Culture isn't everything: ASIC

ASIC commissioner John Price has warned a "strong culture" might not stand resolute in the face of remuneration incentives.

Addressing the Governance Institute's Risk Management Forum in Sydney yesterday, Price warned companies that ensuring the behaviour of employees required a more holistic approach than embedding a strong culture.

Pointing to cultural matters he finds interesting in his role as a regulator, Price told the forum that misaligned incentives posed a danger to the effectiveness of company culture when it comes to directing staff behaviour.

"It's fine to have a strong culture," Price said.

"But ultimately if you pay people to do particular things, you shouldn't be surprised that they do them."

The ASIC veteran said he was also concerned with companies who focus on short-term financial results "to the exclusion of anything else", noting APRA's prudential report into the Commonwealth Bank documented the dangers of using such a lens to evaluate performance.

With culture forming a strong theme in the Royal Commission's final report, Governance Institute general manager of policy and advocacy Catherine Maxwell asked Price how boards can keep in touch with their company's culture yet remain in an oversight role.

Price said boards need to strike a balance between having enough information to understand the root causes of issues in their organisation, yet not so much that they miss the forest for the trees.

However he called out hypocrisy as particularly corrosive, and said boards should seek to ensure company leaders receive the same treatment as their underlings when things go awry.

"Ask yourself the question, what action is taken against leaders or top performers who don't uphold a company's values?" Price said.

"Because, in my view, there's nothing more corrosive in an organisation than hypocrisy. And if there's one rule for some but it's not the same rule for others that is a big problem."

Read more: ASICJohn PriceGovernance InstituteAPRACatherine MaxwellCommonwealth BankRisk Management ForumRoyal Commission
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