Speaking at the 2018 Corporate Conduct & Class Actions Symposium, Maurice Blackburn national head of class actions Andrew Watson said instances of misconduct – such as the Bank Bill Swap Rate (BBSW) “rate-rigging” – are “far more serious and far more sustained” than what cricketers Steve Smith, David Warner and Cameron Bancroft undertook in Cape Town earlier this year.
“Outside of the example of the resignations from the AMP board, where are the boards and executives who have taken responsibility for their conduct, beyond the mealy-mouthed crafted [statements] written [by] public relations teams?” he asked.
“It’s time for the boards of the big four banks to take proper responsibility for having overseen some of the most widespread, damaging and appalling conduct we’ve witnessed. Executives who allow a culture of lawlessness, in the pursuit of profit, should face more severe sanctions than simply losing their performance bonuses.”
Directors who have been on boards during periods of misconduct must reflect on their own positions, Mr Watson continued.
“It is past time for those who have created the cultures that were the problem, or for those who sat idly by while those cultures were created, to do the right thing and contemplate resignation,” he argued.
“They should not wait for recommendations from the royal commission, nor wait for regulatory action from ASIC, and nor should they wait for the adverse outcomes of class actions. They should act with integrity and take responsibility for what can only be described as abject failure, and they should resign.”
Another lesson from the banking royal commission, he added, is that “we must have strong enforcement and regulatory action” to deal with the consequences of corporate misconduct and to act as a deterrent against future misconduct.
“What is all too evident is that some regulators have focused too much on a partnership with those whom they regulate and have tended to avoid prosecutorial activity. This has contributed to a corporate culture which sees breaches of the law which, even if detected, will simply be negotiated away with the regulator,” he said.
The royal commission has heard that ASIC, as the financial services regulator, in at least one instance allowed a bank to get away with massive discounts on penalties for misconduct, and even let it draft the press statement announcing the penalties.
“We need stronger public enforcement from all our regulators. The public regulators will always have limited resources, and because those will often be focused on getting unlawful conduct to stop, rather than obtaining compensation for those affected by corporate wrongs, we also – it’s my contention – need strong and effective private enforcement,” said Mr Watson.
This, history shows us, is achieved by a class actions regime that holds corporations to account for their misdeeds and ensures compensation to those affected by misbehavior, he noted.
In a separate speech at the same symposium, ACCC chief Rod Sims said that bad behaviour remains rife among corporate Australia and repeated his calls for tougher penalties to be issued to act as stronger deterrent.
“Are businesses behaving badly? I think, sadly, too often yes,” said Mr Sims.
“Not only because consumers get hurt, but because I think it does undermine faith in our market economy, and that has broader consequences.
“When I’ve met senior board members and management, they say to me quite clearly, ‘It’s not up to me to tell them how to behave: their job is to maximise shareholder value and decide how best to this’, and I can’t disagree with that.
“But I do say they shouldn’t express surprise when they get a community backlash for some of their behaviour”.
Mr Sims added: “What I can do as chairman of the ACCC to contribute to reducing bad behaviour is take companies to court and get very high penalties… imagine if those penalties were hundreds of millions of dollars; I think the senior executives and boards would have a very different view of how they send signals, how they set up incentives structures, what processes they put in place to make sure that there is appropriate behaviour.
“I think it will make a big difference. I don’t think it is sufficient, but I think it is necessary… to get higher penalties.”