ON 9 August 2021, CourtHeath attended the 6th Annual Australian Dialogue on Bribery and Corruption. Co-hosted by the Global Compact Network Australia and Allens, the online event offered an invaluable opportunity for participants to hear leaders in anti-bribery and corruption, compliance and governance, discuss the importance of responsible business conduct through integrated risk management.
In the second of our two-part series, we offer an overview of the panel presentations, paying special attention to the importance of embedding ethical leadership and a holistic risk and compliance approach in business.
The keynote presentation, Crystalising ESG obligations – the convergence of anti-corruption and other due diligence obligations (see part 1 of our blog series), was followed by four panel discussions:
- The interconnectedness of corruption and human rights risks
- Stakeholder demand for an integrated risk and compliance approach
- Practical insights into developing and implementing an integrated risk and compliance approach
- Spotlight on culture: embedding ethical leadership and a holistic risk and compliance approach.
Ethical leadership and culture in business
The Dialogue heard about the crucial role ethical leadership and culture play in embedding a holistic approach to risk and compliance – a healthy and safe company culture is imperative, to encourage employees to raise issues and expose corruption.
Stakeholders and investors now hold companies to account. Promoting ethical leadership and acting ethically is now an economic decision for boards as well as a moral decision. Company Boards are increasingly held to account for behaviour, actions and company culture and if stakeholders lose confidence there can be significant repercussions, as seen in the examples of Rio Tinto, Crown Casino and the Australian Wheat Board. Culture is no longer a negotiable matter as highlighted in recent Royal Commissions.
It is now accepted that directors, boards and company employees should be involved and active in promoting a value driven, safe, corporate culture. The approach of meeting financial targets no matter what, is no longer acceptable. There was a discussion about methodologies to effectively measure and objectively monitor corporate culture. Organisations are encouraged to create a systematic approach of measurement systems to keep track of company culture: values and behaviours assessments, risk management and cultural surveys are all useful tools. Education and continued growth in this area is important to provide confidence that company culture is meeting stakeholder and community expectations.
CourtHeath reflects that for many years there have been serious repercussions for company directors when corporate culture permits corruption to flourish unchecked (see our blog about the Siemens corruption scandal). The failure of company culture to meet expectations of customers, other stakeholders, shareholders and investors has been, as previously mentioned, a feature of recent Royal Commissions. Importantly, culture is now on the agenda for regulators.
Commissioner Kenneth Hayne AC in his Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, said:
The culture of an entity… can be described as “the shared values and norms that shape behaviours and mindsets” within the entity. It is “what people do when no one is watching”. Culture can drive or discourage misconduct.
By its nature, culture cannot be prescribed or legislated, according to Commissioner Hayne. He said that sustainable culture needs to come from within. Regulators have an important role to assess an entity’s culture, “hold up a mirror” to it and supervise change—but the hard yards must be done internally.
Since 2020, Principle 3 of the ASX Corporate Governance Principles requires listed entities to instil a culture of acting lawfully, ethically and responsibly.
Principle 3 is underpinned by new recommendations that:
- entities should articulate and disclose their values, whistleblower policies, and anti-bribery and corruption policies
- the Board should be informed about any material breaches of the entity’s code of conduct.
The Australian Securities and Investments Commission (ASIC) continues to focus on corporate culture because, in the words of Commissioner John Price:
We see the very real impact of poor culture through misconduct, scandals and poor outcomes for investors and consumers.
ASIC responded to the Royal Commission saying:
Successful individuals must be encouraged to disassociate themselves from a culture which is cavalier about compliance with the law. Boards which fail to drive a culture of strict compliance with the law will find their directors subjected to reputational damage. Significant reputational harm is adverse to shareholder value. Loss of shareholder value in turn drives the directors to search for a sustainable future for their companies. Shareholders, and potential shareholders, well understand that a sustainable future for their investment cannot be achieved if the corporate culture is one of ignoring the law.
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A participant in the UN Global Compact, CourtHeath seeks to raise awareness about the Sustainable Development Goals and the principles of the Global Compact with business and government organisations in Victoria.
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IMAGE: Used under licence from shutterstock.com
Written by Elizabeth Tower and Pauline Bernard
[category courtheath's blog]
[risk management, corruption, ethical leadership]