Keeping big business accountable for financial misconduct

10 Feb 2020 | 3 mins

Benjamin Franklin once wrote in a letter that nothing in this world is certain except death and taxes. In corporate Australia, sometimes it feels like the only certain thing is financial misconduct.

Investigative journalist Tom Ravlic will be speaking at the UWA Business School about exactly this, casting his forensic eye over the financial wreckage of the misconduct resulting in the recent Banking Royal Commission, and explaining why some people choose to behave badly, enrich themselves, and hurt others in the process.

In his free public lecture on Friday 14 February, ‘Clipping the wings of vultures – the greed, the misconduct and fixing poor culture in the finance sector’, Tom will consider a deceptively simple question: how do we manage staff in such a way that they properly balance the financial and ethical needs of an enterprise?

“Running a business means more than just telling people what the key performance indicators are and waiting for them to deliver,” says Tom.

“It is more than just measuring the financial returns, which might be the measure a market applies to an entity listed on the Australian Securities Exchange. There is the need to get all aspects of governance right, and this means ensuring that the leaders in the business recognise contributors to financial success while also looking closely at how the moneybags are dragged through the front door.”

The CBA whistle blower

We asked Tom to share a couple of well-known examples of corporate financial misconduct and incentivising of good behaviour.

“One example from a decade of what we could loosely term ‘corporate sin’ covered by numerous parliamentary committees is the story of the financial planning arm of the Commonwealth Bank around the time of the global financial crisis.

“CBA whistleblower Jeff Morris – a man who has become well known for his fight against a system that treated customers poorly – provided evidence to a parliamentary committee that exposed the way in which the financial planning arm rorted its way into profits.

“Advisers considered the kickbacks they would get in the forms of commissions, and sought to find ways to convince clients to allow their funds to be put towards risky investments.

“Investments began to tank and the bank sought to sanitise client records so the losses were able to be painted as being the fault of the customer for taking the gamble, rather than the ‘advice’ constituting a money grab for the adviser and a loss of savings for the customer.

“Morris and two other Commonwealth Bank colleagues went in to fight against what were, to them, unethical practices, and the act of whistleblowing caused great stress, with Morris stating he believed that one of his colleagues died young as a result of the push to expose wrongdoing.”

The need for fair metrics and rewarding ethical conduct

“One of the things companies must do is carefully consider what they set as performance targets for their staff.

“Companies need to ensure they are rewarding good behaviour in the form of ethical conduct, as opposed to placing all the emphasis on selling. The banks have changed their incentive structures because one result of the royal commission was a greater appreciation that the institutions encouraged greed through their incentives programs.

“They may not have said that staff should sell products to people for whom they are a poor investment choice, but the rewards for the writing of a large volume of business would have been lucrative to some individuals.

“The Hayne Royal Commission forced the community as a whole to confront the fact that some business practices diluted basic human decency and caused advisers, bankers and allied professionals to be mercenaries in search of a buck.”

Event details

‘Clipping the wings of vultures – the greed, the misconduct and fixing poor culture in the finance sector’

Tom Ravlic public lecture

Friday 14 February | 5–6.30pm

Wesfarmers Lecture Theatre, UWA Business School

Registration essential

 

Media references

Rachael Chamberlain (Marketing Officer) | 08 6488 5863.

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