FSU statement on proposed Royal Commission into finance sector

This could turn current performance based pay systems, including bonus arrangements, on their heads.

After months of controversy and scandal in our industry, everyone’s talking about ethical behaviour and how pay systems influence what happens within the finance sector.

The FSU is very concerned at the damage done to our industry by recent crises in life insurance, funds management, allegations of illegal behaviour in inter-bank rate setting and allegations of unethical behaviour in banking.

In response Labor Leader Bill Shorten and Shadow Treasurer Chris Bowen announced that a Labor Government will hold a Royal Commission into misconduct in the banking and financial services industry.

The Australian Bankers Association (ABA) (the industry association for banks) then announced a long term review of pay models, whistle blower protection, consumer protection, removing those guilty of poor conduct from the industry and a stronger commitment to regulatory action.
Change is on the way
Former Colonial First State Executive Chris Cuffe, (who was said to have been paid $32 million in his final year with Colonial) has said: “In my view the scandals in financial advice, life insurance and rate setting are primarily caused by one thing: the remuneration structure. Pay someone to behave a certain way and there’s a good chance they will.”

The Australian Financial Review (AFR) reported recently that last year NAB CEO Andrew Thorburn told NAB Board Chairman, Ken Henry, that he (Thorburn) wanted to use his Chairmanship of the ABA to: “lift industry practice specifically to improve the industry’s reputation with respect to customers.”
The Fin Review went on to quote Mr Henry as saying: “We should think about the possibility that the particular financial incentives we provide do actually encourage behaviour which is not really in the interests of the customers.”
In the same article CBA Board Chairman David Turner was reported to have accepted that conflict can exist between customer and employee interests. The AFR quoted him as saying, “There could be conflict. You can structure remuneration in a number of ways so that it doesn’t conflict…We are looking at how remuneration is structured.”
Taking a stand for your interests
The union has now written to Labor’s Shadow Treasurer, Mr Bowen, the ABA and the major banks outlining the steps that need to be taken to defend the interests of finance sector employees as the debate unfolds.
There is common ground among employees and the community.  It is in the interests of our industry, our community and our economy for the finance sector to be held in high regard with public confidence in our professional behaviour and ethics.
Sustainable improvement in the ethical standing and cultural practices in our industries will require legislative change and a serious commitment to improved staffing and resources, skills development and training for finance sector employees.
What the banks have to do to make it real
We’ve said that the ABA and the banks need to do the following to make their promise of reform real;
1.Provide an unequivocal commitment to supporting the removal of conflicted pay models from the industry while protecting the living standard of bank employees who have come to rely on product based payments,
2.Ensure that the “impartial third party” charged with overseeing the process is truly independent and has the confidence of the community and the workers employed in the industry,
3.Guarantee that employees and their union can make direct representations to, and be heard by, the “impartial third party” and have their contributions taken into account before any recommendations are made,
4.Extend the proposed whistle blower protections to include effective guarantees of job and career security for whistle blowers,
5.Defer the proposal for an employer controlled “black list” of bank employees until agreement can be reached with the union about the details behind its construction, management and use.
We have particular concerns about the criteria for getting on or off the list, a potential denial of natural justice,  potential defamation of character, potential breach of privacy, the apparent lack of an appeals process, the accompanying restraint of trade as well as control of and access to the register, and
6.Engaging in genuine consultation with employees and their union during the review of the banking code of practice. 
The FSU National Executive states there is a role for a Royal Commission
A piecemeal approach to the problems and the possible solutions is not going to work. Abolishing sales based pay and bonuses without replacing them with something better is not going to work. On this basis there is a role for a judicial inquiry into the systemic problems in the banking and financial services industries. The FSU will support a Royal Commission provided that the terms of reference for the Royal Commission do not allow it to become a witch hunt against individual employees. Rather, they must focus on the systemic problems caused by decisions taken at the senior levels of the industry.
The senior management decisions about pay and bonus systems, targets and performance measures, staffing and training, offshoring and outsourcing all combine to drive an industry culture that has undermined community confidence in what we do for a living. These are the things that a Royal Commission should look at and these are the things that must change for the better.

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  • anonymous
    commented 2018-02-01 20:25:16 +1100
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