Beware the pre-election anti-business pressure on the Turnbull government to dent its traditional Liberal free-market credentials. Populist political demands for tougher controls (including gaol for breaches of proposed ‘business culture’ requirements) along with Labor’s political stunt of a Royal Commission into the financial sector, have already imposed themselves on an election based by the government on its determination to restore the ABCC that Gillard/Rudd Labor removed under instructions from the corrupt CFMEU. While this regulator was absent, the real need for it was demonstrated by the number of prosecutions against crooked unionists emerging from the Heydon RC.
In parading ethical purity, some critics have pointed to the ‘unsatistfactory’ corporate culture that has led to ‘scandals’, with Australian big business having a ‘stench around it’ and ‘looking decidedly grubby’. Malcolm Turnbull ‘can’t fight an election on union corruption while at the same time ignoring the stink emanating from the corporate sector’, was the Australian’s Alan Kohler’s contribution last week. ‘The evidence of tax avoidance, bribery and corruption of corporations and the wealthy has simply become too great: the coalition must distance itself from them’. Kohler’s serious sin is pretending there is equivalence between the need to restore the tough-cop-on-the-beat to stop CFMEU thuggery, and a corporate sector where there already are tough-cops-on-the-beat. It is the actions of these regulators, like ASIC’s prosecutions of the local banks for allegedly rigging the bank bills swap rate (after achieving big settlements from some foreign-owned banks) and the ATO’s significant actions on tax evasion, especially from overseas, that help explain why these companies are rightly subject to public criticism. Certainly, failures by bank subsidiaries to behave ethically to the disadvantage of their customers have justified popular bank-bashing, and lists of users of tax havens in the Panama Papers have done nothing for their reputations (in themselves, not evidence of tax evasion). Kohler’s absurd claim that ‘the 2016 election should be fought on corporate corruption not union corruption… The political atmosphere around corporates… has turned toxic and it is arguably worse than around unions’, lacks any basis of fact, beyond being a useful hook on which to hang a populist campaign. The corporate sector is overwhelmingly law-abiding; tax-paying generators of Australia’s wealth and employers of workers. Denigrating it as a whole represents a lynch-mob mentality.
This has clearly developed into such a political issue that last week former banker turned PM Turnbull felt the need to tell the banks to clean up their act. ‘We expect our bankers to have higher standards; we expect them rigorously to put their customers’ interests first. Banks don’t just operate under a banking licence, they operate under a social licence and that is underwritten by public confidence and trust’. He warned that the banks would endanger their social licence to operate if they continued with ‘the singular pursuit of an extra dollar of profit at the expense of values’. After the federal government backed the banks with guarantees during the global financial crisis, there had been ‘too many troubling instances’ of some banks ‘regrettably taking advantage of fellow Australians’.
What will be done about it? The industry, and even ASIC’s Greg Medcraft, agree that you cannot impose corporate culture by regulation – although Medcraft says that poor culture is often an indicator of behaviour that leads to offences and, in the face of overwhelming industry opposition, wants to impose criminal liability for corporate culture that tolerates legal breaches. Medcraft’s term expires next month and cynics suggest ASIC’s decision last week to charge Westpac with rigging the bank bill swap rate rather than follow the customary practice of avoiding the uncertainty and expense of court proceedings by accepting settlements without admissions, could be an attempt to have his term extended to let him complete the case. A Labor appointee, he is not particularly close to the present government. His plan for criminal liability may appeal to Labor, with corporate ethics and culture being the justification for a new round of authoritarian corporate regulation. But surely not by a Liberal government.
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