The final report of the ‘Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry’ (universally known as the ‘Banking Royal Commission’) landed with a thud on Monday and will serve to shake-up the Australian finance sector for years to come.
Commissioner Kenneth Hayne’s report exposed a text-book catalogue of departures from the integrity expectations of the government, the business community and the Australian people. The timing of the release of the Hayne report was interesting, coming as it did, three months after the release of another high-profile integrity-related report – an organisational review of Cricket Australia – commissioned following the ‘ball-tampering’ affair involving members of the Australian test team in South Africa in March.
Many people will struggle to see the parallels between the two enquiries arguing “Well, one was about the serious business of finance the other was only about elite team sport”. It is true, there are major differences between them but there are also similarities that become increasingly obvious as you look for them. Both have become all about ‘winning’ (beating the competition), being better (and being seen to be better) than one’s peers and maximising stakeholder returns.
In business, stakeholder returns are measured in monetary terms – profitability and growth in shareholder value. In elite team sport, stakeholder returns are measured in games and championships won. Stakeholders and the Boards that represent them have come to ‘expect’ these things rather than just ‘hope’ for them. Those who are accountable for delivering on those expectations feel that pressure, all day and every day. Increasingly, they sense their job, and with it their personal reputation, is on the line if they do not deliver. They are told by their stakeholders, often in as many words, “you’ve got to win”. Disgraced former Australian test captain, Steve Smith quoted an exchange between him and senior executives of Cricket Australia in the lead-up to the ball-tampering affair when he was told: “We don’t pay you to play, we pay you to win”.
Commissioner Hayne’s findings suggest that similar sentiments have for many years been cascaded down the organisational structures of some of this country’s most important financial services institutions in an attempt to drive ‘winning behaviours’. We therefore should not be surprised when, in business and in sport, sometimes those who are accountable for delivering very high stakeholder expectations go too far. As the Cricket Australia report found “There [was] immense pressure on players always to win and the unacceptability of being anything less than the best in all forms of the game.” This is reminiscent of one of Commissioner Hayne’s: “Rewarding misconduct is wrong. Yet incentive, bonus and commission schemes throughout the financial services industry have measured sales and profit, but not compliance with the law and proper standards. Incentives have been offered, and rewards have been paid, regardless of whether the sale was made, or profit derived, in accordance with law.”