When did ASIC become the expert on culture?

It was with great concern that I read the article about ASIC inserting organisational psychologists into the banking boardrooms. I am in support of the value of the organisational psychologists in assisting the Board, our products and systems are built on their expertise. I am just opposed to the regulator using organisational psychologists as a tool that is not reportable to the Board it is observing.

In my experience, we use organisational psychologists to deal with behavioural items, interaction with management and to assess individual directors. We also use their specialist skills to review culture throughout the organisation. The strength of the organisational psychologists is that they make intuitive and pointed observations of individuals and processes and these are then used as discussion points with the individual directors or Boards. These observations, until discussed in detail with the participants are just that, professional observations.

This is where my concern starts and my concerns are really unanswered questions: What is the remit of the organisational psychologists in the employ of the regulators going to be? How will they report back to the Board in a meaningful and improvement focused way? Will this lead to Boards making risk adverse decisions due to undue scrutiny and a fear of potential failure? If the outcome is going to be how to institute the regulator’s expectations onto Boards, what exactly are these expectations? Right now the regulator is focused on Boards improving culture and to have a way to monitor non-financial risk, will all Boards be expected to do this in the same programmed way going forward? What will be the next focus? Other concerns I hold are in what context are individuals being assessed at the Board meetings. For example, will the organisational psychologists be making observations on an individual’s suitability or lack thereof to be a director or make decisions?

Who is to say the regulator actually knows how to deal with culture and non-financial risks better than the Boards or their professional advisors. How does an appointed ASIC organisational psychologist (and this is in no way an attack on the individuals involved, I am certain they are professional and experienced) actually promote Boards looking at non-financial risks differently.

Rather than the regulator inserting their own people, they should be allowing Boards and organisations to choose their expert providers, allow those experts to work with the Board to make improvements and then assess the Boards based on the improvements and processes they have in place. I am all for regulators taking an active role in ensuring compliance but it should not be done by having someone in their employ constantly standing over the Board’s shoulder. I would like to see less ‘Big Brother’ and more professional and detailed communication on what the regulator actually expects.

1 COMMENTS
  1. Leanne Faraday-Brash / 03 Jul 2019

    ASIC may not be an expert on culture but few would question the link between culture and governance/compliance/ethics, groupthink, overconfidence/hubris and organisational outcomes. I would much rather be invited in by the Board where the Board is the client and I am. I’m not comfortable being parachuted in to the situation by a “client” that is not in the room as it can arouse suspicion and is likely to precipitate some behaviour as an artefact of the psychologists’s presence.
    Of course the best of all worlds might be to invite the organisational psychologist to become a director and help create a Board culture (pun intended) where frank, fearless yet respectful joint decision-making can take place and ultimately produce great outcomes for people, profit and public image.

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