Australian Competition & Consumer Commission (ACCC) chairman, Rod Sims, claims the banking royal commission’s revelations of misconduct in the financial services sector highlights the need for harsher penalties for corporate wrongdoing. Sims argues that such penalties should act as a real deterrent rather than merely being regarded by management and directors as the cost of doing business. His claims follow a recent report by the OECD, which found that penalties for corporate misconduct in Australia are generally much lower than those of comparable countries. From The Australian:
ACCC chairman Rod Sims… [wants] penalties in the hundreds of millions of dollars in a group of cases now at an advanced stage of investigation…
“We need to have massively higher penalties — 10-15 times higher than they are — that grab the attention of company boards and senior management so penalties are no longer merely seen as a cost of doing business”…
“By the banks’ own admissions, incentives matter here. It’s clear to me the banks are saying we have to do these (bad or illegal) things because the financial consequences of not doing them are too high, and that means the penalties are not large enough to ensure the focus is on real competition for the benefit of the customer”…
Mr Sims said he often heard corporate leaders complain about market pressure to grow profits. “It doesn’t surprise me when they say inappropriate behaviour is sometimes necessary otherwise the share price may fall’’…
A report last month by the OECD found average Australian penalties are significantly lower than comparable jurisdictions, especially for large firms or for longstanding anti-competitive behaviour. Based on a sample of cartel cases, the report found penalties would have to be increased 12.6 times to match the average penalty in OECD countries.
Meanwhile, Treasurer Scott Morrison on Friday announced tougher penalties for companies in response to scandals exposed by the royal commission. From The New Daily:
The government has announced stiff new penalties for individuals and businesses found guilty of financial crimes, including longer prison sentences and higher fines.
The new measures also significantly increase the powers of the corporate watchdog ASIC…
Mr Morrison said individuals found guilty of the most serious breaches of the Corporation Act would now face a maximum of 10 years imprisonment.
They would also face maximum fines of either $945,000 or three times the benefit they have received as a result of their misconduct, he said.
For corporations, the most serious breaches would attract a fine of up to $9.45 million, three times the benefits, or 10 per cent of annual turnover.
Similar changes will be made to maximum fines in civil penalties.
The fallout from the banking royal commission continues…
