The AMP drama highlighted some of the fault lines that exist within corporate governance practice within Australia where ‘rainmakers’ occupy exalted positions and hold status, power and sway in corporate Australia. The way AMP has handled the alleged misconduct provides some salient lessons for managers and organisations about ‘how not to handle misconduct’. In particular using a company commissioned lawyer to investigate violates important ideas of procedural justice.
Chairman David Murray was brought in to AMP to rebuild post the ‘fee for no service’ scandals revealed in the Hayne-led Banking Royal Commission. It was the very same shareholders/institutional investors who are now feeling pleased to have removed Murray, who installed Murray two years earlier as “rainmaker” to turn AMP fortunes around.
It’s worth keeping in mind that none of the AMP shareholders were complaining about its unscrupulous practices before the Royal Commission, nor when AMP was making profits and paying dividends. To view this case as one that demonstrates the power of shareholders have to influence boards would be to our minds, wrong.
We know from the Banking Royal Commission shareholders at AMP and elsewhere can’t be relied on to effect systemic change. Shareholders are inherently conflicted with their desire to make money.
In our opinion Murray has walked before being pressured further by public opinion and shareholders or told how to do his work as board chair. Murray has never liked being told how to run his firms or boards and has quit before having to stomach more of this.
He’s previously expressed his disdain for prescriptive advice on corporate governance matters including gender composition on boards, ‘social license to operate’ considerations, and has disliked public opinion judging his responses to scandal including the Royal Commission.
These changes to the AMP Board are just window dressing at the top level. Whilst the move may buy the AMP board and management team assembled by Murray including CEO Francesco De Ferrari some space to do their jobs, it hasn’t addressed any of the root causes of AMPs trouble, nor the ongoing disturbing accusations around its corporate culture.
We have written previously in the Conversation that AMP lost sight of its values post de-mutualising and listing on the ASX. The conflicts of interest at the heart of AMPs vertically integrated financial service business where customer interests are not always put first have not been systemically resolved.
Given that AMP has suppressed the lawyers report it commissioned into the matter its impossible to establish the facts of the case with certainty, so it makes it hard to draw definitive conclusions. It does highlight the need for organizations’ to clearly and unequivocally demonstrate that non-professional behaviour is unacceptable.
All of this provides a salient reminder that organisations are not very good at investigating themselves and their own misconduct.
How can AMP revitalise its board in the wake of David Murray’s departure?
Three immediate improvements that spring to mind when considering governance at AMP are 1) appointing employee directors, 2) board composition and directors duties, and 3) not using lawyers to report on matters of workplace misconduct.
Putting AMP employees or union members on the board could have a positive impact. Employees on boards provide improved communication channels to information about what is happening within firms and in this case crucially about workplace ethical climate and culture.
They also make firms more likely to listen to whistleblowers and take their claims seriously. AMP needs to work harder at the gender composition of its board and management teams being reflective of the broader society.
After the GFC the Irish banks put ‘public interest’ directors on the boards of the banks bailed out with public funds and then subsequently strengthened the public interest duties of all directors.
Government should consider explicitly changing directors’ duties to cover workplace culture.
Boards need to do better than getting external reports into misconduct prepared and then hiding behind lawyer-client privilege.
There are a number of potential government agencies that could be tasked with doing these types of investigations and reports including the Equal Opportunity Commission, Fair Work Ombudsman, or ASIC.
Warren Staples and Andrew Linden - School of Management
