Kathleen Conlon is chairman of Lynas Rare Earths Limited, a non-executive director of REA Group Limited BlueScope and Aristocrat Leisure Limited, and a former non-executive director of CSR Limited. She maintained that regulation was a “minimum standard” for companies – and that failing to maintain it often resulted in business failures.

“In my opinion, regulation is setting a very minimum standard. And it’s designed to set a minimum standard of community expectations. There are companies who choose to fight regulation or ignore regulation in order to get a competitive advantage because they’re not meeting that minimum standard,” she said.

“I would say that some of the failures that you’ve seen in financial services have come from people trying to get a competitive advantage by ignoring regulation. Most companies are actually far exceeding the regulatory expectations and, in fact, there are cases where community expectations and investor expectations are also exceeding the regulatory framework.”

VIEW ALL

Ms Conlon added that regulation shouldn’t become the endgame – and companies should be focused more on creating a good culture, rather than letting regulations set the culture or standards of an organisation.

“As a board, we’re really focused on how we create competitive advantage through culture – where regulation is just a minimum standard,” she said.

“Because people don’t necessarily follow that minimum standard, they start to create more impact on businesses to try to make sure people are following that, and that has a cost to those businesses that are trying to exceed, because it adds cost to it.”

Ilana Atlas AO is a non-executive director of ANZ Banking Group Limited, Origin Energy Limited, Scentre Group Limited, Scentre Management Limited, RE1 Limited and RE2 Limited – and said that regulation and company culture often go hand-in-hand.

“Organisational culture is a very complex outcome of systems, processes, symbols and behaviour, particularly the behaviour of leaders in organisations. And regulation is an input into organisational culture – I don’t think it’s the determinant of it,” she said.

“But regulation is, by its nature, generic and applies to everyone. So, it is up to each organisation to determine how it implements regulation. It can be embraced and used as a lever to improve the experience of customers, or it can be treated very grudgingly – as a compliance exercise.

“The way regulation is implemented is just as determinative of culture as regulation itself.”

Ms Conlon agreed, stating that a variety of things tell you about the culture of an organisation, including employee engagement, turnover, workers comp, and customer feedback, to name a few.

“Part of it is the conversation the board is having with the organisation to say ‘what are the elements that really matter to us, and how do we measure that?’” she said.

However, in terms of unearthing cultural problems in an organisation at a board level, Ms Atlas said outside of the pandemic, boards would “see, hear and listen” to understand what was going on within an organisation.

“There are many indicators of culture within an organisation. The challenges for boards are that you get lots and lots of metrics. And the reality is you have to get underneath those metrics in order to understand the stories. So that’s really the trick for directors. You can be overwhelmed with the data,” she said.

“The idea is, how do you get through [the data] to get to the nub of the challenges that organisations are facing? We spend a lot of time trying to understand the business, visiting parts of the business, speaking to employees – and many of us are trying to grapple with how we do that in this current environment.”

Cathie Armour is one of the commissioners of the Australian Securities and Investments Commission (ASIC) and added that strong corporate governance systems – and good regulation standards – can mean “long-term value creation and effective risk management” for companies.

“From a regulator’s perspective, we’re really interested in outcomes for the firms we regulate. And we’re really interested in actions that ensure that those firms are able to discharge the goals of long-term value creation and effective risk management,” she said.

Ms Armour added that the responsibilities of those governing and managing corporations are to take into account a broad range of stakeholders, now more than ever before.

“It’s all about good corporate governance being focused on long-term wealth creation and looking to take learnings from past experiences and rules that have been posed in other areas and applying them more broadly.”