Take, for instance, the Hayne royal commission, which held the mirror to the financial services sector and found some egregious misconduct.
Industry, the government and the regulators know what needs to be done to ensure better public outcomes but it requires long-term fixes too few are prepared to do.
It is why the AFR conference heard a chorus of voices issuing messages of foreboding if we change the status quo.
AMP chairman David Murray led the charge, telling the conference that regulators getting too tough and focusing on big fines might lead to “imprudent outcomes” that would send the banks back to the era before deregulation of the financial markets when credit was difficult to get.
He also warned that the focus on bank culture has “gone over the top”.
Murray is thinking about the short term. He fails to mention that the reason the sector got into such a mess was due to poor culture and timid regulators. Self-regulation clearly didn’t work.
As commissioner Kenneth Hayne said in his interim report: “Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn-out remediation program and protracted negotiation with ASIC [Australian Securities and Investments Commission] of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct.”
Without regulatory consequences, including the possibility of big fines, public shaming or prison, the sector continued to test the boundaries. It got to a point where AMP was caught lying to the regulator, once venerable institutions including Commonwealth Bank and National Australia Bank charged the living and the dead for services they hadn’t received, and insurers developed junk insurance.
Much of the poor culture was driven by greed; a quest to hit short-term bonuses and targets.
Despite this, the royal commission failed to properly address remuneration. George Frazis, who runs Westpac’s consumer bank, told the AFR conference the bank was changing remuneration structures for frontline staff to remove outcomes-based pay.
Why stop there? Why not go further up the chain?
To do that would have an impact on short-term profit and bonuses for executives.
It is all about frightening everyone into maintaining the status quo. Karen Den-Toll, a partner at Deloitte who specialises in governance, regulation and conduct, warned the conference that after the royal commission “we don’t want a situation where executives are scared to act”.
With so many vested interests wanting to protect their hip pockets and personal ambitions, it will be hard to get significant changes.
Shadow treasurer Chris Bowen reminded the conference about payday lending and the cost of inaction. He said it had been 1070 days since the coalition government received a set of recommendations for sector reform. In October 2017, it released exposure draft legislation, which it continued to sit on.
He estimates the inaction has resulted in 800,000 Australians signing up for payday loans, with at least 15 per cent ending up in a debt spiral including bankruptcy. But it has powerful lobbyists. “This is political failure with a real social cost,” Bowen says.
Bowen promises to dust off the legislation to reform the sector if Labor wins the federal election in May.
But he will face a loud cacophony of voices lining up to keep things as they are.
It is something that the House of Representatives economics committee in Canberra will be able to test on Wednesday when it hears from NAB and ANZ in a post-Hayne world. There will be some small changes, but nothing too radical. It seems Weaven and his dream for long-term outcomes might be some time off.
Adele Ferguson comments on companies, markets and the economy.