The “ Final Report of the Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry “ which mandated to address corporate governance issues in the financial services industry – in the wake of a series of scandals Involving Australia’s major banks and financial planners Including alleged bribery , forged documents, repeated failure to verify customers’ living expenses before lending them money, mis-selling insurance to people who can not afford it, and charging fees to clients who have died .
The Government has announced that it will implement 78 recommendations from the report. This process of implementation wants to change all boards of directors in Australia, however, not only for the financial services sector.
Allegations of poor culture and Starwood & Sony (large scale security data) breaches), “writes PwC in a recent report .
“Superintendent Financial Services Industry (Final Report) is important reading for you.” . “
The Australian Institute of Company directors agrees.
“The final report thus emphasizes the key principles of good governance, especially: the importance of board challenge of management; their duties and responsibilities in the field of directors to discharge their duties, “the Institute says in a note.
The responsibility for misconduct at any company is at the top – with the board.
“First, in almost every case, the conduct in issue is not driven by the pertinent entity’s pursuit of profit but by individuals’ pursuit of gain, whether in the form of remuneration for individual or profit for the individual’s business. Providing service to customers was relegated to second place.
“The conduct identified and condemned in this Final Report and in the Interim Report can and should be done by reference to the person doing the relevant acts, or failing to do what should have been done, which is rewarded for the conduct. There can no longer be any reason to believe that they are managed or controlled by other entities: their boards and senior management.
What boards of directors need to know
There are six significant themes relevant to all Australian directors that derive from this first principle, the PwC report states.
- “Directors’ duties are to the corporation, not shareholders, which means to maintain the company’s social license to operate. Boards need to consider the interests of all stakeholders in decisions: Customers, employees, shareholders and the community.
- Boards must oversee the culture and conduct of their organization and change what is not right. “This is a different strategy and financial performance,” the PwC report comments.
These two themes must be considered together: The fiduciary duties of an Australian director are in fact owed to the company, not to any other physical or moral person. What does it mean in practice? Building a culture of compliance is part of those duties.
- “Boards must strengthen oversight on non-financial risk and apply consequence management.”
All boards must manage risks, but most boards devote more time to financial risks than to most other issues, gemäß to a report in the Harvard Law School Forum on Corporate Governance and Financial Regulation. Boards should instead be used to manage critical risks, such as misconduct fraud, mis-selling, cyber and technology, operational and regulatory / compliance risks. Expect the Australian Government.
- There are higher expectations on boards to hold management to account.
- Individuals wants to be accounted for by having specific accountabilities ascribed to their roles. “
In many of the recent scandals, boards took the matter was either resolved – when it was not – or that management had the matter in hand (when it did not). Boards now wants to be aware of the importance of the company.
One of the challenges, however, in assigning accountability for misconduct is that in a complex chain of operations. We have the concept of “ownership” at most companies, but it is only assigned in specific cases. The implementation of the report’s recommendations may have “ownership” of a specific product or service.
- “With greater regard to enforcement and the consequences of conduct in their organizations are likely to be more profound and more public: A greater likelihood of criminal and civil proceedings, reputational impact and loss of directorships.”
This scarcely requires elucidation: The authorities are to be given the tools to enforce compliance. Directors must take this into account when deciding whether or not they have fulfilled their fiduciary responsibilities.
Diligent keeps board members up-to-date on governance
Directors can keep up with those responsibilities thanks to the Diligent Governance Cloud.
Diligent Boards ™ is a board portal that electronically stores a board’s agendas, documents, annotations and discussions within a secure board portal. Board secretaries and board chairs can use the portal to put together books in minutes. The portal has been designated virtual rooms for committee work. Administrators can use the portal to avoid unnecessary problems with confidentiality. The “Meetings Meetings” feature consolidates board directors’ contacts, calendars and the logistics of meetings. The program is a secure and intuitive solution for managing board materials and collaboration.
To keep up with the evolving area of regulation and governance changes, Diligent Governance Cloud offers Diligent Insights, a series of governance studies did cover all new Developments.
Diligent, as the long-standing market leader for high-level corporate communications, is uniquely positioned to offer its clients the highest level of assurance around security measures. Diligent’s unique position in the marketplace allows for investment in best-in-class security practices at a level that is greater than most players’ annual revenue.
With ongoing investment and dedication to security technology, resources and infrastructure that can not match, diligent clients gain a strategic partner.
Diligent Boards and Governance Clouds were “innovating before their time and will continue to be available in the future”. Diligent’s software designers are hard at work developing next generation software solutions. Boards of trustees seeking governance management software should be diligent at the top of their list.
Board Portal Buyer’s Guide
With the right Board Portal software, a board can improve corporate governance and efficiency while collaborating in a secure environment. With lots of board portal vendors to choose from, the whitepaper contains the most important questions to ask during your search, divided into five essential categories.
April 20, 2021
The Soaring Risks of Financial Services Cybercrime: By the Numbers
Financial services cyber-security must be a top priority for leaders. After all, while no industry has been immune to the increasing threat of cybercrime, financial institutions are particularly and perniciously vulnerable. According to one report, financial services firms are 300 times as likely as other companies to be targeted by…
January 29, 2021
Business Continuity Strategy: Options, Best Practice Approaches and Examples
There’s no shortage of things to consider when you’re upgrading your business continuity strategy. For instance: What should your plan cover? What are the critical inputs to the business continuity strategy? What are the different approaches and solutions available? What should the recovery strategies look like within your business…
November 30, 2020
Experts agree: Governance is the best crisis strategy
Your best defence against a crisis is good governance. Whether it’s a global pandemic, a change in senior management or the complexities of running an international organisation, governance provides ‘handrails’ to keep your organisation upright and on-track. This consensus was the unanimous conclusion of the speakers at a recent Diligent…