Events that led to Cathy Walter to take actions
In January 2004 when the NAB’s FX losses were revealed, Cathy Walter, a director of NAB, proposed that the global audit firm PricewaterhouseCoopers (PwC) be sued. The fees paid to PwC for advice in 2003 were twice as large as the fees paid to its statutory auditor (KPMG). Jim Power, a PwC partner, had acted as the NAB internal auditor during 2002. He had specifically advised Walter, who was chair of the Audit Committee, that the NAB was not exposed to the risk of FX losses as occurred in another overseas bank earlier that year. The external auditor, KPMG, had raised concerns about the NAB’s FX trading in 2001 and 2002. John Thorn resigned as a partner of PwC in September 2003 to become a director of the NAB and a member of the Audit Committee the following month. The board’s Risk Management Committee had been formed by the NAB in August 2003 with the charter of its Audit Committee changed accordingly. But the Risk Management Committee, chaired by Graham Kraehe, had only met once before a junior employee blew the whistle on the hidden FX losses in January 2004. The 7 non-executive directors ganged up against Walter to protect PwC and themselves in March 2004 by calling an extraordinary general meeting (EGM) of shareholders on May 21 to have Walter removed as a director.
Evaluation of Cathy Walter’s Actions
There are two opinions about Cathy Walter’s actions;
A. She did not act in the best interests of the company
1. Breach of duty of Care
She neglected the duty of due care and vigilance as required by section 180 of ACL .It is directors duty to act with due care without blindly accepting management's recommendations. But Cathy along with other directors did not carry out this duty of care because she relied on management's report that the company is not incurring any FX losses.
2. Inappropriate actions as a