Andrew Schmulow, University of Wollongong

South Africa’s regulatory regime for the financial services sector is going through major changes. The question is whether companies can adapt to a principles-based approach. Or will they default back to rules-based compliance during the implementation of the Conduct of Financial Institutions Act? The aim of the new law is to improve financial sector conduct and ensure fairer outcomes, particularly for customers.

There are strong arguments that a business that prioritises the values of good conduct will be rewarded with loyal customers. They, in turn, have a high degree of trust in the business, and are more likely to source products and services from it. There are also indications that more loyal customers are less concerned about marginal differences in the price of a product or service, when compared to those of competitors.

In a wider social context, the South African government has made it clear that it expects financial services companies to take seriously the idea of a social contract. And that this, is essentially, their licence to operate in the financial industry.

From the industry’s perspective this means that treating customers well and pursuing greater financial inclusion are a legal requirement, as well as necessary to mitigate risk.

These developments reflect changed and changing expectations by wider society of the role financial service providers should play in contributing to South Africa’s future.

For all these reasons, compliance with new conduct standards should be regarded as an opportunity to embed resilience.


But these kinds of changes are often met with anxiety. Rules-based compliance is straightforward. Principles-based systems are less clear.

In my view anxiety is unnecessary, as compliance with new conduct standards serves a practical purpose.

If done in conjunction with deep reflection, compliance will steer the business towards better conduct. Moreover, a principles-based approach allows for flexibility by eschewing a tick-a-box mentality, which leaves the firm at risk. In some entities, good conduct already runs deep in the organisation. What will change, even for them, is the introduction of a more structured framework, more finely targeted, and set against ideational principles, not prescriptive rules.

Put simply, the new conduct regime produces an unexpected additional benefit: through compliance with the principles of good conduct and the assurance of good consumer outcomes, firms may expect to gain greater resilience.

Achieving authenticity

In practical terms, compliance that is founded in ethics and integrity brings authenticity.

To achieve this, three issues should be addressed.

The role and perception of compliance: It is important that businesses understand that compliance is not the “business prevention department” but the “business sustainability department”. Put simply, compliance should be regarded as a protector of the business and its place in society. An excellent compliance department, operating in a principles-based regime, is the vector by which the business transmits good outcomes for customers in future.

Implementation: By structuring the business around core principles, the entire organisation is brought along, and helps strengthen the underlying sub-set of narrow compliance. For this process, the compliance department must deploy a framework across the business, under the rubric that it is everyone’s job to act ethically. This envisages leveraging the existing skills, and especially in the case of highly compliant firms, long-standing expertise that is embedded within compliance.

Conduct review: Interrogating the life cycle of a product or service starts with product or service conception. This is more extensive than the customer journey. By spending time with stakeholders – including customers – to help understand why a product or service process works or does not work, these enquiries deliver significant understanding to the firm, and will deliver monetary benefits. Put differently, product performance information intelligible only to a highly educated customer will not be adequate for customers who are low income. Therefore, it would fail to comport with the underlying principles of constructing a financial system that is aimed at “protecting financial customers, promotes their fair treatment and protection, and promotes financial inclusion and the transformation of the financial sector”.

Interrogation of those processes would involve chunking conduct standards into a set of qualitative and conceptual (as opposed to analytical) enquiries. By aligning with overall corporate values, these enquiries reinforce the “all together” concept. What is also required is independence in the design of recursive reviews that will make a valuable contribution in mitigating otherwise unavoidable “observer biases”. Evidence of the problems caused by such cognitive biases are to be found in Australia, in the recent review by the Prudential Regulator of Commonwealth Bank and the Westpac self-assessment. Both allude to governance and conduct failures precipitated by a process-driven, as opposed to goal-orientated, myopia.

Future-focused firms will lead the way

Forward-thinking firms will be first movers towards stakeholder (as opposed to shareholder) primacy.

This approach was recently promoted by the Australian Royal Commission as the way forward for Australian banks and insurers. The South African authorities are paying careful attention to the commission’s findings.

In time, therefore, first movers in this space will no longer seem radical, but simply early. Those firms will provide the definition of leadership in the industry. If being values-driven is an end in itself, then first movers will enjoy an advantage. Moreover, credibility in this space affords firms the opportunity to set the standards to which the regulator will hold the rest of the industry.

Andrew Schmulow, Senior Lecturer, Faculty of Law, University of Wollongong

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Andrew Schmulow, University of Wollongong

The sexual harassment scandal enveloping AMP is another graceless turn in what looks like the death spiral of one of Australia’s oldest and formerly most trusted companies.

Joining a long line of executives to walk the plank at the venerable financial services giant, AMP chairman David Murray and board member John Fraser have quit over the promotion of Boe Pahari (disciplined in 2018 for sexually harassing a female colleague) to head AMP’s capital business division.

Since the Australian Financial Review broke the story of the claims made against Pahari, sparking a revolt among AMP’s female employees, the board had been under increasing external pressure to admit and correct its mistake.

Now it has – half-heartedly.

The exit of Murray and Fraser (and Pahari’s demotion to his previous job level) was, AMP said in its statement to the Australian Stock Exchange, a response “to feedback expressed by some major shareholders”.

Murray’s own statement was even less apologetic:

The board has made it clear that it has always treated the complaint against Mr Pahari seriously. My view remains that it was dealt with appropriately in 2017 and Mr Pahari was penalised accordingly.

However, it is clear to me that, although there is considerable support for our strategy, some shareholders did not consider Mr Pahari’s promotion to AMP Capital CEO to be appropriate.

In other words: what’s all the fuss about?

Murray’s failure to appreciate why he and the board made a mistake is, arguably, symptomatic of AMP’s management for at least two decades. Its focus on money over trust is central to the failures and scandals that have trashed its reputation and share price.

Vertically challenged

Founded in 1849 as the Australian Mutual and Provident Society, AMP was a not-for-profit life insurer for almost 150 years before it demutualised in 1998. Since then it has pursued profits with gusto, if not prudence.

Part of the push to privatise was to have funds to expand, with “vertical integration” all the rage in the financial services sector.

Vertical integration involves a bank or other financial services company providing products all along the financial supply chain. Once a bank might have offered you just banking services, for example. Now it will provide contents and life insurance, financial and retirement planning, and ways to invest in the stock market.

“From the perspective of banks,” noted the 2019 final report of the Hayne Royal Commission that uncovered systemic cheating of customers in the financial services industry, “vertical integration always promised the benefit of cross-selling opportunities.” But the internal efficiency of the “one-stop shop” did not necessarily produce efficiency for customers:

The ‘one stop shop’ model creates a bias towards promoting the owner’s products above others, even where they may not be ideal for the consumer.

Read more: Banking Royal Commission: the real problem is how we value executives and workers

When what isn’t best for the customer becomes the business model, it’s a slippery slope to taking other liberties. AMP slipped to charging fees for no service and billing dead customers for life insurance.

Following these and other revelations from the royal commission, AMP chair Catherine Brenner, chief executive Craig Meller and most of the board resigned. But interim chief executive Mike Wilkins made it clear AMP remained “committed to a vertically integrated business model”.

That commitment was buttressed by the appointment of Murray, a long-term defender of vertical integration in financial services, as AMP’s new chair in June 2018.

Bad habits

It’s not only vertical integration, though, to which AMP’s management appears rusted on. Money (not trust) is still number one.

It is plain the board’s primary concern in keeping, then promoting, Pahari was that he “made a lot of money for the company”.

In this case, despite Murray’s insistence that the board treated the complaint against Pahari seriously, the evidence suggests AMP downplayed Pahari’s behaviour as “low level” and “about comments made”. The former executive who made the complaint, Julia Szlakowski, has detailed a much more substantial pattern of inappropriate behaviour.

To cap it all off, the company is reportedly seeking to track down employees who might have leaked information to the media. Chief executive Franco de Ferrari and other executives have warned about the consequences of leaking, including “possible termination”.

“I think this is a battle for the heart and soul of AMP, in my view,” the Australian Financial Review reported one employee saying. “It’s moving from a culture of harassment to a culture of fear.”

Breaking up

On June 30, de Ferrari appeared before the House of Representatives economics committee. He enthused about the changes the company had made, declaring:

Virtually no aspect has been untouched, starting from the top, with complete board renewal and streamlining and strengthening of the management team.

Within days the appointment of Paharai had kicked of a staff revolt. By August 6, the chief executive of AMP’s Australia division, Alex Wade, was forced to resign after multiple women, reportedly emboldened by the response to Pahari’s promotion, complained about behaviour including allegedly sending explicit photos.

On August 13, de Ferrari declared during a teleconference with journalists to discuss AMP’s first-half results:

We know we have more to do in improving diversity and inclusion. The transformation of culture is now my top priority.

Granted, AMP may well be “the most challenging corporate transformation in corporate Australia”, and he might have said “right from the beginning this does not happen overnight”.

But from someone two years into the job it was a startling remark.

Leaks, needless to say, should be the least of AMP’s concerns. It’s the lack of a moral compass that threatens to run this ship aground and ultimately break it up.

Andrew Schmulow, Senior Lecturer, Faculty of Law, University of Wollongong

This article is republished from The Conversation under a Creative Commons license. Read the original article.

(1) CEO Franco de Ferrari stated on numerous occasions he had read the report compiled by the independent investigator – Andrew Burns QC – hired to assess the allegations of sexual harassment by Ms Szlakowski against her boss, Boe Pahari;

(2) he stated that “many” (not one, not two, not a few – “many”) of the allegations she made were untrue;

(3) Ms Szlakowski asserted that AMP was constantly diminishing and belittling the severity of what she had endured, in order to cover-up their hypocrisy in appointing Pahari, in the face of a “zero tolerance” approach to sexual harassment;

(4) AMP has now released the investigator’s final report. Guess how many of the “many” allegations Ms Szlakowski made the investigator in his report found to be untrue?


Franco de Ferrari either didn’t read the report, or he read it and purposefully misrepresented the contents. 

Put simply: he lied.

He is unfit to run a bath, much less a firm upon which hundreds of thousands of consumers rely to ensure that when they retire, they aren’t left eating dog food. And as long as he squats in the CEO’s office, every woman in AMP is at risk. 

“In an internal email in mid-August, AMP chief executive Francesco De Ferrari had told all staff that “many of the claims were not substantiated by the external investigation” after Ms Szlakowski called on the company to come clean over the matter after it made “persistent and misleading” attempts to play down Mr Pahari’s alleged behaviour.

“The London barrister hired by AMP to investigate a female employee’s sexual harassment complaint against senior executive Boe Pahari found all her main allegations credible

Last month, an Australian Federal Court ruled against ASIC (Australian Securities and Investments Commission) in its responsible lending case against Westpac Bank, where the bank was alleged to have improperly assessed whether loans granted between 2011 and 2015 were suitable for customers. In a 29 June article, AFR columnist Karen Maley rose to the defence of Westpac bankers, saying:

Westpac’s latest win in the “wagyu and shiraz” case battle is a humiliating – but sadly predictable – setback for James Shipton and the revamped leadership team now charged with running the Australian Securities and Investments Commission.

Juxtaposed with Maley’s view was the view expressed by Kenneth Hayne, former High Court Judge and Commissioner Royal; he of actual gravitas. He stated that wherever ASIC saw the law disregarded its response should be to ask themselves this question: why not litigate? 

But that was not the only thing he said. He went further. He said ASIC should litigate even where it predicted it would likely lose. Only that way, he explained, would deficient and inadequate laws, no longer fit for purpose, be exposed, having been tested in the courts.

Put differently, where the existing law was inadequate to the task of remedying an identified problem, legislative reform would be needed. But first, ASIC would have to make the case for such reforms by testing the efficacy of those laws in court, and demonstrating that the existing legislation was deficient.

So with that in mind, ASIC’s loss (and Maley’s misplaced and ill-informed criticisms) can be subjected to a sober assessment.

Reckless lending is a time-bomb

ASIC’s case against Westpac was based upon a perceived need to punish Westpac for engaging in reckless lending, and a desire to dissuade it and other banks from continuing with that practice. Why? Because reckless lending leaves consumers over-indebted, and vulnerable in the face of a sudden and steep economic downturn.

Such downturns are hard to predict, and are often the result of unforeseen events – like a global pandemic – a coronapocalypse, if you will. When an unusual event like Covid-19 occurs, or worse, a true black swan event, consumers who have borrowed too much start to fall into default. It starts at the margins: with consumers who can’t service personal loans and shop credit, splurged on holidays and PlayStations and furniture.

From there it spreads to credit card defaults. And then vehicle finance. And finally mortgages. And when those defaults occur at scale – and especially when they spread to the mortgage belt – the banks that provided all that finance can become fragile. At that point, facing a potential financial crisis, taxpayers are saddled with the consequences of the reckless lending banks pursued.

This has happened. Ten years ago in the US, it precipitated a crisis in the subprime mortgage market. That in turn metastasised into a global firestorm, the embers from which still glow.

As Professor Gail Pearson points out in her chapter in the forthcoming Cambridge Handbook of Twin Peaks Financial Regulation, of which I am co-editor, 60% of all domestic bank lending is now in mortgages. She states:

More significantly, the changes in debt to household income are spectacular. This was around 40% in 1980, 140% after 2012, and approaching 200% towards the end of 2017.

So to be clear, it is not only right that ASIC tackle this issue. It would be indefensible if they did not.

Hemming and hawing

ASIC’s responsible lending case against Westpac dates back to March 2017, when it initially charged the bank with failing to take account of borrowers’ expenses, as they were required to do by law. Westpac’s defence was that, strictly-speaking, they had complied, in that they had taken account of borrowers’ notional expenses. They did so by using the Household Expenditure Measure (HEM) benchmark. The HEM, by the way, provides a benchmark for expenses which is on the genteel side of the poverty line. It is, by any reasonable assessment, absurd.

Westpac initially agreed to a AUD 35 million settlement to resolve ASIC’s proceedings, subject to court approval. In an August 2018 case dismissal, Federal Court Justice Nye Perram decided that, irrespective of the fact that the HEM might assess notional expenditure at a level far below that of actual expenditure, it was nonetheless a justifiable method by which to comply with the affordability requirement contained in the National Consumer Credit Protection Act 2009.

In deciding that Westpac had not contravened the Act, Perram stated that:

(a) the policy objective of the Act was to prevent unsuitable loans; 
(b) the test of suitability focusses on the customer’s ability to comply with their loan obligations – without substantial hardship; 
(c) the Act does not prescribe how a lender is to make such assessments, it merely requires that the lender not make unsuitable loans; and 
(d) ASIC’s case was based on a slew of ‘implied’ and ‘unnecessary’ rules.

It was in this case that Perram famously (or infamously – depending on your view) stated that a borrower may enjoy “Wagyu Beef and Shiraz” three nights a week (actual expenditure), but in order to service their mortgage, may well be prepared to make do with far more modest fare (HEM). Keep that metaphor in mind. It’s one I will come back to.

ASIC appealed, and to my great disappointment, lost. The majority of a Full Bench of the Federal Court upheld Perram’s decision. At worst, their Honours erred in that they failed to understand the context within which these laws were enacted. In particular, the systemic threats underlying Australia’s runaway property prices, or the manner in which this legislation should have been interpreted: not as a set of prescriptive rules interpreted in a positivist paradigm, but as a set of principles, designed to drive good conduct and financial consumer well-being.

At best, their Honours correctly interpreted the legislation, thereby demonstrating that it is inadequate to the task of combatting reckless lending. In major part because it fails to clearly direct the Bench away from a prescriptive, black-letter law, positivist and rules-based interpretation, to a principles-based approach, where consumer financial well-being is defined as the touchstone against which every provision of the Act should be interpreted.

Either way, ASIC has exposed the problem in practice, and the deficiencies of the purported remedy. If the regulator decides not to appeal to the High Court, then the stage must be set for legislative reforms. And those reforms are urgent, because make no mistake, this is the calm before the storm.

For example, there have been reports in the press recently of soup-kitchens in Adelaide providing food to families – including families with mortgages. To be clear, these people are not skipping Wagyu Beef and Shiraz. They’re skipping meals.

Lies, damned lies…. and statistics (with apologies to Oscar Wilde) 

In the interim, our banks have fought a concerted rear-guard action (with apparent supporters like Maley), designed to question ASIC’s motives and undermine their strategy. In so doing they hope to sap ASIC’s morale, so that ASIC will cease interfering in their drive for profit-at-all costs. Including by leaving consumers, especially vulnerable consumers, over-indebted and trapped; and worse, setting those consumers up to be the kindling for a fire, the first sparks of which may soon become evident in the wash-out from Covid-19.

Principally, banks have argued that ASIC’s ruckus over HEM is making it harder for hard-working Australians to obtain loans. That argument comes from the same playbook that gave us this gem: a Royal Commission into misconduct in the banking industry will cost a fortune, and those costs will ultimately have to be borne by consumers.

It’s a veiled threat, and it’s the PR equivalent of Saddam Hussein’s Human Shields Strategy: hold us to account, and we’ll punish Joe Public. It’s a threat that is not only transparent and insulting, it is also factually incorrect. For starters, I imagine that tighter lending laws would see exactly the same number of borrowers succeed in obtaining loans. They just won’t get loans that are as big. The technical term for which in the academic literature is affordability.

It is true, however, that we have seen a decline in the provision of loans of late. But according to data from the Australian Bureau of Statistics, this has not been supply-side driven. It has been demand-side driven.

Where’s the beef?

If the warning signs – a property bubble; our big four banks ever more dependent on mortgages; an exogenous shock to the economy delivered by a global pandemic; and wide-spread reckless mortgage lending – morph into a financial crisis in Australia, the question will surely be asked: why don’t we have laws to prevent reckless lending? 

To that the reply will be, we do, we just don’t enforce them. And when the howls pour forth: why on earth not? the response will be: well… apparently they were all too much… Wagyu Beef and Shiraz…

The article first appeared on the Regulation Asia website.

AMP doesn’t just have a women problem. It has an everyone problem

It is breath-taking to behold. One of Australia’s oldest and (formerly) most venerated firms, AMP. As it twists and folds through successive graceless turns of its glittering death spiral. From an historical high of $45 per share, to the pitiful $1.50 today, I give the company five years before it is consigned to the scrap-heap of history. Here’s why…

Where to begin…? Revelations at the Hayne Royal Commission that AMP was charging fees for no service (some would call that ‘fraud’), to charging dead customers for financial advice (some would call robbing a corpse particularly distasteful). One can only wonder how such a service would be provided exactly? By séance perhaps? Then the revelations that the company lied – in writing – to the regulator, ASIC, so many times that they lost count (again the irony is withering. Counting is something most people would regard as a key skill for a financial services firm). Then there were the revelations that in an ‘independent’ investigation, commissioned by AMP, and conducted by AMP’s lawyers, and subsequently submitted to ASIC, the Chair and CEO directed so many changes and amendments to the Report that it was almost ghost-written. Next came the PR spin, with all the grace and finesse of a road accident: AMP asserted that when they said the report sent to ASIC was ‘independent’ they meant it was ‘independent of ASIC’ not ‘independent of AMP’. Across the length and breadth of Australia you could hear eyes rolling. I said at the time the life-span of that ploy (the description seems so unfair to ploys) would be measured in days. Sure enough, about 36 hours later the Chair and CEO walked the plank. But not before the Chair complained that the media were camped outside her house and frightening her children, when she tried to take them to school (but think of the children…), until one journalist pointed out, her kids were on school-holidays. 

Shame on the writers of the Bold and the Beautiful. You call yourselves soap-opera writers? Talentless swill. Come to Australia, we’ll show you how to write melodrama.

Thereafter someone-somewhere thought it would be grand to appoint David Murray as the new Chair. Here I make full disclosure. I have for some time now not renewed my membership of the David-Murray-for-Christ Club. Call me picky but I just think there are examples from the late Mesozoic period that are slightly more woke. Murray got cracking on appointing a flashy fly-boy by the aptly named Franco de Ferrari as CEO. But not before The Ferrari negotiated an eye-watering $7 million sign-on bonus. Just to be clear: he wanted seven bar before he set foot in his office. Because… some sort of genius savant. Apparently. At this point one starts to lose sympathy for AMP shareholders: there’s unfortunate, and then there’s just punishment gluttony. But at least, one might expect, The Ferrari would be laser-focused on doing what was needed. That’s a list to which I will return.

Instead he set about trying to sell AMP’s New Zealand life division to Resolution. That sale was blocked by the NZ authorities because it failed to adhere to an agreement that NZ policy-holders be given adequate protection in the event of a sale. The Kiwis had a written agreement-and-everything (funny thing that. Kiwis. Frustratingly efficient and on the ball compared to their lumbering cousins to the west). One would assume at this point that (a) because AMP is 170 years old, and (b) started life as an NZ company that (c) the written-agreement-and-everything must be terribly old. How else would a sharp fellow with a speedy surname on a 7 extra, EXTRA large sign-on bonus miss something so critical? What with being a savant and all. Well the agreement wasn’t new, to be fair. It dated all the way back to 2018. David Murray (him of the for-Christ fan base) tried to blame the New Zealanders. The RBNZ quickly put him back in his box.

But all of that is just the Hors d’oeuvres. While the Hayne Commission was slaying dragons (or stomping on cockroaches – it depends on your perspective), the highly respected and rigorously independent Productivity Commission released its findings into Australia’s Superannuation industry. In it they named the 50 worst performing funds in the country (all of which are retail funds). And which firm was front and centre? 


(Did you guess it? If you did you too may be a savant).

At this point AMP started haemorrhaging customers like a decapitated victim in a slasher-flick. It was gory to say the least. And herein lies the first lesson: trust. T.R.U.S.T. It’s a bit of a thing when you are handling other people’s money. It’s a bit more of a thing when you are handling people’s retirement savings. And it’s a funny thing, trust. It can take 170 years to build and just one tawdry afternoon of sweaty-testimony to irreparably shatter. Lying as a norm, stealing from the dead. This didn’t just burn bridges between AMP and the people who keep them in business. It was saturation bridge-bombing, followed by napalming most of the surrounding country-side. A powerful lesson, no?


As situationally aware as a recalcitrant garden-gnome, and ignoring The Immutable Truth: that they are a business whose currency of trade is trust, what did they do? They did it again. And again. And again. These. People. Just. Don’t. Learn. Ten months after the Hayne Commission handed down its Final Report, ASIC revealed in Parliamentary Committee questioning that AMP was still charging dead people for financial advice.And that’s not all (it never is). In their remediation programme they were ‘refunding’ customers by putting the refunds into new Super accounts. A neat trick. Every new account doubles up on fees they can charge. So what the right hand gives, the left hand takes away. Then the right hand takes away some more. And here I refer to the customers lucky enough to get refunds under a scheme that has been pilloried for acting at a pace much like – well – a Ferrari that’s broken-down in the shade of Italian automotive reliability. 

But wait, there’s more. 

To try and cleave back money, money, money (never mind trying to restore trust, trust, trust) AMP has foreclosed on most of its tied-brokers: they’ve been forced to sell their practices back to AMP at a fraction of the price they paid. Because of course shafting the people who sell your dreck is a scheme only a savant riding on the back of a Brontosaurus could cook-up.

All of this is what youths-in-hoodies call woke.


Against this backdrop there has been an awareness created nationally, and internationally, of the despicable and vile sleaze that too many women in every facet of life have to weather, every day. The #MeToo Movement, sparked in the US after revelations of institutionalised creepiness to flat-out rape by the human toad Harvey Weinsten, has washed its oily slick onto our shores. At the High Court no less. What a day of shame for Australia. You would think that a seven-million-dollar-before-I-start-work man like The Ferrari, and his Brontosaurus, would have that in mind when promoting – let alone failing to sack – a senior executive? But like a youth wearing his hoodie, but back to front, they nonetheless put money, money, money ahead of trust, and appointed a sexual harasser to lead their most profitable arm, AMP Capital.

You couldn’t make this stuff up.

Where this dates back to is the de-mutualisation of AMP. For those who may not be aware of what that means, allow me to explain: A ‘mutual’ is a corporation owned by the ‘members’. Members are the people who have policies with the firm. It is by far and away the best model, because all the profits go to the owners who are also the policy-holders. When a mutual de-mutualises, it converts itself to a listed company comprised of shares, and shareholders. The policy-holders get a proportion of the shares – but just a proportion – a share of the shares if you will. The remainder – millions of shares usually, are sold to investors. In that way the mutual raises capital from the market. They tell the former owners that the injection of capital will allow them to expand and make more profit. But what they neglect to mention is that the company – which they used to own – will now have two masters: the policy-holders and the shareholders. Very quickly, the shareholders become the paramount master. They will sell (or buy) the shares based upon short-term gains – a quarter of a year usually. Whereas the policy-holders will only see their returns decades-hence.

So, the pressure is on. Profit, profit, profit, now, now, now. And to super-charge that toxic spiral, the directors get bonuses based upon the profitability (over a quarter and a year) and the share price (which is also based upon profitability over the quarter and the year). So it’s not just toxic. It’s leveraged toxicity.

To make targets, the company has to find new ways to bring in the bucks. In an ideal world this would come from hard work, and the best investment decisions. Coupled with that, new policy-holders would join up because… hard work, great investing. 

In an ideal world.

In the AMP world, hard work and great investing wasn’t producing results fast enough – and they never do by the way. Because… stellar performance this quarter, and the targets will get even higher next quarter. This is the insatiable beast called greed. And when there are no checks and balances, where will the monster look to feed? On the policy-holders.

So, fees and charges go up (and up and up). And when those cannot go up fast enough, new fees and charges are introduced. There’s a theory of taxation which applies here: if you levy one giant tax on the populace, they’ll burn down the government. So instead, you split the one massive tax into thousands of little taxes, which can be increased incrementally, and added to surreptitiously. So AMP did that.

But still the beast wanted more. And by this stage hard work and great investing had been forgotten. The place had become a gouge-fest. Where to find more revenue? Steal it.

Charge customers for financial advice they hadn’t received – indeed couldn’t receive because there weren’t enough financial advisors to go around. Still the beast wanted more. And by now ‘ethics’ and ‘integrity’ would be code for ‘trouble-maker’. So, anyone with any of those traits would’ve been ‘managed out’. That way charging financial advice could be extended to customers who were… you guessed it… dead.

This is typical of a company that has lost its way, forgotten its purpose, and whose culture has become fetid, toxic sludge.

When this was revealed before the Royal Commission, along with all the other nasties that infect a poisoned culture, like lying to the regulators, AMP went into free-fall. Now if you are a savant you might add up one plus one and come to the result that the solution is de-toxify the culture, and stop shafting your policy-holders, right? Well, if you agree with that, then clearly that’s because you are not really a savant (no $7 million sign on bonus for you). Instead The Ferrari on his dinosaur added one plus one and come out at 3 (entirely correct for extremely large values of one). They doubled-down on charging fees for no service. As late as December 2019 – ten months after the end of the Hayne Commission, ASIC was still railing at AMP for this dishonesty. But the reason is easy to understand: if you don’t know how to make money through hard, honest work and great investing… well for pity’s sake be reasonable… They had to make money somewhere. How else would they pay The Ferrari his 7 bar sign-on bonus?

It’s the same toxicity that has resulted in revelations this week from the victim of the harassment directed at her by Boe Pahari, the newly installed head of AMP Capital. In attempting to side-step that deplorability AMP cooked-up excuses which Pahari’s victim has rejected as untrue, half-truths, efforts to diminish and belittle the conduct in question, efforts to sanitise it all, etc. And oh boy, she’s got copious file-notes and a gun of a lawyer at Maurice Blackburn. The formidable Josh Bernstein. And as if that were not enough, she’s hired the same firm of New York lawyers who represented Gretchen Carlsson when she eviscerated the world’s second most powerful man in media: Roger Ailes – CEO of Fox News. Looks like this sub-plot will continue to move ink by the truck-load (stories in the SMH, The Age and the AFR today). That’s on top of Pahari allegedly spewing homophobic slurs (I always find prejudice to be an exquisite irony when it comes from a man of colour). And of course I neglect to mention the exit of another senior executive, Alex Wade, head of AMP Australia: sacked last week because he was texting lewd self-portraits to his female employees. But I must not digress into that saga, because of course with AMP you can’t talk about everything in one go. It’s a blog post, not a PhD, after all.

At this point you want to get the popcorn, and pull up a chair. 

But why did AMP circle the wagons round Pahari, in the midst of an existential crisis, I hear you ask? Well as one board member, John Fraser explained, Pahari has made AMP a lot of money.

There we go again: money, money, money.

Funny that. The Ferrari also explained this week that the 50% collapse in AMP’s profits are due to ‘reputational issues’. Wait. So… in fact these geniuses can’t even chase money effectively.

In the last fortnight Mr Speedy said he now realises culture is the most important issue at AMP. Now. He nowrealises. Somehow, despite being CEO for two years, and being so smart they had to pay him what a small country town would earn in a life-time to grace the place with his genius, and after scandals that have put the firm on a trajectory that will double up as a case study for aeronautical engineers (how flying things crash), he now realises the place has a culture problem.

You have to laugh. Else you’d cry.

In the interim AMP has gone from about eight women in leadership roles to (at last count): one. But its early days and only Monday. Could go lower, you never know.

So now we come to that list I mentioned at the start of what seems like a long piece, but is really nothing more than a nodding acquaintance to all the scheisse that has become this raging, Earth-dwarfing, Jupiterian-sized Giant Red Spot of a shit-storm that is the vortex formerly known as Australian Mutual Proprietors.

Cummings and Worley (Cummings, T.G. and Worley, C.G. (2001), Organizational Development and Change, 7th ed., South-Western College Publishing, Cincinnati, OH.) provides a six-step model by which leadership should lead:

  1. Formulate a clear strategic vision;
  2. Display top-management commitment;
  3. Model culture change at the highest level;
  4. Modify the organisation to support organisational change;
  5. Select and socialise newcomers and terminate deviants; and
  6. Develop ethical and legal sensitivity.

Newton (Newton, A. (1998), Compliance: Making Ethics Work in Financial Services, Financial Times Management, London, p. 98) states thusly:

The values, attitudes and beliefs exhibited by senior management represent the single greatest influence on the culture of the organisation. They must drive the development of the right culture. If senior management do not appear consistently to be committed to the need for or implementation of the right culture that will send a clear message to all employees that they have no incentive for doing so either.

None of these traits have been practiced by the leadership of AMP. Unfortunately, the rubric of ‘stability’ will prevent the changes that need to be made, assuming that there is still time to make them. For one thing, AMP needs a leader that is humble, introspective, will listen, will learn, and when need be, unlearn. Someone willing to ‘serve’ – principally policy-holders. That kind of person is not possessed of an ego so enormous that his ego has an ego. The sort person who demands seven million dollars before he has demonstrated he can, he cares, he ‘gets it’. Someone who will not appoint sexual harassers to the highest echelons of a company that serves a country in which women are in the majority. Nor does it envisage a Chair who once said that trying to regulate culture was comparable to the Nazis. Because being held accountable is like being in Auschwitz, apparently. What a galling cheek. [Murray did walk those remarks back after an explosion of anger and disgust].

So, AMP will not be saved. You can take that to the bank. 

It won’t even make for great viewing. It’s too pitiful and sad for that.

Post Script: Revealed tonight: Boe Pahari, sexual harasser and head of AMP Capital has just appointed himself as head of the inclusion and diversity committee. This saga has gone from tragedy, to high farce. I would say ‘you couldn’t make this stuff up’ but I’ve used that already. Kudos though to AMP. They’ve left me out of words…