TD CEO says all the right things

Tack­led is­sue head-on and im­me­di­ately

National Post (National Edition) - - FINANCIAL POST - BAR­BARA SHECTER

NOT A SIN­GLE SHARE­HOLDER STOOD UP AF­TER­WARDS TO ASK ABOUT THE CONTROVERSY.

Bharat Mas­rani’s pre­de­ces­sor as chief ex­ec­u­tive of Toronto-Do­min­ion Bank, Ed Clark, was known for im­port­ing in­dus­try-lead­ing cus­tomer ser­vice to one of Canada’s largest fi­nan­cial in­sti­tu­tions, and deftly han­dling the fi­nan­cial cri­sis.

On Thurs­day, at TD’s an­nual share­hold­ers’ meet­ing in Toronto, Mas­rani ar­guably faced his great­est test of whether he is a wor­thy suc­ces­sor on those fronts.

As Clark likely would have done, Mas­rani ad­dressed the ele­phant in the room im­me­di­ately.

Mas­rani said the bank takes “very se­ri­ously” con­cerns raised re­cently in the me­dia about TD’s sales prac­tices, and that he did not be­lieve there is a “wide­spread prob­lem” of peo­ple be­hav­ing un­eth­i­cally to achieve sales goals set by the bank.

Ad­dress­ing the is­sue head on was prob­a­bly the right move: not a sin­gle share­holder stood up af­ter­wards to ask about the controversy.

Long­time in­dus­try ob­servers say TD has been un­der pres­sure to re­spond to the un­proven al­le­ga­tions — re­gard­less of how sig­nif­i­cant they ul­ti­mately turn out to be — in part be­cause its rep­u­ta­tion and brand have been so strongly based on cus­tomer ser­vice.

The bank’s mar­ket­ing has long fea­tured a comfy-look­ing green chair and slo­gans about bank­ing be­ing com­fort­able and easy.

And, un­til last year, TD was the undis­puted leader in J.D. Power’s an­nual sur­vey of cus­tomer sat­is­fac­tion, be­fore ced­ing the first place spot to Royal Bank of Canada.

TD has had “a pretty stel­lar rep­u­ta­tion for cus­tomer­friendly ser­vice, dat­ing back to the (ac­qui­si­tion in 2000 of re­tail bank) Canada Trust,” said Bob Waite, who ran the com­mu­ni­ca­tions and gov­ern­ment re­la­tions depart­ment at ri­val Cana­dian Im­pe­rial Bank of Com­merce be­tween 2000 and 2005.

“In that sense they may have more to lose from a rep­u­ta­tion per­spec­tive, sim­ply be­cause they have fur­ther to fall,” added Waite, who now runs a com­mu­ni­ca­tions firm that ad­vises ex­ec­u­tives.

Against that back­drop, Mas­rani, as far as he was able to ad­dress mat­ters, said all the right things.

He in­voked TD’s self-given ti­tle of the Bet­ter Bank, and pledged to work with the bank’s board of direc­tors to ad­dress any is­sues. He also said he would and seek “ob­jec­tive ad­vice” from a lead­ing pro­fes­sional ser­vices firm — most likely a global con­sul­tant.

His dec­la­ra­tion that the CBC had not un­earthed a sys­temic prob­lem at the bank also sug­gested a level of con­fi­dence based on what he has seen in­ter­nally — that if there were prob­lems, they were of a lim­ited scale and were not wide­spread.

Bank CEOs in Canada gen­er­ally re­spond to such is­sues, even when their share­hold­ers don’t pub­licly de­mand it.

One rea­son may be that they are per­ceived as some­thing of a so­cial in­sti­tu­tion as well as a fi­nan­cial busi­ness. Per­haps it is be­cause there are so few big banks, or pos­si­bly be­cause they have a more col­le­gial re­la­tion­ship with their reg­u­la­tors than coun­ter­parts in coun­tries like the United States, but peo­ple ex­pect more of them.

Royal Bank, for ex­am­ple, faced crit­i­cism more than a decade ago af­ter it opened out­lets of­fer­ing im­me­di­ate cheque cash­ing in two low­in­come Toronto neigh­bour­hoods. The bank of­fered bet­ter terms to cus­tomers who didn’t meet the cri­te­ria for typ­i­cal bank­ing ser­vices than other al­ter­na­tive fi­nan­cial ser­vices, but a big bank be­ing in this busi­ness didn’t sit well with some.

Brian Le­vitt, the chair of TD’s board of direc­tors and the for­mer pres­i­dent and chief ex­ec­u­tive of Canada Trust par­ent com­pany Imasco Ltd., is no doubt aware of the unique po­si­tion of Canada’s banks.

Near the end of Thurs­day’s share­holder gath­er­ing, he told the 100-plus TD in­vestors in at­ten­dance — and oth­ers watch­ing a we­b­cast — that the bank’s man­age­ment and board have been look­ing at sales prac­tices for months.

The stepped up scru­tiny, Le­vitt said, be­gan last fall when U.S. reg­u­la­tors ac­cused Wells Fargo em­ploy­ees of se­cretly cre­at­ing more than a mil­lion fake bank and credit ac­counts — a vastly more se­ri­ous set of al­le­ga­tions than those lev­elled at TD — with­out cus­tomers know­ing in a con­certed ef­fort to boost fees and bonuses.

He as­sured share­hold­ers Thurs­day that the board of direc­tors is “on top” of the is­sue and re­ceiv­ing reg­u­la­tor re­ports from man­age­ment.

In the end, TD’s an­nual share­holder gath­er­ing ran more or less like many other such meet­ings: There were cof­fee and pas­tries, there was crit­i­cism of CEO pay — even those share­hold­ers who took shots at as­pects of the bank’s busi­ness also took time to ex­press their plea­sure at be­ing share­hold­ers.

The man who ap­proached the mi­cro­phone and com­pared his ex­pe­ri­ences at TD to walk­ing into the bar on the tele­vi­sion show Cheers — where ev­ery­body knows our name — would have made Ed Clark proud.

FRANK GUNN / THE CANA­DIAN PRESS

Pres­i­dent and CEO Bharat Mas­rani, right, and Chair­man of the Board Brian Le­vitt speak at the TD Bank Group an­nual gen­eral meet­ing in Toronto on Thurs­day.

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