Company laws must change to ensure that directors have an explicit duty in the Corporations Act to look after the health and well-being of all employees, according to a former finance sector union organiser and co-author of a study looking at the impact of banks’ profit-seeking behaviour on employees.
Brendan Byrne, who is now an ordained minister in the Uniting Church, worked in the financial services sector and was an organiser with the Finance Sector Union. He is now part of the Religion and Social Policy Network that operates under the auspices of the University of Divinity.
Byrne and his co-authors, John Bottomley and John Flett, were commissioned by the Finance Sector Union to look at the ethical issues that arise when banks impose key performance criteria related to maximising sales to the exclusion of all else.
The report focuses on the impact on employees of what its authors call “capitalist ethics”.
Byrne told Banking Day that one of the problems is the fixation on profits as a way of looking after shareholders that naturally flows from the culture where a board of directors looks after the owners of the business.
Something, Byrne argued, needs to change in the way laws are constructed so there is an emphasis on directors focusing holistically on the way employees are treated by the system they oversee.
The Hayne Royal Commission targeted greed as being a problem across the system, but Byrne observed that the notion of driving corporate performance measured in financial returns for shareholders means that selling product – selling a lot of it – becomes the focus of the company’s journey.
“The Corporations Law in many respects sets the cultural framework within which the finance sector operates. It is worth noting that the corporations law makes the primary moral duty of directors the best interest and benefit of shareholders,” Byrne said.
“That always gets translated as shareholder return, shareholder value and increased share prices.
“By making the primary moral responsibility of directors and, by extension, the executive management teams who work under them, the benefit of shareholders, you automatically create a cultural framework in which improving the share price and improving the return on shareholding becomes the primary purpose for which corporations exist and therefore the primary end to which the work of the corporation is directed.
“In that context it axiomatically follows that sales and income generation at all costs becomes the normative mode of existence. That is enshrined in the legislation so what needs to happen, as well as whistle blower protections, [is] the change to the corporations law to make the cultural framework of the corporate sector more socially responsible.”
The three authors of the report found that employees that responded to a survey were generally comfortable with the written code of conduct for their entities, which was generally aligned with their own personal moral compasses. It was the fact that the banks and similar institutions focused on profit generation that began to create tensions related to profits.
“For Justine, Deborah, Lyn, and Miroslav, the gap between their employer’s ethical guidelines and their personal ethics was significant, even to the point of troubling. Of the three female workers, all at Westpac, Justine said Westpac’s guidelines encouraged doing the right thing, working as “one team”, and challenging the status quo,” the report said.
“[Justine] said that in theory the employer’s stated ethical guidelines aligned quite well with her own, however she ‘doesn’t think people are able to abide by them easily’ due to the pressures arising from her workplace culture.”
Another Westpac employee, Deborah, noted that while the bank’s written guidelines lined up with her own values she doesn’t “believe the company actually lives them” with another Westpac team member, Lyn, branding the guidelines as “spin” put out for members of the public.
A CBA staff member, Miroslav, told the researchers that the bank’s training for him consisted of focusing on breach notices but that only financial results mattered unless outside bodies began looking at the innards of the financial institution.
“Miroslav added he was grateful his ethical standards do not fit with CBA’s ethics, which he said are ‘simply miles apart’,” the report noted.
The report also observed that the pressures placed on bank employees to compromise their personal ethics in order to achieve the objectives of the employers’ profit maximisation was a cause of illness for some employees.
The report’s authors conclude that employees are treated as being mentally ill or unwell rather than the ultimate cause of their illness being defined as the system being imposed on them by employers in the finance sector.
“It is a manifestation of tempered justice to impute workers’ suffering to personal ‘weakness’ rather than systemic injustice, then provide an Employee Assistance Program that individualises their symptoms of work-related stress and privatises their healing,” the report observed. “Workers’ harm is minimised, and ‘sufficient’ justice is provided to legitimate the continuation of the status quo.”