Banking Royal Commission: A big wake up call for business

The bank inquiry is proving its worth but we can’t pretend this type of behaviour is confined to the finance sector.

AMP chief executive Craig Meller and chairman Catherine Brenner. (John Feder/The Australian)

The AMP shellacking has served as a giant wake up call to all business and indeed the regulatory system. Big business has been caught systematically ripping off ignorant consumers to maximise profits and, of course, executive pay.

This column was not originally a fan of the royal commission but now acknowledges it was wrong, as this week’s evidence has been stunningly successful in proving the value of a well managed process from Kenneth Hayne.

All the business talk about putting customers first can now be seen in a different light and clients too should get a wake up call and learn to take the initiative to keep the charlatans honest.

The events covered have been under review by ASIC for the past 12 months and the amounts of money in question are not large but that's not the point.

In this case, AMP chair Catherine Bremner was neatly included, with a focus on her role in trying to protect her chief executive.

But what may one ask was she and the board doing to protect customers from an executive team systematically working out ways to rip off ignorant consumers?

Hopefully APRA’s coming report on the culture at CBA will help shine a light on how the inaction of boards can lead to failed processes.

Obviously the financial services sector is in the spotlight and most at risk but if the rest of business thought that somehow the same issues don’t apply to it them they’re badly mistaken.

Companies talk a lot about putting customers first but they actually have to do it and be seen to do it, which for many in big business will require a massive cultural change.

Take a bow Michael Hodge, counsel assisting the Royal Commission for shining the spotlight on what is wrong with the system and, in doing so, justifying the need for an inquiry.

Like any barrister he is a good salesman and his count of the 20 times AMP has lied to ASIC all relate to the same historical event, albeit a particularly heinous one in which the company has charged people for services it didn’t perform and, worse, conspired to work out ways to continuing to charge them for nothing.

No wonder the financial advice industry faces such a credibility gap when the failing doyen, AMP, admits to this sort of behaviour.

The knee jerk calls for a longer commission and more powers for ASIC are wrong, ASIC and indeed APRA should be held to account for not administering the powers they have.

The evidence presented by Hodge encapsulated what has been sitting on ASIC’s desk for 12 months as its 60 officers fight over every crossed “T” and dotted “I” with the high-priced lawyers AMP employed.

ASIC has the powers it just struggles to use them, although it must be said its call for the power to order remediation deserves some clarification.

The fact AMP has high-priced lawyers fighting the regulator every step of the way makes you wonder where its heart really lies as does board time spent on whether and how to include chief executive’s Craig Meller’s name in a report to ASIC.

One would think the board has other matters to focus on.

The cultural change required needs to be widespread so that it creates an environment in which people right down to the shop floor can speak up and express their views on what is going on at the company. It starts from the top and needs to be enforced.

Plainly it is not working now because companies are looking at short term profits and their executive remuneration not creating a long terms sustainable enterprise.