TD CEO says all the right things
Tackled issue head-on and immediately
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.
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.