Contributed by Jim Hayes
The big four banks and the AMP have just been lashed by Commissioner Kenneth Hayne for massive dishonest conduct. He has urged that criminal charges be laid under the Corporations Act, which carry big fines and up to 10 years jail.
Seventy-six recommendations have been made.
The Royal Commission had been intended to be a whitewash.
Former Prime minister Malcolm Turnbull and the current Prime Minister Scott Morrison had done everything to avoid it. But when even their own backbench demanded action, they reluctantly fell into line.
Still trying to protect the banks, they expanded the brief to include the whole financial industry. The intention had been to divert the Royal Commission into laying off the banks and targeting the industry superannuation funds.
They had made it clear that they intended to replace the union, government and business management of the industry superannuation funds, with management from the banks and finance industries.
By this means, they hoped to take the heat out of the banks by making the unions the target.
Australia’s government bent over backwards, not only to protect the banks from scrutiny, but to ensure that any inquiry would be to their benefit.
It hasn’t worked out this way. The royal commission has taken a life of its own and an unintended course.
Public feeling that the banks should be dealt with is so strong and the revelations so damming, that the bad behaviour of the banks has been impossible to ignore.
Prosecution of those responsible would be carrying out justice and it would be a means to recover some money, to compensate those who have been harmed. This on its own, however, will not be enough. This is not only about individuals, but the institutions themselves.
If further change does not come about, what led to the bad behaviour will stay in place. Some individuals might have to fall on their swords, and after the smoke has cleared, the bad behaviour will continue.
For a start, there must be an investigation into the associations between the banks, ANZ and the Liberal and National parties. There must be good reasons why so much energy was put into protecting them. This raises the spectre of corruption. Is there a network contacts doing favours? If so, what is it and how far does it go? Unless this is uncovered and acted on, little change can be expected. Those in the political arena found to have aided the misconduct of the banks should also have to face just consequences.
A big part of the problem is how the banks and AMP are organised. They act as a cartel. Evidence for this is that they all share the same major owners, own the same share portfolios in other companies, rotate their senior management, operate in tandem, and in Australia, face less regulation than in just about any other country. The cartel must be broken, and adequate regulation must be brought in.
Otherwise, all will continue to do what their major shareholders demand. That is, to pursue every avenue to make the maximum profit and neglect all other considerations – at least s far as they can get away with it.
The finance industry in Australia must be adequately regulated, to ensure that it acts in a socially responsible way. This does not only mean that it is prevented from breaking existing laws.
Social responsibility includes operating to meet the needs of society in terms of fairness to individuals and organisations, ensuring that investment is properly used to the benefit of the future of whole economy and interests of society, and not channeled into excessive speculation and bubbles.
Reality is that the Australian economy is sick and exists within the context of an unwell global economy. These are the conditions that have prodded the four banks and the AMP to cut corners and increase the extent of their wrongdoing. This pressure will remain.
If we want to get rid of bad behaviour, we must take steps towards creating a democratic economy, where the decision making is not monopolised by the big investors and their top managers.
It means giving a voice in the workplaces to those work there and giving a voice to the citizenry as both customers and as part of the collective will of society, outlining its priorities and pursuing them. Priorities like ensuring that distribution of wealth is fair and equitable and that the future is sustainable.
We must shift from an economy depending on individual greed, to one that is based on the interests we share together and as individuals.
Management must be made transparent and accountable. Reward to individuals should be based on the contribution they make.
Unless this final step towards building a democratic economy is taken, what can be done to address the behaviour of the banks and ANZ will be severely limited.