The importance of people, culture and values to responsible

corporate behaviourJohn McFarlane

CEO ANZ

Sustainable Human Capital Conference Australia

March 2007

The key issue is sustainability - few companies actually stand the test of time

25%23%

15%

Aust UK US

Number of top listed companies that exist in their original form • Of the top 20

companies in Australia in 1980 only 5 exist in the same form today

• In the UK only 23 of the companies that formed the original FTSE 100 index in 1984 remain in the same form

• In 2002, only 74 of the original 500 companies that formed the US S&P 500 index in 1957 remain in the same form

Companies and industries have life cycles

Foundation

Viability

Growth

Maturity Fade Renewal

Australian banking conforms to the life cycle – ANZ experience

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

$m

* before abnormal items and significant transactions

NPAT* “Renewal and Re-invention”

Viability

Growth

ANZ

JOURNEY

Cultural Transformation Tools®

ANZ has journeyed from viability through transformation

SERVICE TO HUMANITY, INTERGENERATIONAL

RENEWAL, VITALITY, RELEASE OF ENERGY

PROFESSIONALISM, RELATIONSHIPS, BELONGING

SOCIETAL

COLLABORATION

COHESION

TRANSFORMATION

BEST PRACTICE

VIABILITY

COHERENCE, CONNECTING WITH MEANING

ORDER, BEST PRACTICE, HI-PERFORMANCE

7

6

3

2

1

5

4

MAKING A REAL DIFFERENCE IN PEOPLES LIVES

FOUNDATION, VIABILITY, SOUNDNESS

RELATIONSHIPS

It’s been a great journey for shareholders: 9 year compound shareholder return of 17%

0

20

40

60

80

100

120

140

97

98

99

00

01

02

03

04

05

06

Today

0

5

10

15

20

25

30

Dividend (LHS) Share Price (RHS)

cents

Share Price & Dividends

A$

22%

17%

1 Year 9 Year

Total Shareholder Return*

*Total Shareholder Return Compound Annual Growth Rate to 27 February 2007

A focus on shareholders alone is not enough

Performing & growing for shareholders

• EPS double-digit

• Cost-Income mid 40’s

• ROE above 20%

• Intangible value

• Distinctive disclosure

A high performing, values driven culture for our

people

• Performance ethic

• Breakout transformation

• Freedom with accountability

• Stretch incentives

A compelling reason for customers to bank with us

• Restoring customer faith

• Simplified accounts and fees

• Ten charter promises

• Matched savings accounts

Earning community trust

• Maintaining rural branches

• Seniors and welfare banking

• ANZ Community Fund

• Financial literacy

• Financial inclusion

Superior people processes are key enablers of growth

Culture

Leadership

Recruitment & Development

DeploymentOpportunity &Recognition

Superior opportunities, effective performance targeting, differentiated rewards, and firm consequences management, all based on merit

The best people in the world available to us in the roles where they will have the biggest impact

The recruitment and development of talent to execute today and build the future

An effective organisational model with enlightened shared values and a growth mindset

Source: extract based on presentation by Michael Treacy, Microsoft CEO Summit

To decide what to do, manage what’s important

Source: McKinsey & Company Benchmark comprises 33 of Australia’s Top 50 companies

Stretching goals and targets

A clear and compelling mission

Consequence management

Effective organisational processes

Clear performance feedback

People orientation

Rewards and recognition

Average Superior Distinctive

Financial management

Operational controls

Opportunities

Values

customer satisfaction,open communication

best practice, well managed

accountable, balanced,teamwork, continuous improvement

customer first,leadership excellence,

staff safety, shareholder value

recognition,

different,

inclusiveinspirational, open, integrity,committed,

community truststaff fulfilment

vision, sustainable

Shaping the values of the organisation

Raising the bar from staff satisfaction to employee engagement

How much I likethings here

How much I want to be here

How much I want to and actually do

improve our business results

SatisfactionSATISFACTION

1980s 1990s 2000s

COMMITMENT

ENGAGEMENT

Creating talented and engaged people

Talent raises productivity, profit and revenues

Source: McKinsey

40%

49%67%

Increased productivity in

operations roles

Increased profit in general

management roles

Increased revenue in sales

roles

“How much more does a high performer (top 20%) generate annually than an average

performer?”

ANZ now has the highest staff engagement of any major Australian

company

Australian Bank Average

DestructiveZone

SeriousZone

High Performance/

Best Employer Zone

25%

60%

40%

IndifferentZone

54%

2000 2001 2002

Launch of Perform, Grow and Breakout

Doubles paid parental leave

Guarantees part-time employment for over 55s

Cultural and Corporate Responsibility initiatives

2003 2004 2005

Maintaining momentum with new initiatives

2006 & 2007

Achieving a positive shift in ANZ performance ethic

Source: McKinsey & Company Benchmark comprises 33 of Australia’s Top 50 companies

Stretching targets and goals

Clear compelling mission

Visible consequence management

Effective working of the organisation

Clear feedback on performance

Best people

Rewards and recognition

Average Superior Distinctive

2003

2000

Financial control

Operational effectiveness

Opportunities

Values

And a substantive shift in values

2000

Results Orientation

Accountability

Cost Reduction

Profit

Continuous Improvement

Bureaucracy (L)

Goals Orientation

Shareholder Value

Customer Focus

Achievement

2003 2006

Customer Focus

Cost Reduction

Accountability

Continuous Improvement

Achievement

Profit

Results Orientation

Community Involvement

Shareholder Value

Customer Satisfaction

Customer Focus

Community Involvement

Brand Image

Profit

Cost Reduction

Shareholder Value

Customer Satisfaction

Results Orientation

Achievement

Organisational Growth

1

2

3

4

5

6

7

8

9

10

Source: Cultural Transformation Tool

2007: Taking Breakout to the next phase