AICD’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has raised serious governance issues. Governance and the role of boards and directors in shaping and monitoring organisational culture and behaviours are under tremendous scrutiny.

We share the concerns of the community with the behaviours and practices revealed through the Royal Commission. I have described some of the behaviours presented in testimony as indefensible:

• Misleading regulators is unacceptable;
  
• Charging people for products and services they do not receive is unacceptable;
• Failing to compensate people in a timely manner is unacceptable;
• Regardless of the legalities – this conduct is simply wrong.

However, the questions being raised are not just for the boards of banks and financial services companies. Every board and every director in Australia should be focused on what this means for them. Responsibility for the culture of an organisation sits squarely with the board. A lack of accountability and transparency in corporate culture is one driver of the trust deficit between Australians and our institutions.

So the AICD faces an important challenge.

A fundamental principle supporting our governance model is that boards are accountable for the culture of their organisation. What more can we do to improve governance and promote the transparency, timeliness and accountability that the community rightly expects?

Our immediate focus is sharing the lessons from the Royal Commission with our members. Once the Commission reports, we will formally incorporate these lessons into AICD's policies, educational programs and resources for members.

I encourage you to add a discussion of the issues emerging at the Royal Commission to your next board agenda. Reflect and ask some hard questions:

• How does your board shape and monitor culture?
  
• What's happening in your organisation that isn't meeting the expectations of your stakeholders?
• How quickly does bad news rise to the board, and how quickly does your board react?

As the Royal Commission continues the AICD will call out poor governance behaviours, and continue to argue the principle that boards are accountable for culture and outcomes.

However, it is not our role to prosecute specific boards and directors.

While we share the concerns of the community with the behaviours and practices we've seen through the Royal Commission, Australia prides itself as a country governed by the rule of law, with institutions established to preserve the rule of law.

The Royal Commission is yet to hand down its findings, and those findings and recommendations will lay out the path to individual accountability. That is the path we must follow to ensure the Royal Commission lays the foundation for better governance and corporate behaviour; and directors, regulators, shareholders, government and the community will need to work together to build on that foundation.

The AICD is committed to contributing to this vital task of rebuilding the trust of Australians in our institutions. As you may have seen, we have been vocal on issues relating to culture, trust and the Royal Commission's activities:

• My comments to James Thomson in the Australian Financial Review;
• Chairman Elizabeth Proust's comments to Glenda Korporaal in The Australian;
• My interview with Peter Ryan on ABC AM Radio;
• My interview with Pat Karvelas on ABC Radio National Drive;
• Our statement: 'AICD welcomes tougher penalties for serious corporate wrongdoing';
• Chairman Elizabeth Proust’s interview with Fran Kelly on ABC Radio National
• Chairman Elizabeth Proust's comments on diversity which appeared in The Sydney Morning Herald;
• Chairman Elizabeth Proust's Opening Address at the 2018 Australian Governance Summit – Trust, Innovation and Sustainability; and
• Rachel Botsman MAICD on 'Dealing with a loss of trust' in the Company Director magazine

Thank you for your time and consideration. Please feel free to contact us if you have any further concerns.