, I am very happy doing what I am doing,” he responds, laughing when it’s pointed out that this is very much a politician’s answer.
Power lives up to his name. He’s big and tall and when he shakes your hand you feel a tinge of inadequacy. His job title is the Managing Director for Private Wealth and Insurance. He looks after the Private Bank, reserved for clients who earn more than $450,000 a year or have loans and investments worth more than $2.5 million. It’s the Koru Club of banking: less waiting, more personal service.
In 2010, Finance Minister Bill English indicated he might put the Government banking contract, held by Westpac, up for tender. But Power insists this was not a motivating factor in Westpac’s decision to hire him.
“I’m not sure the political contacts were of any interest,” he says, “because one thing they’ve done very deliberately is quarantined me from public-sector interface. I don’t have anything to do with the Government banking.
“They came to me and said, ‘We’ve been thinking about this and we think this might interest you.’ I think I brought value in understanding how to run reasonable-sized machinery.”
The bank must have rated his ability to push through change after watching his blitzkrieg of ministerial reforms in the justice sector – although the jury is still out over how positive his changes were or how durable they will be. His successor, Judith Collins, has unpicked many of his ideas – including the process of considering compensation for David Bain – although he refuses to discuss what she is doing in his old portfolio.
Westpac also wanted to mine the knowledge of the transtasman market that Power built up when, as Minister of Commerce, he worked on the single economic market. He has a vice-like grip on the new financial regulations – he wrote many of them – so does he feel like a gamekeeper turned poacher?
“Look, the bar is very high for me,” he says. “I have to do everything within my power to make sure those rules are met at every single juncture. I am very conscious of the fact that I was partly behind putting this thing together and now I have to make sure that we understand the culture and meet those rules and guidelines.”
Bankers don’t enjoy high public esteem, in large part because they make so much money. Westpac’s cash earnings for the year ended September 2012 were $707 million – a rise of 22% on the previous year. But prosperity in the banking sector is important for the economy, Power says.
“New Zealand, during the global financial crisis, did well or better than comparable economies, because the banking system was strong and that was in large part due to the four majors [Westpac, BNZ, ANZ/National and ASB].”
So how can it be that in an economy that is barely growing at all, a bank can grow at 22%? At first Power says it’s “the nature of the business” but, perhaps realising this is an inadequate explanation, adds that banks are in “the middle of the pack” in terms of return on equity for companies of comparable size. “If the banks are strong, the economy is strong and I’m actually pretty comfortable with where it all sits.”
No doubt the four big banks are pretty comfortable with the collective profit of $3.4 billion they made in 2012. For Power, if they do well, we all do well. “I’m not sure how many thousands of people all four [banks] employ together but Westpac employs 5500 people who all pay tax, all pay PAYE, who are all in the economy.”
Banks do pay tax, of course, although sometimes reluctantly. In 2009, Justice Rhys Harrison ruled Westpac had structured transactions with the purpose of avoiding tax and ordered it to pay $961 million in back taxes. Banks also pay eye-wateringly large sums to their top executives. Westpac CEOs now earn more than $5 million a year. Isn’t that kind of sum just a bit silly?
“It’s a big organisation and an enormous amount of responsibility goes with it and in the end it’s a demand-and-supply issue. If you want serious talent running these organisations, they big command big salaries,” Power says.
But does he worry that if the bank teller is earning $50,000 and the boss gets 100 times more, then things are getting a bit out of whack? “Internationally, this has been a debate since bailouts on Wall Street. I do think large corporates are far more sensitive to these issues, but the truth is that these are massive billion-dollar entities that small economies rely on to be managed by highly skilled people. So in the end it pays to meet the market.”
As a politician, Power always appeared to have high ethical standards and a strong moral compass. So now when he puts on his tie and goes to work – at 6.30am, he claims – what’s it all for?
Interestingly, he feels he is still crusading. “I don’t think that it is government’s job alone to contribute to the thought leadership debate in New Zealand.”
He says Westpac has taken a leading role in several economic debates, including teaming up with Massey University for the New New Zealand Forum, bringing Al Gore to New Zealand to talk about climate change and hosting Daniel Franklin, executive editor of the Economist.
“I genuinely believe that there is a role for corporate New Zealand to be contributing to … what I would loosely describe as thought leadership or commercial diplomacy debates. It’s not just bottom line. It’s good corporate citizenry. It’s contributing to the debate without getting political,” he says.
The latest project is a major longitudinal study on financial literacy – again, in partnership with Massey University, which will track the views, every five years for 20 years, of people now aged between 18 and 22.
The initial results show that 77% didn’t think planning beyond four years was important and about 65% learnt everything they knew about finance from their parents. “If financial institutions want to be serious players in the economy in the years ahead, it can only be to their advantage to have a higher level of financial literacy in place.”
He’s not pretending it is altruism, and it isn’t patriotism, either: his is an Australian-owned bank. But, he says, the Australian-owned banks that operate in New Zealand are among the most stable in the world. “We should be looking at that as a tick of economic stability.”
The profits go to Australia, but Power prefers to focus on the benefits to New Zealand including the tax and jobs.
There was disbelief when Power announced he was standing down. Conspiracy theories flourished. No one could understand why someone with such great expectations would leave before he was pushed. Power says Prime Minister John Key “was surprised and then after a period of time he understood it”, and others had the same reaction. “It was the right time for me – 42 years old. It was either go then or do another 10 years.”
They would have been 10 years in which he might have got the top job, I suggest.
“You know better than I do that this stuff doesn’t work like that,” he responds. “I spent a lot of time in that second term in opposition thinking about how politicians have exited over the years and it never ends well and I was just not going to follow that model.” So he is a rare exception to the rule that all political careers end in failure. “I like doing things on my own terms,” he says simply.
Power describes the job offer from Westpac as a “bolt out of the blue”, although he had an appetite for the commercial world from his time as Commerce Minister. He had been considering a few things “on the fringe of government” along with the Westpac offer, but says his wife told him, “You are no good on the fringe of anything; let’s go and do something new.”
It’s a Power trait, giving others the credit. His wife prompted the Westpac decision, he says, and his success is often down to his employing people who are smarter than he is. “I maintain to this day that I had the best staff in the Beehive when I was a minister and I reckon I have some of the smartest people working for me in the commercial sector.”
This self-deprecating approach is a skill he learnt in politics, but a trace of the old life that he’s so eager to show he has left behind. He likes his new life, which is, he says, more of a life.
“I am enjoying my privacy. The arrangements I have got allow me to help coach the College Rifles Diggers Under-9 rugby team – I might say they only lost three games this season,” he says, laughing.
Even then, he undercuts himself and shares the success. “The coach is very good – I just carry the oranges.”
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