(Bloomberg Opinion) – Rockers Van Halen had a notorious way of spotting trouble when setting up for live performances.
Tour riders at concerts would start around bakeries of M & Ms afterwards with all brown candy removed. Rather than a symptom of excessive rock-‘n-roll, the question was a test for local executives who set up the band’s extensive shows, according to singer David Lee Roth. If brown M & Ms were present, it was a signal that electrical, audio and safety issues might also have been skimped on.
There’s a lesson in that for David Murray, the veteran Australian banker who resigned on Monday as chairman of harmful fund manager AMP Ltd.
Murray is a former Chief Executive Officer of Commonwealth Bank of Australia and author of a 2014 official report on the country’s financial system. He was brought in just over two years ago as part of a clean-up of the board to address scandals stemming from a government investigation by Judge Kenneth Hayne, including the payment of life insurance costs to dead people and lies to ‘. the business regulator.
Murray has been brought down by his wrongful approach to a completely different scandal: reports in the Australian Financial Review that an executive who saw his bonus following the settlement of a sexual harassment complaint had been promoted to head of the investment management unit of AMP. Director John Fraser will also leave, AMP said Monday, and the company’s Australian company was suspended without explanation last month.
For several years, Murray has used his position as a lion in the country’s financial industry to counter opponents seeking to draw links between general abuse and its core supervisory activities.
A pressure from government agencies to control the internal behavior of companies was too much, which would reduce competition, because “you can not regulate for culture,” he said shortly before joining AMP. “The distinctive culture of one organization is part of its competitive advantage,” he argued in 2016.
Let us focus on what the current case and the resulting internal uprising among employees say about AMP’s “distinctive culture” and the extent to which it is a competitive advantage. The long lesson should be that regulators tasked with ensuring a stable and honest business sector are reasonable to take a holistic view of the way a company runs itself, by looking into the metaphorical M & Ms -come to tell signs of bad behavior.
The real test of a company is not so much how sexual harassment occurs in the workplace, but how management treats it. A company that promotes someone whose salary is expected to raise $ 500,000 ($ 358,000) for the settlement of a subordinate case does not send a message that women are valued. It is also not to signal that credible complaints from lower-ranking employees will provoke any introspection. Instead, it tells those with qualifications about internal practices that their concerns are more likely to be addressed and ignored.
That is precisely the cultural problem facing the Australian financial services sector. In addition to the practices disclosed in the Hayne Royal Commission and the current case of sexual harassment, there have been other examples that have violated money laundering laws by Commonwealth Bank and Westpac Banking Corp. and tried to manipulate the benchmark for lending rates.
The symptoms of the rot look similar in several cases: a blind eye turns to abuse; give more credibility to those who are seen as ‘profit centers’; a lack of control by management and administration; dishonesty and obscurity when they are caught. Regulators are happy to keep more on these types of issues. Murray’s fate is a powerful demonstration of his own myopia as opposed to that kind of oversight.
His replacement as chairman will be Debra Hazelton, who previously worked in Tokyo to promote the global corporate culture of Mizuho Financial Group Inc. to shake up. That will probably be the key to their success in the years to come.
The dinosaurs that sought to curb the internal practices of Australia’s financial industry as a matter of private concern that regulators did not conduct business research have had their day. Companies that do not integrate in the future will quickly lose the trust of both their customers and their staff.
This column does not necessarily reflect the opinion of the editors or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist who owns shares for products such as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.
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