Senior leaders of banks, insurance and superannuation firms and mortgage lenders should pay for misconduct with fines and other strong penalties, says Associate Professor Elizabeth Sheedy, from Macquarie University’s Applied Finance Centre.
That’s why this Royal Commission is so important, because it has the potential to change the external environment. We need serious consequences for financial institutions, and their senior leaders, when misconduct occurs. Serious consequences for misconduct will change attitudes – its not worth taking the risk of being caught if there is the possibility of fines and other consequences (like loss of license to operate) that really hurt the shareholders and the senior leaders.
Shareholders and executives are the ones that have benefited from all the misconduct; shareholders and executives are the ones that need to bear the consequences. Only then will shareholders and executives start to apply pressure to manage for the long-term, and for the benefit of customers.
So does the Final Report deliver in that respect? Some of the relevant recommendations include:
On the vexed question of remuneration, The Royal Commissioner, the Honourable Kenneth Hayne has said “It was apparent from the evidence before the Commission … that no-one has identified an ‘ideal’ or ‘optimal’ system of executive remuneration for financial services entities.” (p. 350) Here at Macquarie University we’ll continue our program of research investigating financial services remuneration and its implications for misconduct.
Discover more here about Macquarie University’s 2017 and 2018 research on the risk culture of large super funds, remuneration practices and culture and compliance behavior in the finance sector.
This article has been republished with the permission of the Macquarie University Lighthouse.
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