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Breadtag Sagas ©: Author Tony, 6 April 2019
Understanding the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, February 2019.
Understanding Corporate Misconduct in General
Although this may not appear to be directly relevant to overseas readers. I suspect it is worthwhile skimming through. You may find it relevant enough to read carefully, as it is a detailed case study of corporate misconduct. Banks in the USA during the global financial crisis behaved equally badly and weren’t punished for it. Earlier Enron destroyed itself through financial misconduct. Banks in the UK and Europe have also engaged in bad behaviour in a not dissimilar manner.
What is most galling for bank shareholders is that in Australia, while misconduct in the financial sector enriched individuals in entities, I suspect that these activities were not that profitable for the corporate bottom line. I have no evidence to prove this but it is a suspicion. However, it would require a forensic accountant and extensive research to demonstrate,
Even if you are from overseas, I would be amused and grateful, if you signed the petition.
1.1 General Relevance
When I was in New Zealand recently, which also has Australia’s banks, no one seemed interested nor had they watched the Royal Commission proceedings on TV that had us riveted in Australia. Now back in Australia I fear we are also in danger of losing interest now the circus is over.
By contrast, I think the findings of this Royal Commission are a once in a generation opportunity to understand the nature of major corporate malfeasance and how it should be dealt with almost anywhere.
In Australia, it is a once only opportunity to correct unfettered bad behaviour in the financial sector, with potential to extend this to the whole of corporate Australia and even to the government bureaucracy.
Although Australians were disgusted and appalled by the extent of the bad behaviour uncovered, I don’t think they realise that it is up to them to force the next step. They need to understand the remedy and why its implementation is crucial. The Royal Commission’s recommendations and its implementation strategy are vulnerable. Without strenuous public support and help from concerned organisations, the usual suspects lobby groups and vested interests will get their way as usual and water things down until they are ineffective.
The media and politicians have their own agendas regarding the Royal Commission. These are not necessarily sinister or manipulative, despite the implications of the impending Federal Election. However, agendas are more likely to impede than to facilitate reform.
The reform of the financial sector as the Royal Commission has outlined is a once only opportunity. If it is squibbed and not implemented fully, behaviour in the financial sector will deteriorate gradually to the levels that prompted the Royal Commission in the first place.
Why should it matter? Individuals in all democratic societies today feel powerless when confronted by corporate and bureaucratic systems. We are bamboozled, mistreated and occasionally defrauded. We put up with it because we can’t imagine anything better. Anyone who has dealt with Telstra, the NBN, received a robo-debt demand from Social Security, or dealt with any automated corporate telephone menu knows exactly what I mean.
Bad corporate behaviour in history is not a pretty topic, but from the 1980s things in the corporate sector began to change for the worse everywhere. These changes were interrelated with but not always interdependent with globalisation. Greed, excessive executive salaries, increasing income inequality, lack of institutional morality, profit above all else, and many other things became part of an insidious mix.
In Australia from 2013 scandals involving banks gradually snowballed. The Coalition Government (conservative) strongly resisted pressure to call a Royal Commission into the financial sector until the pressure became untenable and the more conservative coalition partners in the National Party demanded it. Even then, the four major banks wrote a letter to the Prime Minister on 30 November 2017 asking him to convene an inquiry in an attempt influence its direction.
The then Prime Minister Malcolm Turnbull established the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry on 14 December 2017 under the Honourable Justice Kenneth Madison Hayne AC QC.
The Commission was required to work to a tight schedule and to produce an Interim Report on 28 September 2018 and a Final Report on 1 February 2019. Justice Hayne later refused an option to extend the inquiry to interview more witnesses, when it was offered by the new Prime Minister Scott Morrison, on the grounds that additional witness statements were unnecessary to the findings.
I suspect that the Royal Commission was set-up for failure, or at least an inadequate result, because of the near impossible time frame. If so the Coalition Government was to be disappointed by Commissioner Hayne, who set-up a superb team, focused on the purpose and refused to be distracted from it.
1.3 Media Reporting of the Royal Commission
Early on the media reported on the Commission in daily detail, whenever there were public hearings. The public and media alike became engaged with the demeanour of Kenenth Hayne and his ‘baby-faced assassins’ (with apologies) Rowena Orr QC and Michael Hodge QC.
Senior bank and other financial executives from Australia’s largest companies were quizzed and found wanting in terms of behaviour, legislative and possible criminal misconduct. They had to agree under pressure to humiliating admissions. Witnesses detailed heart-wrenching stories of poor treatment by financial entities at all levels that frequently bankrupted them. Early on a prominent Chairman of the Board and the CEO of two separate major institutions (AMP and CBA) were forced to resign because of what was revealed.
The last scalps came with the Final Report. The CEO Andrew Thorburn and Chairman Ken Henry of the National Bank of Australia (NAB) were forced to resign because of criticism from Kenneth Hayne on their attitude towards the Royal Commission and towards change in their organisations. Ken Henry was previously reckoned one of the ‘good guys’ in finance by the public at large.
Like everyone I would like to dwell on these issues too because they were wonderful and entertaining. It was pleasing to see executives of major financial institutions humiliated for failings that they were responsible for. It was important to reveal the depth of the misconduct and the way it impacted on the lives of ordinary people who believed they would be dealt with honestly and treated as human beings.
I may not be able to resist detailing some of this, but that is for another article. And on a more serious note, I think that summarising some of the case studies is necessary to remind us of how bad things had become in the financial sector.
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Posted in Canberra