Our politicians are rightly receiving a hammering for their failures . We really do need to restore public trust in our political system. I have suggested a national summit after the next election on democratic renewal, different in subject but similar to the economic summit that Bob Hawke called in 1983.

But to restore public trust our business sector must also clean up its act . There are too many second rate business executives doing a third rate job. They should ‘stick to their knitting’ instead of running to the government for help or blaming the trade unions.

In the end it is not companies that perform well or badly. It is people. They must be held accountable,particularly directors and senior executives

Essential Media regularly reports on our trust in various institutions. The last report in October 2017, a year before the Banking Royal Commission gave us its interim report, told us that only 29% of Australians had trust in our ‘business groups’. That was on a par with our trust in federal and state parliaments and religious institutions that have been so damaged by sexual misconduct. The 29% trust in business groups was well behind our trust in the police, High Court, ABC and the Reserve Bank. As the Royal Commission on banks proceeds, our trust in business is likely to fall further.

The Australian business landscape is littered with poor performance and often much worse behaviour.

From the 2018 Rich List in Australia, we learn that there were very few business people who accumulated their wealth through entrepreneurial activity. Fifty-one of the 200 most wealthy Australians made their fortunes from real estate where , with the help of lobbyists ,success depends on twisting the arms of governments for zoning and re-zoning. Very few of the rich list were from the services sector, which we have been lead to believe is the industry of the future. Many had inherited their wealth. It did not come from their business skills

Deloitte Access estimates that if the gap in management quality between Australia and the US was halved, our productivity would rise to 80% of the US level. This would represent an increase of GDP of about $70 billion which is equivalent to about $3,000 per person per year.

The Business Council of Australia spends an inordinate amount of time trying to secure corporate tax reductions which would overwhelmingly benefit foreign shareholders. The BCA campaign started as an attempt to generally reform the whole tax system ,which is necessary ,but quickly degenerated into a campaign to assist the Liberal Party’s political agenda.

As a result of bad business judgements there has been a massive capital write-offs by large companies such as BHP Billiton, Rio Tinto and more recently Westfarmers. Frightened to invest in their businesses many have also embarked on large scale share buy backs and very generous dividend policies and of course excessive and unmerited executive salaries

Wage theft has been widespread in companies such as 24/7 and similar franchise groups that exploit non unionised workers and young people.

In cooperation with the four large accounting firms many foreign owned corporations have indulged in massive tax avoidance

These accounting firms have major conflicts of interest. Their traditional accounting and audit roles have been overwhelmed by their advisory and consulting services.

Industry superannuation funds which are jointly managed by employers and employees have over a long period achieved far better returns for policyholders than the retail funds, mainly owned by the banks.

Many of our companies give lip service to the gathering storm of human-induced climate change. But there is little real action to meet the Paris objective of restraining temperature increases to no more than 1.5%. Many business organisations have decided to play the Coalition political game on climate change whilst ignoring the corporate risks that climate change poses for their organisations and the planet. They have the gall to tell us that we need bi partisanship in climate and energy policies when they have supported so many crazy and contradictory coalition policies in the past.

The business sector has failed comprehensively to shape their companies and to employ the people who have relevant skills for the Asian century. Tim Soutphommasane, the former Racial Discrimination Commissioner at the Australian Human Rights Commission put the problem this way in this blog on 11 April this year ‘our examination of almost 2500 senior leaders in business, politics, government and higher education shows only very limited cultural diversity. Almost 95 per cent of senior leaders at the chief executive or ‘c-suite’ levels have an Anglo-Celtic or European background. Of the 372 chief executives and equivalents we identified, 97 percent have an Anglo-Celtic or European background. All up there are 11 of the 372 CEOs and equivalents who have a non-European or Indigenous background. A mere cricket team’s worth of diversity’.

The 1989 Garnaut Report ‘Australia and the North East Asian Ascendancy’ and Ken Henry’s White Paper ‘Australia in the Asian Century’ both made many recommendations on how we should respond to Asia, including skilling Australian companies for the job ahead. But both reports disappeared almost without trace. The media and our corporate sector sat on their hands. Australian corporations are still not equipping themselves for Asia. They have gone on ‘smoko’ We could count on the fingers of one hand the number of CEO’s and directors of our ‘top’ 200 ASX companies that can fluently speak any of the languages of our regions. The male, pale and stale directors club shuns new talent and appoints people like themselves with the same limitations.

And the crowning failure of our corporate sector has been our banks and insurance companies,. The royal commission revealed incompetence, greed and dishonesty on a wide scale. The royal commission has also demonstrated how directors of our major companies have been more concerned to advance their own careers and the careers of their friends rather than the interests of the companies and customers they should be serving.

Where were the chairs and directors of our major banks when all this was going on. Even dead people were being charged and customers levied fees when no services were provided. But bank directors sat tight on their inflated directors’ fees. Some casually moved out of regulatory jobs in Treasury and the Reserve Bank and jointed egregious and greedy banks like NAB and Macquarie.

The Chairs of our four main banks Lindsay Maxsted (Westpac), David Gonski(ANZ), Ken Henry(NAB) and Catherine Livingston(Commonwealth) must bear a heavy responsibility for the disasters disclosed in their banks. Didn’t they know what was happening under their watch or did they decide that this is the way business is done these days. They all earn excessive remuneration just like their CEOs. They have badly let us down.

We are all naturally anxious that the Royal Commission result in significant reforms of our financial system. Will the profit culture before everything else be changed? Will the regulators really do their job? Will new legislation impose such penalties that the greedy wrong-doers will think twice in future?

We can expect to see some improvement, but the banks will seek minimal reform and hope that the present unfavourable publicity will blow over.

Clearly the regulators must do better, and I expect that they will. But my experience with regulators in the aviation and intelligence sectors is that the regulators become part of the club. It is obvious that the regulators who should have been effectively and firmly supervising the banks, came under the bankers’ spell. In the intelligence field the supposed regulators, supervisors and inspector generals including even parliamentary committees, join the intelligence club.

No-one went to jail in the US for the malfeasance in the financial sector that precipitated the global financial crisis. It is unlikely that any directors and CEOs in Australia will face criminal charges. Very astutely they have mainly hidden from view in the Royal Commission.

What has happened in the Royal Commission into the behaviour of banks and our financial institutions comes as no surprise. In this blog on May 30, 2014, ‘Are our bankers listening or caring’, I drew attention to a conference in London on ‘inclusive capitalism’. At that conference the governor of the Bank of England and the IMF Chief said that bankers regarded themselves as different and not bound by the need for economic and social inclusion that is essential in a modern society. Both the governor and the IMF Chief said that the actions of the banks were excluding them from mainstream society.

And that is precisely what our banks have done in Australia as revealed by Justice Hayne.

Surely it is time to look again at the banking arrangements of the 1940s under Chifley and Coombs, with the publicly owned Commonwealth Bank operating both as a central bank as well as a trading/savings bank. Our publicly owned Reserve Bank could now develop some real banking competition by providing an online banking system to compete with the poorly performing Australian commercial banks by providing lending services particularly for housing directly to the Australian community. Unfortunately the bankers’ club which includes Treasury, the Reserve Bank and the commercial banks, does not want to upset the present cosy arrangements that are serving us so badly. I am sure the Australian community would welcome the breaking up of this cosy bankers’ club and some real competition. Surely it is time.

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