Quigley’s resignation

I was sad to see Neil Quigley resign as Reserve Bank Chair, but not surprised. The lack of transparency over Orr’s resignation was sub-standard.

However to be fair, Quigley had a very challenging job. It is the first time I can recall that a Reserve Bank Governor had to be effectively removed from office, and I can understand the desire to do it in a way which didn’t result in a public meltdown between the Governor and the Board. So I thought it would be useful to look at what Quigley did right and wrong.

• Appointment as Governor in December 2017, to take effect from March 2018. At the time this was a very uncontroversial appointment. Orr had been a bank chief economist, a Reserve Bank Deputy Governor and a very successful NZ Super Fund CEO.
• Re-appointment as Governor in November 2022, for a further five year term from March 2023. By this stage the Board should have been aware of the many concerns over Orr’s performance. Not just the monetary policy failure which led to inflation over 7%, but his bullying behaviour towards critics. They clearly knew about this because as part of his re-appointment they said “The Governor will also model the highest standards of behaviour in promoting a safe environment for debate and in treating with respect those people with different views from their own”
  • A public sector CEO that needs to be told by his board to treat people with respect should ring warning bells.
  • To be fair, the views of the Minister will have played a big role. The reality is that you don’t put up a CEO for re-appointment if there is any risk the Minister will say no. The Board would have been unofficially told the Minister (Robertson) was happy or even keen for Orr to be re-appointed.
  • The fact that both National and Act opposed Orr being reappointed (I can’t recall any other Governor ever having opposition from a major party) would have been unofficially known to the board and did they consider the damage it would do recommending reappointment, which would expose the Bank politically
• It has been revealed that Quigley had started a process that could lead to Orr leaving. He e-mailed Orr with a list of board concerns. This was the correct thing to do. Any CEO that has a formal e-mail from their board of concerns knows what this means. So Quigley did well to start this process. Of course I suspect all these concerns were known in 2022 when they recommended him for re-appointment.
• Orr was determined not to accept a reduction in funding for the Reserve Bank, despite the rest of the public sector doing so. Quigley led the board to develop a view different to the Governor, that they could perform their statutory functions with reduced funding. This was important, and good leadership. Boards need to know when to back their CEO, and when not to.
• Quigley worked out a managed exit with Orr through an exit agreement. This was good, as a messy fall out between the Board and Governor would not be good.
• Where Quigley fell down is in agreeing (or suggesting) that the resignation was for personal reasons. We don’t know if this was a requirement of any agreement, but if it was then it should not have been agreed to. You can sugar coat a resignation, but you can’t mislead.
  • The sensible thing to do would have been to simply refer to the funding disagreement. This was the primary cause of the resignation, and should have been public. It was also naive to think it would not become widely known (as it did).
  • You could have still agreed to not make any reference to wider concerns over behaviour, as this is pretty common in exit agreements to not wash all the laundry in public.

So there were many things Quigley did do right. But the two things he clearly got wrong was recommending re-appointment in 2022, and hiding that the resignation was about a funding disagreement.