Temper your sense of justice?

By Kristy Muir

Friday February 15, 2019

Now is the time to draw on what we know, to bring together the corporate, not-for-profit, academic and government sectors and to progress what we can do to create change and rebuild trust, writes Kristy Muir.

Temper your sense of justice” has become one of the better-known phrases out of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. It was a comment from Ian Narev (the then CEO of CBA) to Matt Comyn (CBA’s current CEO) who was then head of retail banking. It is a comment that was allegedly driven by prioritising increased profits over customer outcomes. And yet, the CBA’s vision, as described by Narev in his CEO Statement in the 2016 Annual Report, which was released only a couple of months after this phrase was used, was “to excel at securing and enhancing the financial wellbeing of people, businesses and communities.” There was clearly a disconnect between the rhetoric and the culture and, when push came to shove, profits trumped purpose.

Why are profit and purpose so disconnected? Larry Fink, CEO of the Global Asset Management company, BlackRock, which had US$5.98 trillion dollars under management at the end of December 2018, challenged CEOs in his 2019 letter to think differently about the connection between purpose and profit:

“Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them. … profits and purpose are inextricably linked.”

The issue though is not the absence of a clearly expressed purpose – take our big four banks in Australia as an example. Each one has a stated purpose, connected to individuals, families and communities. The CBA aims “to improve the financial wellbeing of our customers and communities”; ANZ’s “purpose is to shape a world where people and communities thrive”; Westpac wants “customers, communities and people to prosper and grow”; and NAB, whose brand promise is “More than Money” commits to “back the bold who move Australia forward”.

So, the problem isn’t the lack of a purpose, but instead the seemingly yawning gap between words and actions. Profits have trumped and/or been disconnected from purpose; and purpose has not been embedded within and across organisations – both in terms of incentive alignments and culture.

“Purpose must be embedded within and across organisational culture – standards must be set and people need to be held to account. This is not the responsibility of one siloed team…”

Justice Hayne in his Final Report into the Royal Commission stated that “in almost every case [of misconduct], the conduct in issue was driven not only by the relevant entity’s pursuit of profit but also by individuals’ pursuit of personal gain, whether in the form of remuneration for the individual or profit for the individual’s business. Providing a service to customers was relegated to second place.” The result was “substantial loss to many customers but yielding substantial profit to the entities concerned.”

This is not a homogenous problem. I have worked with many individuals within these and other financial service organisations (including NAB) who have (and continue to) work for better outcomes for increased financial inclusion, financial resilience and financial wellbeing of customers, communities and across society. The Financial Inclusion Action Plan, for example, had 30 trailblazers (including the big four banks) who had committed to almost 600 actions by March 2018. As a result of this call to action, we are starting to see tangible outcomes.

If we are going to address the disconnect between our financial institutions and individuals and communities they seek to serve, we must find a reconciliation between purpose and profits; we must close the gap between espoused purpose and enacting that purpose; and purpose must be embedded within and across organisational culture – standards must be set and people need to be held to account. This is not the responsibility of one siloed team – it will require collective shared leadership and a serious commitment to addressing financial exclusion and increasing financial wellbeing.

Given the $29.4 billion collective statutory profit of the big four banks in 2018 alone, one must ask the question, how much profit is too much? As a society, we should be demanding that a portion of this profit margin goes into serious investment for social good. Indeed, the investment must go beyond a rounding error on the company balance sheets.

Reconnecting purpose and profit

Change will require exceptional leadership and significant moral courage by leaders to work differently. I wrote about moral courage last year, lamenting that in some corners of our society, “individualism and the pursuit of personal gain appear to have compromised morality for social good.” If we are going to address this, “change will require leaders to challenge, to ask different questions, to push back, to find different ways of working, to commit to and enact espoused values in the interest of a more inclusive, stronger society”.

As Larry Fink states, change requires organisations to better connect purpose and profit. Indeed, without profit it is difficult to “effectively serve … shareholders, … employees, customers, and communities” and purpose is what “drives ethical behaviour”, “creates an essential check on actions that go against the best interests of stakeholders”, “guides culture, provides a framework for consistent decision-making, and, ultimately, helps sustain long-term financial returns for the shareholders”.

I’d go further and say that clarity of purpose and enacting purpose in specific examples is no longer enough. To win back trust and to really demonstrate the connection between profit and purpose, companies need to demonstrate whether they are meeting their purpose. Across the social purpose sector, organisations are increasingly being called on to demonstrate their impact. Indeed, their funding often relies on it. Shouldn’t for-profits who claim social benefits be accountable in the same way? In an age of needing a social licence to operate and when market forces are dominating the social sector, organisations and boards can’t afford not to understand their social impact.[1]

So, to truly live their purpose, each of our big-four banks and other financial institutions must better demonstrate how they are meeting customer needs, supporting customers and communities to thrive and improving financial wellbeing. We know what constitutes financial wellbeing for Australians and we have excellent individuals, programs and organisations aiming to improve financial inclusion, financial resilience and financial wellbeing, including through our partner in Financial Resilience, the financial inclusion team at NAB. Yet, the evidence shows we have much work to do – 2.1 million adults in Australia were experiencing severe or high financial stress in 2018; 1 in 5 felt over-indebted or were just managing to keep up with repayments; and barriers to accessing financial services – cost, trust, wait times, poor customer service – remain entrenched, especially for people with low economic resources.

The financial services industry, which, as Hayne stated, is so “important to the economy of the nation”, is at a crossroads: “The damage done by that conduct to individuals and to the overall health and reputation of the financial services industry has been large”. The “time has come to decide what is to be done in response to what has happened”.

Now is not the time for divisiveness. Now is the time to draw on what we know, to bring together the corporate, not-for-profit, academic and government sectors and to progress what we can do to create change and rebuild trust. Now is the time to bring together leaders, enact a common purpose and to lead collectively for a more inclusive future.[2]

Now is the time to “inflame”, not “temper”, our sense of social justice.

Kristy Muir is the chief executive of the Centre for Social Impact (CSI), a professor of social policy at UNSW Sydney and an elected member of UNSW Sydney’s Council.


1. It’s one of the key points we cover as part of our Governance for Social Impact executive education course for Non-Executive Directors.

2. We’re actively working to do this through our Amplify Social ImpactInitiative and we are looking for partners to join us.

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