Australian business is being warned that the corporate regulator will have their corporate culture and ethics under the microscope.
Australian Securities and Investments Commission chairman Greg Medcraft is telling companies they need to have a positive culture safeguarding the public.
He says businesses now are under increasing scrutiny through social media and the 24 hour news cycle.
“Culture matters to ASIC, to business and to customers. Culture matters to ASIC because culture is a key driver of conduct,” he says in a speech to be delivered today.
“Good conduct leads to good outcomes for investors and consumers.
“The converse is also true. Inevitably, it is the stories of poor culture and poor conduct in the financial industry which are splashed across the front page of the newspaper, which pop up in our newsfeeds, and which are the subjects of heated discussion on social media sites.”
Mecraft cited numerous examples of Australian business ethics and culture gone wrong: the Comminsure life insurance scandal, continuing financial planning issues and the alleged rigging of the bank bill swap rate now subject to legal action between ASIC and the ANZ.
He said we are now living in an age when corporates cannot escape due diligence.
“We now live in a world with technology and social media at our fingertips,” he said.
“This has seen the advent of what I call ‘customer regulation’. If a business does not have the right culture, they will see the effect of this as customers vote with their feet, or make their views known (sometimes very loudly) through social media.
“Individuals now have unprecedented access to information and, as a result, companies are held responsible by the crowd. If they are not behaving in the right way, the crowd will let them know – if not the headlines.
“Time and time again, we have seen firms blaming it on a few bad apples driving bad outcomes for consumers, rather than taking responsibility by looking more closely at their organisation and implementing the necessary changes to address the root cause of the problem.
“I want to say that if you don’t have the right culture that genuinely puts the customer first, or if this isn’t heard or felt by your customer, you will see the very real impacts of this on your bottom line or the value of your business.
“These impacts are heightened by the technological world in which we live. Social media and the 24-hour news cycle have changed everything.”
He said ASIC was now including culture in its risk-based reviews of companies.
“So what we are now doing is bringing the elements of culture together and considering whether they indicate a cultural problem,’’ he said.
“Where we think there may be a problem, we will ask questions and do a ‘deeper dive’.
“This helps us to not only identify instances of misconduct, but also broader, more-pervasive conduct problems. We want to uncover these problems early – and to disrupt and address them.”