MICHAEL PASCOE. The banking royal commission – it’s even worse than it looks

If you think the banking royal commission is big, you’re wrong. It’s much bigger.

This week’s disclosure of corporate lies, deceit and greed has damaged the reputations of the big five (big four banks plus AMP).

Down the track, some third-string heads will roll and the vertical integration of the wealth management industry will be unravelled.

But they’re only the immediate headlines. The bigger story behind these early days of the royal commission is the trashing of the entire Big End of Town, of the great and the good who make up the nation’s network of ASX 200 directors, CEOs and CFOs, of the chairmen and women who reached the peak of Australian corporate culture – the top of a big five board table – only to be shown to be, at best, incompetent.

They’re meant to be the cream of the market crop. Certainly the executives and chairs are paid that way. Having a big five directorship on your CV is about as good as it gets in the NEDs (non-executive directors) Club.

If these, the masters of our little universe, could so lose the plot at institutions as important, solid and rich as the big five, what are they capable of across lesser entities?

The companies that are now the big five have been the cornerstones (yes, you can have five corners) of Australian business all my life. I’ll add the relatively young Macquarie to make a neat half-dozen. Plot the careers and connections of the men and women directors and C-suite executives of the financial big six and you pretty much have Australian capitalism.

There are 58 current board members of the big six. Add those who have been directors over just this century’s culture failure and you’d have a network of 200 or so names that encompass pretty much all of corporate Australia. They include former Reserve Bank governors, Treasury secretaries, the usual big law firm and accountancy partners, recidivist financial sector NEDs, former finance CEOs and sundry bizoid and professional odds and sods.

We should give some of the more recent appointments the benefit of the doubt (Catherine Livingstone is working hard at CBA), but those 200 bluebloods have been collectively responsible for institutions egregiously and repeatedly failing their customers and, therefore, Australia.

And when that failure has been exposed, it really hasn’t mattered in the Club. No matter how many times it’s happened, it’s always been merely an unfortunate matter among the lower ranks. Million-dollar bonuses continued to be paid, golden handshakes and parachutes made and taken.

For example: I don’t especially want to single out AMP but it did star this week by lying to the regulator and fiddling “independent” reports as well as dudding clients so …

It is testimony to AMP’s once-great reputation that it has survived more than a decade of rolling scandal. That reputation was built up over its long history as a fine mutual before being floated off 20 years ago in the usual fee-feeding frenzy and executive salary explosions.

The float itself turned out to be a poor investment except for the policy holders and executives who took the opportunity to quickly sell out. Management since has had little to be proud of on the performance front.

AMP first made the big-time financial advice scandal headlines way back in 2005 when the toothless ASIC watchpuppy did a little shadow shopping and found a third of AMP financial planners seemed to be putting AMP’s interests ahead of their clients as they switched them into AMP products. Nearly half of a randomly-chosen bunch of AMP files didn’t disclose a reasonable basis for advice and did not make proper disclosures about the cost of switching.

ASIC barely whipped AMP with a feather.

Do you like a bitter joke? The ASIC deputy chair, Peter Kell, droning about poor adviser performance at the royal commission this week was releasing ASIC shadow shopping surveys on poor adviser performance at AMP 15 years ago.

To use a technical phrase, ASIC has achieved bugger-all while occasionally feather-tickling.

Andrew Mohl was AMP’s CEO at the time of that shadow shopping. He is now a CBA director.

Craig Dunn was running AMP’s financial services division at the time. Did his career suffer? AMP subsequently made him CEO. He is now on the Westpac board.

Scandals down the line have barely scratched those at the top. The CBA’s recent bonus cuts are the exception. In general, the people in charge of corporate Australia, the boards of directors, have let it roll along.

This is where the culture of the 200 and their concept of their role should be questioned. Their tendency to be captured by the CEOs they appoint and their ignorance – wilful or otherwise – about what’s really going on in their companies and how bonus hurdles are being met is a collective failure.

That’s why it’s open to this royal commission to shoot responsibility to the top where it belongs, instead of just taking a few mid-level scalps, to prove wrong the doubts I had two years ago about what the commission might achieve.

This article first appeared in NewDaily on 19 April 2018

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5 Responses to MICHAEL PASCOE. The banking royal commission – it’s even worse than it looks

  1. Richard Barnes says:

    Great piece Michael.

    Those 200 really are the 1% of the 1%, and have no interest whatsoever in fundamental change. They and their mates in the two major political parties, the big four accountancy firms, the consultancy firms, the lobbying outfits, etc make up the one big pool of the nation’s wealthy and powerful, moving smoothly from one position to another.

    Others have said it far better than I: this isn’t an aberration of capitalism; this is capitalism.

  2. Jack Hill says:

    Michael, I couldn’t agree with you more and hope this commission severely criticizes and somehow punishes these board members who have condoned these practises over the years. Shame on them!

  3. Rosemary O'Grady says:

    The ‘bitter joke’ of 15 years ago could be topped by ASIC under-performance from – at least – 1986.
    If the Hayne Royal Commission does only what we are seeing now – it shall have lanced the sore of decades of collusive bureaucracy and laziness in the financial industries’ sector, and Hooray for all that!!

  4. Greg Bailey says:

    Michael has given us an excellent summary of this wholly deleterious history and it is good to see that journalists like him are still writing for the Age.

    I fear that even if all the malpractice and sheer criminality is exposed, very few prosecutions will be made and the status quo will continue, irrespective of which of the two majors are in power. Government support/protection by legislation of the large financial bodies–such as banks and insurance companies – lies at the centre of a government’s role in a neoliberal polity. Add to this the tacit encouragement of these practices, and the inviolability of the big four, by the large consultancy firms, business economists and some financial journalists, then serious change is a long way off.

    If criminal charges are suggested, who will supervise them? The AFP or ASIC and APRA, the latter two having been massive failures? Moreover, the average person in the street will say they always knew the banks were crooks, but that they had to put their money somewhere and seek financial advice from someone. Hence the well publicised stoicism of the average Aussie will kick in and there will be minimal political call from the voters to change this situation, especially since most will look at individual cases and not realise how embedded this kind of practice is in Anglo-Saxon economies.

  5. Albert Haran says:

    It will be interesting to see if this R.C. snares more heads than the R.C. into Bill Shorten and his Union rorter mates. (Their wording not mine)

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