Culture Through the Eyes of the Banking Royal Commission

Directors, take note!

The Hayne Royal Commission - Recommendation 5.6:

“All financial services entities should, as often as reasonably possible, take proper steps to: 

• assess the entity’s culture and its governance; 
  
• identify any problems with that culture and governance;
  
• deal with those problems; and
  
• determine whether the changes it has made have been effective.”

Directors have a responsibility to care about the culture of the companies they steward.

Hayne points out that directors have a responsibility for culture. A director’s duty “demands consideration of more than the financial returns that will be available to shareholders in any particular period”. He goes on to state that the long-term financial advantage of a corporation is likely to include “the interests of shareholders, customers, employees and all associated with any corporation”.

This brings to mind a conversation I had last year with someone from an organisation representing company directors where I asked if they’d like us to deliver a talk about culture. I was informed that “culture is not one of a director’s responsibilities – It’s an operational matter”.

Well, I think the Royal Commission is telling us that directors should very much care about culture. One way directors can take positive action on culture is to commission a Culture Code for their organisation.