“Ethics is code of conduct; how you behave, your values”

April 2015

Conversation with Tan Sri Dato’ Azman Hashim, Chairman, AmBank Group, on early days of the bank, the role of technology and ethics within the banking profession.

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Here is the transcript of the video

Being an entrepreneur banker

Emmanuel Daniel (ED): You started as a professional (accountant), did your qualifications and worked at Maybank. At which point does a professional banker in a corporate setting, set out to become an entrepreneur saying to himself, “I can do this, I can own this”.

Azman Hashim (AH): I was an entrepreneur to start with because I started with Bank Negara. I worked there for four years and then decided to set up a practice. That was my first entrepreneurial step I think. My office staff lasted only two weeks. I didn’t fire her, she fired me. So I had that entrepreneurial zeal in me. Joining another bank was also another step in that direction. It was really a challenge that went on to become passion. I was serving as a non-executive for a few years and I got a feel of the banking business. When I went into banking, I had to cut my income substantially. I did that because there was passion, the passion to build Maybank, where I was for ten years.

In a way Maybank benefitted from my entrepreneurship. We really expanded those days. After that spell I got into the corporate world. Even though it was the corporate world, I had the banking zing inside me; I was trying to acquire something. At that time I managed to acquire a bank.

ED: In that regard, anyone who is entering the banking industry today, what you saw at that time being an entrepreneurial opportunity, is no longer an entrepreneurial opportunity today, is it?

AH: Why not? I think entrepreneurship goes everywhere. Every sphere, every sector, every size! Like if I now to go in, I will have to go on a bigger scale. Maybe take over a bigger bank for example. So entrepreneurship, the hunger is still there. Some people say that the opportunities are even more now. The tycoons that we have today in Malaysia, big successful business people, they all started small. The economy was growing and the country was growing back in 1960s. They all look back and say they started small.

ED: In those days the fastest routes were property related development and trading. Very few people understood banking or financial services. Even fewer Malays were in banking financial services. What was it about yourself that you saw as a person which gave you insights into what you could do? Was it your upbringing?

AH: Not really. I was trained in chartered accountancy. I am a financial man. When I started, I was 21 years old; I was exposed to the financial sector straightaway. With these I was dealing with the corporate world all the time. Then there came a point, I thought I am very comfortable running financial institutions, let’s get one. I started to think, why not do something in banking and build it into a conglomerate. This would take a lifetime. So that was the vision, the passion.

ED: Which aspect of financial services attracted you most or which was your starting point? Was it the merchant bank or the commercial/retail side? That’s where rubber hits the road, your funding cost is managed and customer base is found.

AH: I think we built our core with investment bank. In fact the last big addition in the conglomerate was the commercial bank. Not purposely but because we couldn’t get one. It was the last one available. Unfortunately, I got it just a couple of years before the big crisis of 1997-98. In the two years that we got the commercial bank we trying to get good profits, we were giving out lot of corporate loans. When the crisis came, the corporates got hit very hard, so we got it really hard.

ED: As a Malaysian institution you find that a number of your peers have become regional. When they become regional, replicating your ethics your morality your culture across markets becomes an issue. You’ve not had much of that as an issue, have you?

AH: No, but we are hoping that the Financial Services Professional Board (FSPB) will be adopted elsewhere. These are very fundamental ways to behave. The intent of FSPB is to spread the word in Malaysia initially but expand to regions overseas. They can have their own code of conduct, but we’d like them to incorporate the fundamental things that we put out in the FSPB. If we adopt them, it’ll be a success on our part. So, they can still have their own code. I suspect that many institutions already have these codes in some form or the other.

ED: Do you regret that your core business did not regionalize as quickly in terms of size?

AH: Maybe I needed to be 100 years old. I started in 1982 and of course then my idea was a conglomerate. By the time I became 70 I’ve got the stage of Malaysian aspect of it. If I had another 20 years maybe I’d regionalise. But now I feel it’s too late to start regional so we’re focusing on domestic.

ED: So you are quite clear that you want to be a domestic player. But because of your shareholders you do have a regional influence coming in. There’s external culture that’s affecting you, rather shaping you. How would you describe the play between these cultures of your investors?

AH: We are still a Malaysian bank. I think the Malaysian culture is dominant and we want it that way. Still, we can be better. We have expertise coming in from overseas as you say. But we need adjustment, more from those that are coming in. Our culture is there. We have to work within our own environment.

ED: Technology doesn’t respect any of this. It’s changing the rules and the rules are being written by your customers and they are not going to wait for you to catch up so that you’re able to serve them in a way that they want to be served in. How technology savvy are you? How do you think about innovation and destroying what you’ve created so that it can be re-created for the future?

AH: Technology is actually very scary and it’s costing a lot of money. We spend hundreds of millions but we still got to keep up. Things change so fast. I think there should some new rules put out on that as well; type of behaviour. But yes this is something we certainly have to be very sensitive and alert about. That’s why we think IT is very important for the future. We have to have strong IT on our board as well so that we have perspective on what we should be looking at. But you can see that it’s moving very fast. Alibaba for example is doing banking on the Internet. They weren’t going to be a bank at all.

ED: Are you afraid?

AH: I don’t think entrepreneurs are ever afraid. I think we’d look at it as a challenge. This is part of the job.

ED: As the world changes today, you find that a number of global banks Deutsche for example, as we speak, is deciding to hive off the retail side if it. In fact at the very top, there are investment bankers in Deutsche. RBS went on the same road which is build the top line income on the investment banking front. In Malaysia you would find other banks that have taken that road. CIMB I would say has more investment bankers leading the institution than there is retail or commercial bankers. How do you see this balance between retail and investment banking? How honest does an investment banker need to be to say to himself that he understands or doesn’t understand commercial banking.

AH: I guess you are right. What is happening in the world is that quite a number of banks are hiving out their retail part. For Malaysia, most of us are all doing both. Retail bankers are retail bankers and investment bankers are investment bankers. They are different.

The big fear is still there, but in Malaysia we’ll have to look forward the future. We need to consider concentrating on our strengths.

Boards and governance

ED: Now let’s talk about boards and how boards disseminate value. How would you describe your board and the people in your board? What does it look like today?

AH: Actually boards have become very complicated nowadays. In the early days boards would be made of people I would know. I was the one who selected those people. Today, you really have to have people on your board that can contribute and are useful to the bank. One has to be very selective and particular. The regulators also make sure you do this. The directors have to be approved by the regulators. So you have to show that they will be able to contribute in their select areas.

ED: So do you apply the same standards of meritocracy, fair play and loyalty for your management team as well? Do you subscribe to diversity, diversity in terms of skills and perspectives or do you spine yourself going towards harmony and unity?

AH: Personally I feel unity and harmony is the best for a company to work well. Disunity and disharmony can be very negative and destructive. Sometimes that can happen between the board and management as well which is also not good. So harmony and cooperation is really the thing to go for.

ED: How have you seen the board deal with difficult situations, questions or decisions? Have you ever been out-voted by the board?

AH: No. I must say it’s always been unanimous so far. If there has been a disagreement, it has always worked out in the end. If you are not unanimous, probably you are not correct. You’ll be rejected.

ED: Well that’s how you manage control. Is it?

AH: No, I don’t think you can say I control. I used to be executive chairman. I miss those days. Now the government and the regulators require that the chairman cannot be an executive, so you really cannot control. You have many independent directors. Nowadays independent directors must be fully independent. So you actually have to get real views and consensus from the board members.

ED: Were there any recent decisions that you found that the board had to deal with a difficult situation.

AH: Yes, every now and then we have to deal with some very tricky, difficult or sensitive situations but we manage to do the right thing. We are fortunate that we have very senior and experienced members on the board not only in terms of technicality but also knowledge about the environment.

We change the board every nine years and we try now to fit in where we have gaps. For example if we need human resource, we’ll try to find somebody who can fill that gap. We look for technical skills and IT people too.

ED: What is your personal strength in building AmBank?

AH: Originally, because we started off as an investment bank that was our core strength. We were the last to go to the retail side. We are not as strong as some of the others in the retail banking side. Moving forward, I think the formula has to be reviewed all the time. Things change very fast nowadays.

Ethics and values in Malaysia’s financial services industry

ED: Let’s talk about the investment bankers/merchant bankers and the ethics dimension that they have in them.

AH: Thank you for mentioning that. We’ll have to come now to FSPB. Ethics, professionalism and code came in during the subprime crisis in the US. Ethics is code of conduct. How you behave, your values. There is a need to ensure that, at least in the financial sector, we behave as professionals and live to a code of conduct so that things that happened in Wall Street, where there was cheating and fraud going on, don’t happen. This code of conduct ensures that people who put out themselves as financers or bankers maintain a standard and people expect them to behave in that way.

ED: In your career, how have you motivated the people working for you to have ethics?

AH: The way we operate, we don’t tolerate things like dishonesty. We are a bank. People put money with us and we have to prove that we are honest. That is very basic.

ED: We’re having this conversation in a country where it’s rife with its issues that go right against that kind of behaviour.

AH: All countries are like that! It’s a matter of how much. US is the worst when you talk about crisis. We are doing this FSPB exercise, coming out with a code of conduct, professionalism, ethics, and standard that we expect the professionals in the industry, not just banking but insurance, capital market, Islamic Banking and so on to follow.

ED: Across financial services, what would you put your finger on to say is the most important definition of ethics that characterizes someone who is in financial services.

AH: We have some pillars like integrity etc. The first draft is coming out on 5 May 2015. There’ll be a 60 day period where we’ll look for responses from interested parties. We expect that all of the elements are already in the code of conduct of institutions. If that’s the case it’s wonderful. The next stage will have more work because it’ll be more detailed and we will continue to update and improve. We must keep up with what’s going on.

ED: Where does your personal involvement in this programme end? Do you see yourself being involved in it for a long time to come?

AH: There doesn’t seem to be an end. I think this work should go on and on because it is trying to ensure that professionalism in this industry is maintained. I don’t think it should end.

ED: You sound like a man wearing an oversize t-shirt trying to explain something that’s been in you all the time and but now trying to codify, make it transparent and publish so that others can share what you share. So let’s go back to you as a person. How do you think you’ve influenced the culture of this organisation? How would you describe the culture of AmBank? Especially, because it’s a conglomerate that’s been mashed together by different acquisitions.

AH: I think it’s probably my own behaviour and personality. I’ve been building this up since 1960’s, it’s been 50 years and many of my staff will not leave me ever. So, loyalty is one of them. Secondly, I have treated everybody as my partner and colleague. I don’t look down upon anybody. That’s how I behave and I expect people to behave as well, not look down upon anyone and bully. Thirdly, there’s fair-play and merit-based recognition. I didn’t differentiate, it was purely on merit. People coming to an organisation expect all that and that’s why they stay.

ED: What about dealing with complex organisations with forces outside the institution. What are the things you would do and what are the things you wouldn’t do as an organisation?

AH: I wouldn’t do anything illegal. I wouldn’t do anything unfair. It should be a win-win always. In the case of a private operation like mine, with my own capital, I have my own survival. Competing with the best of the world, likes of Standard Chartered Bank, Citibank, HSBC and so on we had to compete on the basis of best performances, services, efficiency. You cannot have second class people. You have to look at the best people. So, to survive you have to do what I’ve done.

ED: What is the most difficult decision you’ve made in your career that you still remember or maybe even regret? Something that you wish didn’t happen but it did and it reflected on how you think and what’s important to you.

AH: Of course there have been a few decisions where I said yes and should have said no. But that happens. It’s a matter of choice. 1997-98 crises were my most difficult times because there were factors out of control. Overall stock market went down, everything went down.

ED: How was your balance sheet at that point?

AH: My share price went from $24 to approx. $1. At that time, we all had no money. Malaysians had no money. Sometime I feel it was a strategy to buy cheap things from Malaysia. So, all the people who came in to buy were outsiders. The most difficult thing that happened was the consolidation of banks. Initially they came out with six banks; they called it the central banks. We were not one of them. We were not the smallest but one of the smaller banks was tried to take us up.

ED: How would you have played it if you were not allowed to continue at that point in time? You would have had to call in to help all the people that you know. Context, relationships and compromises would have been important at that time to make sure you survived in that stressed period.

AH: Survival at that time meant survival of the bank. I would’ve survived as a person. Even if I sold the bank then, I would have the money and I would do something else. But I didn’t want to lose the bank. It wasn’t the money; I always wanted to build something. It was my passion and I wanted to preserve that. That was important.

ED: You just provided another value that it’s never about the money.

AH: Probably the most important to me was the first million I remember. It was a big deal. After that it didn’t matter very much. You don’t count a thing, you just keep building. Actually to me it doesn’t mean much because I don’t change my lifestyle. I live in same 50 year old house; I have the same wife. So it’s really building something and accomplishing that well.

ED: In that regard, how do you think you influenced your children? How did you pass on your values to your children? None of your children are in financial services. They walked the other direction.

AH: They are not in the banking industry so I don’t have any handing over to be concerned about. I try not to pressure them into doing what I want them to do. They are free to make their choices. Passing on value is more by example. With our fathers we didn’t have discussions. I do have discussions with them, but not much. It’s more by example; how I behave with people.

ED: If you were to describe your children today, what would you say are the most important characteristics of your children?

AH: I love them very much. Firstly I think they are humble. I think they behave like ordinary children. They don’t behave like they have money. I grew up humble too. It’s only recently that we got so much. Before that we were struggling all the time building this. Being humble is part of the Malay character: we don’t push ourselves forward (aggressively), we moderate.

My children are pretty confident about what they want to do. One of my daughters is Mizz Nina, she became a performer. Now she has changed. She puts on the hijab and has moved more towards Islam doing good things like programs on religion and teaching. That’s good and I give them all the support. As long as they are doing good things I will support them.

ED: Do you think that being an entrepreneur by instinct by having the training of an accountant is what defines you?

AH: No. Many of my accounting friends are still accountants, but I think I am lucky in that sense. The entrepreneur part of me was stronger than the accountant. Because if I was a stronger accountant, I wouldn’t have taken so many risks that I’ve taken.

ED: That’s where bankers are failing today. Too many of them think that they’re entrepreneurs. In fact the problem there is the way in which they are incentivised. You were never incentivised. You were punished every day until you came out on the other side. But today, risk and entrepreneurship means that I do it and you reward me today, quickly. When you interview candidates for senior positions, what do you look for in terms of the accountability element? What are you willing to give in order to get what you want? I think people change jobs because of money today.

AH: Unfortunately so. I think it’s not easy today to get people who are committed and passionate. That’s what we look for: passion, commitment, accountability. This is the real fall of what happened in Wall Street. People were rewarded on a short term basis.

ED: But you can’t hire people on your terms and values today. So what do you do?

AH: You try to sieve the radius as much as you can. I think we have good people around, yes. I have been fortunate that so many people have stayed with me for so long. You have to balance where you have to go. Going steady is good. For me, I have to think long term. It’s not about tomorrow or the next year or two. I have to think long term.

ED: You’ve always thought long term. But at which point does the long term end for you? That you then say “ok I’ve done my part, it’s now time to hand over”.

AH: I haven’t come to that yet. I don’t see any signs yet, but I think I am enjoying myself. I am in my element. I am comfortable. By the way it’s not just banking I am doing. I’ve got my other activities like investment and property, other list of companies. But of course the bank is the biggest part of it.

ED: As you look for investors for the bank, is there a process by which you are exiting, or realizing your profits or rationalizing your involvement?

AH: That’s the future. Of course I am not getting any younger. But I am also enjoying as I am going on. But at some stage I have to make a decision to come out of it and take it easy but so far I don’t see any signs of that. Because of my environment in the bank, I can get involved in other things like the FSPB, being chairman of Institute of Bankers Malaysia; these other things are very nice things to do.

ED: Why is FSPB a nice “to do” for you? Do you have a grandfather’s instinct in you now?

AH: I think I’ve always been like that. Even in my earlier days, I’ve been doing these things, like I was president of the Friends of Prisons Association. So where I can do some good in whatever sector, I will do. That’s why I am so busy.

*This transcript has been edited for readability and flow, and is not verbatim

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