HR implications of the Banking Royal Commission

We look at some lessons for employersfrom the recent findings from the Banking Royal Commission.

The findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry were released on 1 February 2019. The findings will be relevant to your organisation even if it isn’t in any of these industries. This is because many of the findings relate to employee (mis)conduct, culture and reward.

The findings show the need for strong and ethical HR leadership, policies and practices. Organisations may find moving closer towards these characteristics to be a considerable task.

Where to start

Begin by examining how aligned the following are with the organisation’s vision and mission:

• organisational culture
• Codes of Conduct
• philosophy underlying HR policies.

For instance, a Code of Conduct may not have enough detail to make it clear how different actions are or are not consistent with organisational aims. A Code of Conduct like this could be updated to more explicitly define a greater number of acceptable and unacceptable behaviours. Another example would be reward and renumeration practices, including Key Performance Indicators, that encourage inappropriate behaviour.

Six norms of conduct

In his interim report, Commissioner Hayne suggested six norms of conduct that organisations implement to achieve a minimum standard of behaviour:

1. Obey the law
2. Do not mislead or deceive
3. Act fairly
4. Provide services that are fit for purpose
5. Deliver services with reasonable care and skill
6. When acting for another, act in the best interests of that other.

Improvement depends on action

Policies, codes and attempts at cultural change will be ineffective unless there is:

• information sessions for all employees about changes to policies, codes and practices, plus strong emphasis on these during new employee induction
• a way for employees who observe misconduct to safely report what they’ve seen (known as whistleblowing)
• immediate and comprehensive follow up on any reports of misconduct, with whistleblowers treated with respect, and anonymity maintained as appropriate
• enforcement of policies and codes at all levels, in a consistent and timely way, using a documented process
• auditing of employee actions (which should at the very least be part of performance management), and
• management leadership, transparency and behaviour modelling.

Why this matters

The report from the Banking Royal Commission is a reminder that business success depends on not just outcomes but also ethics and conduct. Investing in improving culture, policies and codes is worthwhile because problems in these areas impact on reputation, revenue and profitability. More seriously, organisations may become involved in civil or criminal legal action. These things can destroy an organisation and are not a risk to be taken lightly.

For assistance with all aspects of human resources, including the matters raised in this article, contact us via our HR Resource Centre or call the Ai Group Workplace Advice Line on 1300 55 66 77.