The current debate about corporate culture in the financial services industry is essentially about improving customer trust and confidence by financial services providers putting customers first.
Why aren’t consumers surprised any more each time the media exposes new evidence of customers being treated badly by a bank or insurer or a market manipulation scandal?
Why is a CEO’s apology and commitment to investigate and fix the problem met with scepticism?
Ultimately the fact is that the organisations are unable to get their staff to do the right thing, whether it is giving poor quality advice or providing a product that does not match what the customer thought they were getting.
ASIC points to a range of factors that influence how staff behave including conflicts of interest, remuneration and incentive structures, organisational silos, training and how complaints are dealt with.
More intensive regulation and more inquiries will most likely expose more problems.
A culture of compliance is already a factor to be taken into account in setting certain penalties. But a corporate culture is not limited to compliance.
Section 12.3 of the Commonwealth Criminal Code defines “corporate culture” as “an attitude, policy, rule, course of conduct or practice existing within the body corporate generally or in the part of the body corporate in which the relevant activities takes place”.
The section points to the following as factors in considering whether a company intended, knew about or was reckless about something that constitutes a criminal offence:
(a) the body corporate’s board of directors intentionally, knowingly or recklessly carried out the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence; or
(b) a high managerial agent of the body corporate intentionally, knowingly or recklessly engaged in the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence; or
(c) a corporate culture existed within the body corporate that directed, encouraged, tolerated or led to non-compliance with the relevant provision; or
(d) the body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision.
Ultimately each organisation’s board and management must find ways to ensure that individual behaviours reflect the organisation’s ethics and values. Failure at a corporate level to do so may be evidence of a corporate culture that encouraged non-compliance or did not require compliance.
