"Culture" Is Key - An Analysis of Culture-focused Techniques and Tools in the Regulation of Corporations and Financial Institutions

ABSTRACT

Responses to the COVID-19 "systemic shock" include signs of a corporate governance shift away from short-termism and generating returns for shareholders towards a broader corporate "purpose" that better meets the interests of society. However, this trend was already apparent in the wake of the Global Financial Crisis, which illustrated the damage that "defective" corporate cultures can wreak on stakeholders and communities, trust and corporate reputations. As such, this article focuses on the link between defective culture and unethical conduct and wrongdoing in banks and financial institutions. It examines recent regulatory initiatives that seek to address critical defective culture issues, especially those uncovered by the Banking Royal Commission, with the aim of determining whether they may be used to redirect and improve the culture of an organisation. These include embedding the Australian Securities and Investment Commission specialist staff in the major Australian banks, the BEAR/FAR and the deployment of administrative tools, such as enforceable undertakings.