Banking royal commission — governance in the spotlight
‘Governance issues have become central in the current round of royal commission hearings,’ said Acting Chief Executive, Meegan George.
‘Now is the time for a wide-ranging conversation on the clarity of the role of the board versus management. The banking royal commission has highlighted that boards and management need to work together differently in the future to restore trust,’ she continued.
‘Independent directors play an important role in challenging management and holding them to account. The royal banking commission has highlighted that boards need to find a better way to oversee how management implements systems and frameworks and to monitor that a company has an appropriate culture in place,’ continued Ms George.
Arguably, this calls for directors to act more like management and this raises a number of important questions on the role of the board, which are highlighted in Governance Institute’s submission on the Interim Report.
Culture and ethics are dominant themes throughout the banking royal commission hearings. The hearings along with our most recent Ethics Index demonstrate that the banking, finance and insurance sectors have lost the community’s trust and that organisations need to look closely at the ethical frameworks underpinning their future governance models.
'The loss of trust in the banking sector is illustrated by the 2018 Governance Institute Ethics Index — it was the lowest scoring sector and dropped from -3 to -15,' said Ms George. 'An ethical framework should sit at the heart of a company’s governance structure as an authoritative point of reference for all decision-makers and give shape to culture. Culture must be driven from the top. The CEO and board of directors are key to influencing and improving good corporate culture,’ continued Ms George.
The round seven hearings have also explored the importance of minutes and the amount of detail required. As noted in Governance Institute’s 2018 survey on the practice of minutes — minutes should not be a verbatim record of the meeting. ‘Minutes serve as a record of the key discussion points, to record decisions and the reasons for decisions and agreed actions. Approximately half of the respondents to our minutes survey agreed that board minutes should document the reasons for the decision and include sufficient background information for future reference,’ said Ms George.
‘The level of detail required is a matter of judgment and most company secretaries have the requirements of the ‘business judgment rule’ in mind when drafting minutes,’ concluded Ms George.