The call to action comes as the PwC scandal rocks corporate Australia and parliament and mirrors issues faced by the financial services sector four years ago.
Former High Court judge Kenneth Hayne says conflicts of interest and poor culture continue to plague the finance sector and corporate Australia more widely, at a time when the PwC scandal shows businesses are still putting profits over ethics.
Mr Hayne said he wanted to avoid providing commentary on how his royal commission recommendations had been implemented. However, core principles he applied needed to be considered as government and regulators enforced existing laws, and his work had ongoing lessons for boards grappling with community expectations.
Prioritising sales in determining pay meant this “may swamp other relevant considerations” for employees, such as “compliance with the law and compliance with basic standards of probity”. “But if there is only occasional deviation in the [compliance], what is it in the leadership, culture and governance of the entity that is contributing to that result?”He called on boards to ensure standards were “reinforced at every level” and for managers to call out bad behaviour that might undermine governance frameworks.
He warned that if this did not happen, “the so-called bad apples will multiply and the dissatisfaction with the industry generally will increase”.Mr Hayne said many of the core principles from his royal commission must be remembered, including that customers face “asymmetry of knowledge” that made conflicts of interest in advice an ongoing concern. Financial advice also continued to create conflicts of interest.
Calling for simpler standards, Mr Hayne said the six principles underlying financial services ethical conduct could be distilled as “obey the law, do not mislead or deceive, act fairly, provide goods or services that are fit for purpose, deliver goods or services with reasonable care and skill, when acting for another act in the best interests of that other”.
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