Responsibility vs Accountability

One of the issues to have emerged from the response to the current coronavirus pandemic is the notion that “responsibility” is quite distinct from “accountability”.

In the Australian political arena, this is being played out in two specific aspects, both of which reveal some weaknesses in the Federal and State delineation. The first is the Ruby Princess, the passenger cruise ship that appears to have been a significant source of Covid19 infections from returning and in-bound travellers. In this case, blame or liability for the breach in quarantine measures is being kicked around between Border Force (Federal), and NSW Health (State): who was responsible and/or accountable for allowing infected passengers to disembark?

The second arises from the number of Covid19 cases among aged care residents in the Melbourne Metropolitan area. Here, the issue is the governance of aged care facilities as between privately-run homes (Federal oversight), and public homes (State operation). As an example of the strange delineation between Federal and State, “…the Victorian government mandates minimum nurse-to-resident ratios of up to one nurse for every seven residents during the day, the Commonwealth laws only call for an “adequate” number of “appropriately skilled” staff – both terms are undefined.”

As with all key areas of public policy and administration (health, education, social services), the relationship between different government departments and administrative bodies can be confusing and complex. In very broad terms, public funding comes from the Commonwealth (via direct Federal taxes and the redistribution of GST back to the States), since States have limited options to raise direct revenue (land taxes, stamp duty, payroll tax, and fees from licenses and permits). The Commonwealth funding can be allocated direct, or co-mingled with/co-dependent upon State funding. Likewise, service delivery can be direct by the Commonwealth, jointly with the States, or purely at the State (or even Local) level.

Within Victoria, there is an added dimension to the “responsibility” vs “accountability” debate, largely triggered by apparent failures in the oversight of the hotel quarantine programme. This in turn led to the second wave of Covid19 infections via community transmission (and the tragic number of deaths among aged care residents). The Premier has said he wasn’t responsible for the decision to use private firms to operate the security arrangements at the relevant hotels. In fact, the Premier appears not to have known (or wasn’t aware) who made that decision (or how/why it was made). But he does admit to being accountable for it.

Meanwhile, his departmental ministers have similarly denied knowing who made the decision, or they have said that it was a “multi-agency” response – maybe they are trying to shield each other in a strange show of cabinet collective responsibility, and to avoid apportioning direct blame to their colleagues. But if the government didn’t know who was supposed to be running the hotel quarantine programme, then surely the private security firms certainly couldn’t have known either – if so, who was paying them, and from whom did they take their orders and direction?

We are being drip-fed information on the failures in the hotel quarantine programme: did the AMA “write a letter” to the Victoria Department of Health & Human Services about their concerns over the hotel quarantine programme? did the DHHS provide “inappropriate advice” on the use of PPE by hotel security staff? did the Victorian Premier actually propose the hotel quarantine programme at National Cabinet, and then omit to request support from the police and/or the ADF?

It’s not surprising, therfore, that confusion reigns over who was responsible, and who is accountable; more importantly, who will be liable? What would be the situation if, for example, front line medical staff or employees in “high risk settings” have died from Covid19 as a result of community transmission within their workplace (itself stemming from the hotel breakout), and where there were inadequate workplace protections, especially if the latter were based on government advice and supervision?

The new offence of criminal manslaughter applies in Victoria since July 1, 2020. It will only apply to deaths caused since that date and as a result of “negligent conduct by an employer or other duty holders … or an officer of an organisation, which breaches certain duties under the Occupational Health and Safety Act 2004 (OHS Act) and causes the death of another person who was owed the duty”.

Finally, in reading around this topic, I came across an academic paper which discusses the treatment of responsibility, accountability and liability in the context of professional healthcare. In trying to define each from a clinical, professional and legal perspective, the author concluded that:

“….[R]esponsibility means to be responsible for ensuring that something is carried out whilst accountability moves beyond this to encompass the responsibility but adds a requirement that the healthcare professional provides an account of how they undertook the particular task. Liability moves the definition forward by adding a dimension of jeopardy to the definition of accountability. In a strict legal sense once the accountable person has provide their account they have fulfilled their duty. However, if the healthcare professional is liable rather than accountable for their action then the account they provide will be judged and, if found to be wanting, there may be a penalty for the healthcare professional.” (emphasis added)

I wonder if we should be assessing political and administrative liability by the same standard?

Next week: Startupbootcamp Demo Day – Sports & EventTech

 

 

Fitting your own oxygen mask first

Before I get into this week’s article, I want to stress that my reason for posting it is not intended to be self-serving, or self-aggrandising – I’m fully aware of such pitfalls, as captured wonderfully in The State of LinkedIn on Twitter. Instead, I hope it’s received as an example of paying it forward. And all starts with some advice I heard a number of years ago.

My erstwhile colleague, Dale Simpson, likes to use the following analogy when coaching his clients on career development, leadership and directorship:

“Be sure to fit your own oxygen mask first”

The reason being, how can you help others if you don’t take care of your own needs first? It’s not about being selfish, but about being present and able to serve others. It also recognises that in order to be useful, we need to work from a position of stability and resilience ourselves.

Dale also likes to use Maslow’s Hierarchy of Needs in his work. Both Maslow and the oxygen mask have clearly entered my own vernacular. A couple of weeks ago, I was listening to a neighbour at my co-working space talking about the work he was trying to do to help others become more resilient and overcome trauma. As the conversation went on, it was clear that his own circumstances were challenging, due to insecure accommodation, erratic income and other factors. He had also had to overcome a great deal of adversity and other challenges in his life.

I asked him if he had heard of Maslow – he hadn’t. I suggested that he consider what his own needs were, so that he would be better able to help others. A little while later, I went back to my desk and found the above note he had left for me.

I’m sure once he manages to sort out his own circumstances, he will be a fine coach and excellent mentor, because he was very certain of his purpose – he just needed to adjust his own oxygen mask first.

Next week: Steam Radio in the Digital Age

Life After the Royal Commission – Be Careful What You Wish For….

In the wake of the recommendations from the Royal Commission into Misconduct in the Financial Services Industry (aka the Hayne Report), one of the four major banks announced that it would be removing bonus payments for its front line tellers. This was supposedly in line with Hayne’s proposal that performance-linked remuneration, financial incentives and sales commissions in the financial services industry need to be restructured.

Image sourced from Small Caps

This prompted a mixed reaction among the public, based on some of the comments I have read on social media. Some felt that the tellers were being made scapegoats for the banks’ bigger failings – others felt that this was an inevitable outcome from the banking backlash.

Personally, I believe the announcement is potentially just one of the many likely “unforeseen consequences” to come out of the Royal Commission – I’m not saying this particular decision is good or bad, just that we need to be aware of what’s likely to happen based on Hayne’s key recommendations. Be careful what you wish for. And, as an underlying theme to this whole debate, let’s not forget that most Australians are shareholders (directly or indirectly via their Super) of the Four Pillar Banks (one of the greatest government-endorsed and legislatively protected market oligopolies around which also helped steer us through the GFC relatively unscathed….).

So, what else might we see?

First, as with financial advice, residential mortgages will move to a “buyer pays” model. Brokers would not be able to receive commissions from mortgage providers or other intermediaries based on the products they sell, recommend or refer – instead, mortgage applicants will be expected to pay for the services of a broker, who will therefore be under an obligation to find the best product for their client. But removing trailing commissions and other conflicted remuneration may also mean that brokers could seek to earn additional fees from their mortgage clients by re-contacting them a year or so later (with permission, of course) to inform them of a better deal. (Even now, lenders are not explicitly obliged to let existing customers know if they have a newer product that may be better for them). Some estimates suggest that fee-for-service will add about $3,000 to the initial cost of applying for a mortgage. Whether this will also lead to more competition among mortgage providers (who will no longer have to pay broker commissions) is not clear.

Second, the increased focus on acting in the best interests of the customer may result in placing all financial planners, brokers, advisors, insurers, and banks (and their officers, agents and employees) under a fiduciary duty of care to their clients – even if they are not directly managing specific assets, selling a specific product or advising on specific services or financial strategies. In other words, advisors etc. will be deemed to have taken ALL of a client’s needs and circumstances into account. (This is largely the result of the miss-selling of financial products, and the charging of fees for “no service”, by banks and their retail wealth management arms.)

Third, the increased cost of compliance will disproportionately impact smaller financial institutions such as credit unions, member-owned banks and other mutual societies, who came through the Royal Commission pretty much unscathed. Those costs will need to be passed on, to customers and members. Of course, there has also been some political debate around the need for some sort of banking levy – which will ultimately be passed on to shareholders or customers (who are often the same people…).

Fourth, and related to the above, the separation of roles between those superannuation trustees who act as both fund trustees and as responsible entities of managed investment schemes will have a knock-on effect in terms of operating and compliance costs. Such dual-regulated entities will have to decide whether to focus on their trustee role, or appoint a separate and independent responsible entity in respect of the asset management.

Fifth, the higher compliance and regulatory obligations may deter or inhibit more competition – either from new market entrants from overseas, or from local start-ups. The recent restricted ADI model (aimed at enabling challenger or neo-bank brands) has not exactly seen a raft of applications, and off-shore banks tend to come and go in successive waves, largely driven by market conditions. If lending standards are further tightened, it may be less attractive for foreign firms to set up local operations. In fact, there have been calls to force some smaller superannuation funds to merge with larger funds, or exit altogether for reasons of scale and efficiency – potentially taking out some of the competition in that sector. And if mortgage brokers have to move to a fee-for-service model, it will likely force some providers to exit the industry, as happened with the FOFA reforms in financial planning and wealth management.

Sixth, at the level of corporate governance, boards of financial services providers will need to be mindful of their duty to act in the best interests of the company – which has traditionally meant the share holders – and the increased duty of care towards their customers, which may at times be at complete odds. Non-executive directors willing to serve on the boards of banks and insurers may also be harder to find, at a time when there is already a high concentration of directors who sit on multiple boards across Australia’s biggest companies. So, board diversity may be even harder to achieve, especially if non-executive directorships become subject to even greater formal qualification, to ensure board members have appropriate professional experience, industry knowledge and technical expertise, as well as financial competence and risk management skills.

Finally, all this is happening as we face something of a credit squeeze (thanks to increased lending standards and greater provisioning for risk-weighted assets) heightened economic uncertainty (slowing GDP growth, lower productivity, wage stagnation, falling property prices), and an upcoming General Election campaign during which the Hayne Report will be held up as a key reason for why “things have to change”. The irony being that, except in a few areas, the complaints aired and wrong-doing uncovered during the Royal Commission could have been addressed by the regulators and enforcement agencies via existing laws on financial services, prudential standards, and general consumer protection (unfair contract terms, unconscionable conduct, deceptive and misleading behaviour). Plus, the Australian Financial Complaints Authority (which combines the remit of the former Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal) has a wide jurisdiction over consumer complaints relating to Credit, Finance and Loans, Insurance, Banking Deposits and Payments, Investments and Financial Advice, and Superannuation. And as with most External Dispute Resolution agencies, AFCA and its predecessors have an obligation to report on systemic issues within their industry.

Next week: Pitch X

Culture Washing

Banks, Parliament, Cricket Australia, Political Parties, religious bodies, the ABC – the list of national institutions that have come under fire for failed governance and even worse behaviour continues to grow. Commentators are blaming a lack of “culture” within these organisations.

Some Boards end up washing their dirty laundry in public….. Image Source: Max Pixel

Already we are seeing a “culture” movement, which will inevitably lead to “culture washing”, akin to “green washing”, and other examples of lip service being paid to stakeholder issues.

Just this past week, the interim report of the Banking Royal Commission prompted the Federal Treasurer to say that banks need a “culture of enforcement and a culture of compliance”. I can already imagine the “culture checklists” and the “culture assessment” surveys and feedback forms….

There are consulting firms building “culture risk” assessment tools. There may even be some empirical evidence to suggest that companies with better employee engagement and “culture” can generate better share price performance. Even the AICD is getting in on the act with its upcoming directors’ update on how boards can gain “insights on culture”, and how to set the “tone from the top”.

(Actually, all any director needs to do to monitor the “culture” of their organisations is to track social media and sites such as Glassdoor, Whirlpool, Product Review, etc..)

But corporate and organisational “culture” is organic, and cannot be built by design. It is a combination of strong leadership and core values that everyone in the organisation is willing to commit to and adhere to. It also means ensuring that everyone knows what is expected of them, and the consequences of failing to meet those standards are clear.

As for employee engagement surveys, one of my colleagues likes to say, “The only question to ask is: ‘Would you recommend this organisation as a place to work, and if not, why not?’” Another colleague regularly says to his own teams, “If this is no longer a fun place to work, then let me know”.

Next week: Why don’t we feel well off?