There has been a massive recalibration of expectations of all boards and senior executives (not just in Financial Services) in relation to how organisations are governed and how organisational cultures are formed, shaped and overseen as a result of the Financial Services Royal Commission.
APRA's excellent prudential review of the Commonwealth Bank of Australia has also contributed to this massive recalibration of expectations.
Many things that might have been considered as acceptable several years ago are clearly now not considered to be acceptable. The bar for character, integrity and ethics has been raised significantly! And don't expect that bar to be lowered any time soon. In fact, you can almost be sure that something that might seem OK today will be judged in five or 10 years' time as being totally unacceptable.
And we can also expect a new wave of regulation that raises the bar for boards and executives to address many of the failures recently brought to light by the Royal Commission and the APRA review.
As APRA's cultural review of the CBA says, we should all be adopting a stance of chronic unease and not of chronic ease when it comes to our governance and our oversight of the way culture is formed, shaped and overseen in our organisations.
The Terms of Reference for the Royal Commission went way beyond determining whether there had been any civil or criminal wrongdoings.
The Terms of Reference include whether any conduct, practices behaviour or business activities fell belowcommunity standards and expectations" and whether any actions werenot in the best interests of superannuation members."
Putting the bar even higher, events that occurred many years ago have not been judged based on the then community standards and expectations but have been judged based on current day community standards and expectations.
The Terms of Reference also require Royal Commissioner Hayne to determine whether any of the inappropriate conduct referred to above can be attributed to any particular culture and governance failures of those financial services entities.
Many references have been made during the Commission to numerous cultural and governance failings and not just isolated incidents in many financial services organisations.
APRA's prudential review of the Commonwealth Bank of Australia identified many deficiencies in its governance culture and accountability. It noted that community trust in the CBA and other banks in Australia and across the world had been eroded and that it would require time, resolute leadership, hard work and an undistracted risk and customer focus to regain that trust.
We wrote an article with this title around this time last year. We pointed out that many years ago if a seller of goods or services cheated you then it was bad luck to you. The seller would often get away with it and there wasn't much you could do.
We pointed out in that article, that following the recent rapid rise in social media, organisations now need to be extra sure that the products and services they sell are fit for purpose and function as would be reasonably expected (regardless of the very fine print to the contrary) or the word of any deficiencies would spread across the world in no time.
It is now seller beware!
This massive shift also requires boards and executive teams to think quite differently about how they govern their organisations and how they oversee organisational culture.