Of course, Commissioner Tanzer’s comments on culture do not just apply to financial services, having relevance to businesses across a range of sectors.
Drivers of cultureOrganisational culture refers to a set of shared values and assumptions that underpin the fundamental way in which it operates. Among other things, it can influence staff in their thoughts, attitude and behaviour, and in particular their approach to customers and vital organisational issues such as compliance. The Criminal Code 1995 (Cth) (Criminal Code) defines ‘corporate culture’ as including attitude, policy, rules, and a course of conduct or practice.
Commissioner Tanzer argues that some of the key drivers of culture are:
- having a board and senior management that is willing to take responsibility and ensure good outcomes for customers
- ensuring a company’s values and beliefs are widely known and understood throughout each area of the organisation
- enforcing an understanding that employees will be personally accountable for their actions, whether that be being rewarded for positive outcomes through promotion or awards, or not in the case of negative outcomes
- promoting a culture of open and honest communication, whereby employees are encouraged to take part in constructive engagement and
- promoting, and continually monitoring and assessing, an organisation’s culture, to ensure that appropriate changes are made and implemented where necessary.
Section 12.2 of the Criminal Code provides that in the event of the commission of an offence by an employee, agent or officer of a body corporate acting within the actual or apparent scope (or authority) of their employment, it can be attributed to the ‘employer’ body corporate. ASIC Chairman Greg Medcraft has made clear that this extends to a company being held responsible as an accessory for a breach of certain Commonwealth laws by its employees if the company’s culture either encouraged, or otherwise tolerated, that breach.
The potential for criminal liability
According to Mr Medcraft, in ASIC’s view, the power to take action in such a case should extend further to apply to civil penalties and administrative sanctions.
ASIC’s concern with cultureASIC contends that a negative organisational culture drives bad conduct, going so far as to say that bad conduct may even be rewarded in organisations where a negative organisational culture is evident. Accordingly, ASIC considers poor culture to be a key risk area which it will seek to address in its role as regulator, and it is clear that there will be an increased focus by ASIC on culture in the future.
In light of these comments, it is a good time for all businesses to consider whether they have laid the foundations for a strong organisational culture. Not only does this include taking steps to implement appropriate governance policies and related procedures, but also ensuring those policies and procedures are fully understood and embedded in the workings of the organisation.