The ongoing Royal Commission into the nation’s financial services industry has opened a veritable can of worms.
We’re just a short time in and already we have heard a litany of appallingly unethical – if not illegal – behaviour that touches on everything from allegations of bribery and forged documents to lying to the regulators, selling policies to those who can’t afford them and even charging fees to dead clients.
The culture in some of these companies has been so shockingly toxic that not only have CEO and chair heads rolled but the Treasurer warned that wrongdoers could face gaol.
"The culture in some of these companies has been so shockingly toxic that not only have CEO and chair heads rolled but the Treasurer warned that wrongdoers could face gaol."https://t.co/Pl1ob8vIcc #corpgov #royalcommission
— Governance Matters (@GovernanceMatt) May 16, 2018
Interestingly, the Australian Securities Exchange (ASX) has also recently revamped its governance principles. The fourth edition, now out in draft form and calling for submissions, aims to beef up board responsibilities by going to the very heart of culture and ethics and what these mean for directors.
Gone are the days when the board was there to look after only the shareholders. Now, they need to perform a balancing act between sometimes competing interests. There’s the customer to consider, not to mention the broader community and its view of the organisation’s social licence to function.
Operating within the law has always been a given; now directors concerning themselves with the organisations culture and how people behave takes on equal importance.
While I mulled over the significant challenge of putting these admirable sentiments into action, I was reminded of a governance presentation I recently made to a group of FINSIA members. An intelligent young mining engineer, studying finance, got to his feet to pose a thought-provoking and weighty question.
He wanted to know how a board can ultimately be responsible for the organisation’s culture. He wanted to understand the nitty gritty of how they would actually do it and how they would get the chosen culture to permeate the organisation.
I thought for a moment and, he being a “miner”, chose an analogy I knew he would relate to.
I suggested that culture within an organisation is never going to be taken all that seriously until it is given the same importance as safety. In an industry where lax safety can result in serious injury, loss of life and personal liability, respectable mining houses lead the way with systems, policies and protocols that place safety front and centre, every minute of every day.
They ensure compliance in every detail with every safety standard and regulation; they identify every hazard in every work area and across every job…and keep employees informed about the nature of the hazards, how they pose a threat, how to protect against them and what to do if exposed to one of them.
They also take appropriate steps to minimise risk by conceiving and implementing workplace safety and health programs, committing to frequent and effective employee training – in both job skills and safety – and conducting thorough inspections and safety audits.
They go further, paying attention to employees’ suggestions and complaints and encouraging employee participation knowing full well that this leads to employee ownership, which in turn leads to employee-driven safety and a safer workplace.
And finally, they move quickly to correct problems by taking decisive action whenever a safety or health problem is brought to their attention.
The harsh reality is that until we apply the same non-negotiable and unrelenting ‘safety’ focus to ‘corporate culture’ within governance principles, the shameful revelations of the Royal Commission into our financial services industry will remain a part of our corporate landscape.
Until next time,