“Did anyone ask themselves, ‘Is this right?’ I have not changed my view since I wrote those words in 2003. When I look at what we’ve heard from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, it is a classic example. Did anyone stand back and ask themselves the simple question — is this right? It is still very relevant today and it is where many in corporate Australia have gone missing in action. I said in 2003 that someone would be sitting here in 10 years doing something similar. I was right, although a bit out on the timing.
People forget very quickly. If you trace Australian corporate commercial history, every decade back to the 1930s there’s been a corporate fiasco and each has been attended by [the same] government response — increased regulation. As the statutes have got bigger, people have moved away from the spirit of the law. The continuous disclosure rules are a good example of this. They are now so complex that I don’t envy directors or their advisers having to make decisions about what is or isn’t part of the rules. It presumes a rational market, a theory I have never believed in. We are human and the profit motive is pervasive. ‘Accountability’ should be at the heart of the decision-making process. People have gone away from the principle; forgotten what it means.
Essential to accountability is the concept of ‘stewardship’ — that is what is at the heart of governance. They are not your assets you are dealing with. It is a question of culture and we ought to be working on principle as much as we should be working on legislation. Culture involves an understanding of why the law is as it is. The more you rely on the letter of regulation, the less likely you are to examine underlying principles.
Unfortunately, just as corporate governance is in danger of becoming a mantra, so too ethics. It is so easy to treat them as a set of rules rather than a statement of principles. To my mind, we should revisit Aristotle and St Thomas Aquinas (his philosophy is Aristotelian). We’ve got away from those ideas, which are essentially virtue ethics, rather than applied ethics — a set of rules developed to dictate the decision-making process. Applied ethics are useful, but not at the expense of values.
”Did anyone stand back and ask themselves the simple question — is this right?” Justice Neville Owen, Royal Commission into the collapse of HIH Insurance, 2003.
There’s a moral underpinning to our system of values and we have to keep re-examining them. When you read the reports coming out of the Royal Commission, you ask the question — forget about issues of right and wrong — but what in the hell were they thinking? Did they ever apply the olfactory test? Did they ever go back and ask themselves, ‘What would my grandmother have thought of this?’
Commercial life is more difficult than it was 20 years ago because of the speed at which you are required to make decisions. That makes it all the more important to have the ability to recognise the underpinnings of the system. We must have bodies like the AICD. We have to keep at it; keep trying to bring to people’s attention that it is more important now to have these fundamental skills than it has been, because of the pressures.
This [Royal Commission] has gone right to the apex of our financial system. Education is essential. We must be much more vigilant than in the past in making sure all our university and other courses have an ethical element. You have to make people realise that thinking is as much a skill as anything else. As the old quote says: ‘It can take a lifetime to build a reputation; just an instant to destroy it’.
I am sure out of the Royal Commission will come further suggestions for legislative change. It will have a salutary effect, but unless we remember why things went wrong (as well as what went wrong), for how long?”
Read our Royal Commission update from Company Director July issue here.