Ken Henry’s fall from pedestal to bed of nails was not even cushioned by the sterling contribution he previously made to the public service, says Verona Burgess.
There has been, in the past, a tendency in the public service and the media to regard the secretary of the Treasury and the governor of the Reserve Bank of Australia as God-like figures.
Their proclamations were received as if carved on Moses’s stone tablets.
Former Treasury secretary Ken Henry’s fall from grace as chairman of NAB has surely exposed the folly of such over-reverence.
Ironically, his resignation last Thursday came a day after the Governor of the RBA, Phillip Lowe, addressed the Sydney branch of the National Press Club – the first for a governor since Bernie Fraser in 1996.
There was a podium, but definitely no pedestals.
Lowe’s speech did not condescend either in tone or content, making equal sense to both the economic literates and illiterates in the audience (all credit to those involved in drafting it). He did not talk down to the media, posture, deflect or scorn questions, even those he didn’t want to answer.
Nor did he shy from the topic du jour, the report of the Hayne royal commission, either in the speech, in which he endorsed it, or during questions. Like Hayne, he placed the responsibility for financial misconduct squarely on the institutions’ management and said firmly that accountability and cultural change started at the top:
‘Should the leaders take responsibility? Of course they should. What that means in terms of their jobs I will let others speculate on.’
He didn’t need to. The whole room was already doing that. Henry’s disastrous train wreck at the Hayne commission had cast a long shadow. We’ll let others kick Henry while he’s down – nobody can kick him harder than he is surely kicking himself. The fall from pedestal to bed of nails was not even cushioned by the enormous contribution he has previously made in the public service.
As we observed last year, very few former department secretaries successfully make the move to private sector boards at the big end of town and in future they may be more careful about what they wish for.
Before aspiring to join the board of a rapacious financial institution, for example, it might be a good idea to acquaint themselves closely with exploitative sales cultures that treat like dirt not only customers but also frontline salespeople.
Culture obviously does come from the top, but it’s down in the weeds where it has to take effect to prevent greed from trumping the law.
‘Social licence to operate’“Culture obviously does come from the top, but it’s down in the weeds where it has to take effect to prevent greed from trumping the law.”
Meanwhile, over at the ASX (where Henry remains a director, although that might change) the fourth edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations for listed entities is due to come into force on July 1.
A proposed new ‘Principle 3: Instil the Desired Culture’ has had pushback from stakeholders because it includes the concept of ‘social licence to operate’, which may not make the final cut principally because it is not legally enshrined in the Corporations Act – a pity, but there you go.
“A listed entity’s ‘social licence to operate’ is one of its most valuable assets,” says the draft. “That licence can be lost or seriously damaged if the entity or its officers or employees are perceived to have acted unlawfully, unethically or in a socially irresponsible manner.
“Preserving [it] requires the board and management … to have regard to the views and interests of a broader range of stakeholders than just its security holders, including employees, customers, suppliers, creditors, regulators, consumers, taxpayers and the local communities in which it operates.”
It goes on to spell out examples of being a good corporate citizen. Needless to say, systemically breaking the law in the name of greed is not one of them.
The concept of a social licence to operate is hardly new, especially in the mining and energy sectors, but even if it is a bridge too far for the ASX it cannot in practice be a bridge too far for the public service and the ‘twin peak’ regulators, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.
They must now develop a fearless law-enforcement culture – that of watchdogs that actually bite – rather than, as Hayne described in relation to ASIC, a “deeply entrenched culture of negotiating outcomes rather than insisting upon public denunciation of, and punishment for, wrongdoing”.
“Compliance with the law is not a matter of choice,” Hayne said. “The law is, in that sense, coercive and its coercive character can be neither hidden nor ignored. Negotiation and persuasion, without enforcement, all too readily leads to the perception that compliance is voluntary. It is not.”
As Governor of the RBA, Phillip Lowe also chairs the non-statutory Council of Financial Regulators, whose charter is here. The other members are APRA, ASIC and the Australian Treasury.
The council’s objectives are “to promote stability of the Australian financial system and contribute to the efficiency and effectiveness of financial regulation”.
Oh to be a fly on the wall at their next meeting. There won’t be a pedestal in sight.
◾ Defence mechanisms: why Ken Henry lost his job