Dr John Laker AO in the (AFR 15 November 2018 – Regulators can’t fix bank culture: Laker) reinforces what many like me have been saying and no doubt others have wanted to say about the board’s responsibility for organisational culture. Laker says “…organisational culture is squarely the responsibility of boards, in the first instance…”. Dr Laker, a former chair of the prudential regulator APRA, makes reference to evidence coming out of the banking royal commission and the CBA prudential inquiry and warns that boards can not expect regulators to have the answers for improving culture. As I have said previously in my opinion pieces, Regulator regulating the regulators! and Monkey See, Monkey Do, boards need to take back control and renew lost trust, ethics and culture. Dr Laker expressed his views at a conference attended by regulators, banks and the Reserve Bank on 15 November 2018 and very clearly made his point by saying, “…Boards have ultimate responsibility for repairing the erosion of trust in banks and must drive senior management away from a myopic focus on short-term profits…”. Although Dr Lakers comments were directed at the banking sector, I argue they are just as relevant to the wider corporate Australia and all boards should take note.
The same conference heard from the Dutch Central Bank, also the prudential regulator, which has created a team to conduct culture reviews of institutions it regulates in the Netherlands to identify risks from poor board and management decision making. There have been calls for similar culture reviews to be mandated in APRA-regulated entities.
As the pre-eminent governance and corporate culture advisors in Australia, we have the expertise and demonstrated achievements across Australia to provide the solutions for boards to excel. In fact, we have developed Australia’s first Corporate Culture and People Risk Diagnostic specifically designed to assist boards to review culture and the underlying risks inherent in human behaviour when operating outside of desired cultural norms. The diagnostic allows boards to implement a more robust governance framework that not only provides oversight for financial, regulatory and strategic risks, but also monitors the sometimes (when we are not looking) less visible risks within people and social systems.