Donald Neil Sanders

Donald Neil Sanders
Born	June 1927 Sydney, New South Wales, Australia
Died	November 25, 2020 (aged 93)
Nationality	Australian
Occupation	Banker, public servant
Company	Commonwealth Bank
Title	Managing Director (1987 to 1990) and Chief Executive Officer (1991 to 1992), Commonwealth Bank of Australia

Donald Neil Sanders (June 1927 to November 25, 2020), known as Don Sanders, was an Australian banker and public servant who was Deputy Governor of the Reserve Bank of Australia from 1975 to 1987 and then managing director and chief executive officer of the Commonwealth Bank from March 1987 to June 1992.

Sanders joined the Commonwealth Bank as a 16-year-old in 1943, at a time when that bank also served as Australia's central bank. After an economics degree, a period at the Treasury in Canberra and a year at the Bank of England, he joined the newly separated Reserve Bank in 1960 and spent 27 years there, the last 12 as Deputy Governor and deputy chairman of the Reserve Bank Board. He was passed over for the governorship in 1982, when the post went to Bob Johnston.

In 1987 Sanders returned to the Commonwealth Bank as its managing director. His five years in charge covered the bank's acquisition of the State Bank of Victoria, its conversion from a statutory government bank into a public company, and the first sale of its shares to the public in 1991. His title changed from managing director to chief executive officer in January 1991, and he retired in June 1992 on reaching the age of 65. He was succeeded by David Murray.

Sanders was appointed a Companion of the Order of the Bath in the New Year Honours announced at the end of 1982, "for public service and service to banking". He died on November 25, 2020, at the age of 93.

Early life and education

Sanders was born in Sydney in June 1927. He joined the Commonwealth Bank in 1943 as a teller at its branch in Wollongong, south of Sydney, when he was 16. At that time the Commonwealth Bank combined commercial and savings banking with the functions of Australia's central bank; the central banking side was not split off into a separate Reserve Bank of Australia until legislation passed in 1959.

He completed a degree in economics after joining the bank.

Career

Commonwealth Bank, 1943 to 1960

After Wollongong, Sanders worked at the Commonwealth Bank's Enmore and Pyrmont branches in Sydney from 1946 to 1948, and in 1949 he moved to the staff department at the bank's head office. After finishing his economics degree he spent time at the Treasury in Canberra and then a year at the Bank of England in London.

Reserve Bank of Australia, 1960 to 1987

Sanders moved to the Reserve Bank of Australia in 1960, under its first Governor, H. C. "Nugget" Coombs. He stayed for 27 years.

On July 23, 1975, he was appointed Deputy Governor of the Reserve Bank. On the same day Harry Knight became Governor, succeeding Sir John Phillips, who had retired the day before. As Deputy Governor, Sanders was also deputy chairman of the Reserve Bank Board. The 1975 and 1976 annual reports list him in that position on a board that included the Secretary to the Treasury, Sir Frederick Wheeler, and R. J. L. Hawke.

Passed over for Governor in 1982

In 1982 the governorship fell vacant. In his 2022 tribute, Rob Ferguson, chief executive of BT Australia from 1985 to 1999, wrote that Sanders was "perfectly qualified" to become Governor, and described him as "humble, learned and vastly experienced". John Howard was then Treasurer, with John Hewson as his principal adviser. Ferguson suggested that Howard may have preferred a Governor of "lesser status and grounding" than Sanders, and said he suspected there were "professional and personal differences in style" between Hewson and Sanders. Ferguson wrote that the decision caused "profound shock and dismay" among many at the Reserve Bank. These are Ferguson's own views, not a documented account of the government's reasons.

The Reserve Bank's 1982 annual report records that Sanders was reappointed Deputy Governor from July 23, 1982, and that R. A. Johnston was appointed Governor from August 14, 1982. Sanders was 55 at the time. Ferguson wrote that the decision "must have been a terrible disappointment", but that Sanders stayed at the Reserve Bank for another five years. In the 1984 annual report Sanders, by then a Companion of the Order of the Bath, was still listed as Deputy Governor and deputy chairman, with his term due to run to July 22, 1989.

Sanders and Johnston therefore led the Reserve Bank together during the Hawke government's financial deregulation of the mid-1980s. That period included the floating of the Australian dollar and the entry of foreign banks into the Australian market.

Sanders resigned as Deputy Governor on March 10, 1987, about two years before his term was due to end. M. J. Phillips was appointed Deputy Governor the next day.

Commonwealth Bank, 1987 to 1992

In March 1987 Sanders succeeded V. T. (Vern) Christie as managing director of the Commonwealth Bank. He returned to the bank he had joined 44 years earlier. Ferguson wrote that Sanders accepted at once, though he knew the appointment would be "received with mixed feelings in some quarters". Ferguson described the bank at that time as "a bloated and protected species", more out of touch with the market than its privately owned competitors. Bernie Fraser, Secretary to the Treasury from 1984 and a director of the bank, told Ferguson that management presentations to the board before Sanders arrived had been "unbelievably bad". Sanders knew he had only a few years left before the statutory retirement age.

According to David Murray, quoted by Ferguson, the two main issues Sanders faced were dividend policy and a shortage of capital. A further problem was the long-running gap between the bank's board and the federal government, its owner. Murray said Sanders "quickly found a way", taking the politicians' view into account when arguing with his board colleagues. Within the bank, Ferguson wrote, separate fiefdoms were common, especially in the staff department, which in his view existed more to manage relations with the unions and with Canberra than to manage people. Sanders' senior team included Murray, Ian Payne, Bruce Asprey and Garry Mackrell, a long-serving member of the bank's executive committee.

During Sanders' tenure the bank moved into new lines of business. In 1988 it set up two wholly owned subsidiaries, Commonwealth Life Ltd and Commonwealth Management Services Ltd, to enter life insurance and managed investments. In February 1989 it bought a 75 percent stake in ASB Bank of New Zealand. The bank's own history says it met the challenges of deregulation and foreign competition at first by restructuring its internal organisation, and then by developing products for customers outside its traditional base. That process ended in its conversion from a government-owned body into a public company.

State Bank of Victoria

On August 26, 1990, the Commonwealth Bank agreed with the Treasurer of Victoria to merge with the State Bank of Victoria (SBV), which Ferguson later described as one of the Commonwealth Bank's "fallen" competitors. The Commonwealth Bank became SBV's legal successor on January 1, 1991. According to the bank, the deal made it Australia's largest domestic bank.

Tony Aveling, a BT executive who worked on the transaction with Sanders, described it to Ferguson as a "particularly difficult transaction", signed after months of negotiation with a reluctant Victorian government. When the Victorian opposition threatened to block completion, Sanders and Aveling met them. Aveling recalled that Sanders, in a musing, professorial manner, pointed out that SBV's customers had been told they would soon be Commonwealth Bank depositors. If the deal were blocked, Sanders said, there could be a run on the bank. State banks were not regulated by the Reserve Bank, so, as he put it, "I guess it would become your problem".

Former Reserve Bank Governor Ian Macfarlane told Ferguson that in this period "two state banks failed, and two of the Commonwealth Banks' three big competitors made losses and had to be recapitalised". Ferguson credited Sanders with avoiding the excesses of the late-1980s credit boom while still picking up one of the bank's "fallen" competitors in SBV.

Corporatisation and the 1991 float

The Commonwealth Banks Restructuring Act 1990, passed in December 1990, provided for three things: the bank's conversion into a public company with share capital, its succession to SBV, and the issue of its shares to the public. The conversion took effect on April 17, 1991. Sanders' title changed from managing director to chief executive officer from January 1991.

In July 1991 the bank offered just under 30 percent of its shares to the Australian public and its staff. According to the bank, the offer was meant to strengthen its capital base after the SBV acquisition. On September 12, 1991, 230 million shares were issued at A$5.40 each, raising A$1.3 billion, and the bank listed on the Australian Stock Exchange that day. The shares closed at A$6.46 on their first day. The minimum subscription was 400 shares, which cost A$2,160. Privatisation was completed after Sanders left: a second offer in November 1993 reduced the government's holding to 50.4 percent, and a third in July 1996 sold the rest.

Mackrell told Ferguson about one investment banker who, having lobbied politicians for a last-minute place on the underwriting panel for the float, came to present his case to Sanders. Sanders, annoyed at the lobbying, turned his chair and filed his nails for 20 minutes without looking at the banker, then ended the meeting. The banker did not get a place on the panel.

Retirement

Murray recalled that Sanders told him he would retire on a date that seemed to have no significance. When Murray asked why, Sanders said, "It's my 65th birthday." Sanders left the bank in June 1992 and was succeeded as chief executive by Murray. Ferguson wrote that Sanders then left financial markets completely for the last 28 years of his life.

Leadership and management style

People who worked with Sanders described a man who was mild in manner but firm on substance. Fraser told Ferguson: "He was tough but he didn't outwardly display that toughness. In fact, he covered it with a facade." Fraser also said "the organisation really blossomed under his lead", and pointed to Sanders' manner in meetings with private sector chief executives. Another colleague quoted by Ferguson 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."

The SBV negotiation and the float underwriting meeting both show this approach. In the first, Sanders put pressure on the Victorian opposition by spelling out the consequences of blocking the deal. In the second, he refused to engage with a banker who had gone around him to politicians. Ferguson compared him with the former US Federal Reserve chairman Paul Volcker. He said Sanders had a similar ability "to be incredibly tough while avoiding the hubris", and noted that he "avoided the nonsense and hubris, especially sorting out bank credit problems of the late 1980s". Ferguson also described him as "as old-fashioned as anybody born in 1927, and operating in the 1990s, would be".

The AFR's obituary said Sanders was "successful in implementing deep cultural changes in CBA when they were most needed". It called him one of the most influential banking leaders of an era of profound change in banking and financial services.

Major deals and strategic decisions

• Life insurance and funds management (1988): the bank set up Commonwealth Life Ltd and Commonwealth Management Services Ltd as wholly owned subsidiaries.
• ASB Bank (February 1989): the bank bought a 75 percent stake in the Auckland-based ASB Bank. The holding was raised to 100 percent in 2000, after Sanders' time.
• State Bank of Victoria (1990 to 1991): merger agreement with the Victorian Treasurer on August 26, 1990; the bank became SBV's successor in law on January 1, 1991.
• Corporatisation (1991): the bank became a public company with share capital on April 17, 1991, under the Commonwealth Banks Restructuring Act 1990.
• Initial public offering (1991): just under 30 percent of the bank's shares were sold to the public and staff at A$5.40, raising A$1.3 billion. The bank listed on September 12, 1991.

Financial and market performance

On its first day on the Australian Stock Exchange, September 12, 1991, Commonwealth Bank shares closed at A$6.46, against the A$5.40 issue price. Sanders retired nine months later, before the second and third share offers of 1993 and 1996.

Personal life

Sanders retired at 65 and lived to 93. Ferguson described him as "as humble in retirement as in work". He died on November 25, 2020. Ferguson wrote that, having seen Sanders "passed over for the Reserve Bank Governor role on a political whim", Paul Keating "eventually righted a wrong". Keating spoke at Sanders' funeral. 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."

Recognition

• Companion of the Order of the Bath (Civil Division), announced in the London Gazette of December 31, 1982, "for public service and service to banking", on the advice of the Queen's Australian ministers.

In 2022 Ferguson called Sanders "the most distinguished banker in Australia's history", citing his careers in both central and commercial banking.

See also

• Commonwealth Bank
• Reserve Bank of Australia
• David Murray
• Paul Keating

External links

• Commonwealth Bank: Past leaders