The Metaphorical Glass Jaw

As I get older (maybe not necessarily wiser), I feel that as a society, we are becoming far less tolerant and yet far more sensitive – something of a paradox, possibly linked to a decline in personal resilience and a lack of quality and robustness in public discourse. And for a country that is both a secular state and a liberal democracy (and definitely not a theocracy), there has been a surprising amount of debate in Australia recently, about the need for a new or revised “freedom of religion“.

John Stuart Mill – Image sourced from Wikimedia

Much of the commentary has been prompted by the thoughtless and potentially harmful remarks by a professional sports player, who espouses a particularly fundamentalist strain of Christianity. Because the very public expression of his personal beliefs led to the termination of his employment, this has been interpreted as a curtailment of the player’s freedom of religion.

Without getting too legalistic (and there is an administrative review pending), the player’s public statements were out of line with the social values and civil rights espoused by his employer – to the extent that they could bring this particular sporting code into disrepute. It was also a repeat incident. At the very least, these comments could have led to a reduction in the employer’s revenue from sponsors or spectators. (And let’s consider that his comments drew so much attention because he had the privilege of a public platform, one which came as a result of his employment status and his professional profile.)

According to this player’s particular creed, his human-constructed belief system permits, condones and even encourages the use of language that bullies and belittles people who don’t adhere to his own views on sexuality, lifestyle choices or even “belief” itself. While much has been said about the homophobic nature of the said player’s tweet, let’s not forget he also targeted atheists in the same context, simply because they are non-believers.

As I frequently tell customer call centres, who often like to blame the “system” for their own organisation’s failings, a system is only as reliable as the people who design and run it. So, if being an adherent to a particular belief system means you have to hold and profess abhorrent views, especially those that are out of step with civil society, then clearly there is something at fault at the heart of that mechanism.

I recently heard a speech by a retired judge on human rights and civil liberties. He referred to an aphorism attributed to John Stuart Mill, in connection with his treatise “On Liberty”, and the harm principle:

“Your Liberty To Swing Your Fist Ends Just Where My Nose Begins”

In other words, you may be free to say what you like, but Isaiah Berlin’s concept of negative freedom means that (despite Voltaire’s standpoint in defence of free speech) even your verbal punches are not permitted to interfere with or harm someone else’s rights – yet alone instill in them a fear for their personal safety and human dignity.

Nowadays, some might say that too many people are prone to having a metaphorical glass jaw – that they take offence too easily, and seek to find malicious intent in any views or comments that they find objectionable or that do not accord with their own world view. Equally, people can (metaphorically) stick their jaw out, seeking to provoke a reaction by drawing attention to themselves, so that they can claim “foul” when they bang up against a countervailing fist. The boundary between personal rights and freedom of expression is becoming increasingly blurred.

When it comes to calls for the special protection (and even promotion) of religious freedoms, I have something of a problem. Quite apart from the entrenched social prejudices inherent in many organised religions, it seems incongruous that such institutions can claim tax benefits as charitable bodies, and receive public funding while enjoying exemptions from certain anti-discrimination laws.

Although we don’t have a law against heresy in Australia, we still have blasphemy laws in most States. Even though they are rarely invoked, the fact that they exist reinforces the notion that far from needing a “freedom of religion”, religious beliefs are somehow already seen to be above the law. Surely, in a multi-cultural, secular and pluralistic society, religious beliefs will have to take their chances alongside (and rub up against) the rest of human constructs and natural systems – science, history, psychology, philosophy, politics, sociology.

Next week: Startup Vic’s Health Tech & Med Tech Pitch Night

 

 

 

 

Brexit Blues

Reading the latest coverage of the Brexit farce combined with the inter-related Conservative leadership contest, I am reminded of Oscar Wilde’s description of fox hunting:

“The unspeakable in pursuit of the uneatable”

Whichever candidate wins the Tory leadership race and, as a consequence, becomes the next UK Prime Minister, they will inevitably fail to deliver a satisfactory Brexit solution, simply because there is no consensus position.

But the underlying cause for this impasse is a series of flawed processes:

First, the promise made by previous Prime Minister David Cameron to hold a referendum on EU membership was flawed, if not highly disingenuous – because from the start, there were no terms of reference. Cameron chose to make it part of his manifesto pledge ahead of the 2015 general election campaign. Even at the time it felt like a desperate ploy to appease the mainly right-wing and Eurosceptic faction of the Conservative party. Despite being generally in favour of the UK remaining within the EU (but with “looser ties”), Cameron probably never expected that he would have to deliver on his referendum promise let alone lead the Brexit negotiations. Behind in the polls, the Tories were expected to lose the election. Instead, they won, but with a much reduced majority – which should have been the first warning sign that all was not going to be plain sailing with Cameron’s EU referendum pledge.

Second, the referendum question put to the electorate in 2016 was itself flawed. Cameron had originally talked about renegotiating the UK’s terms of EU membership, much like Margaret Thatcher had done with some considerable success in the 1980s. There was certainly no mention at all in Cameron’s January 2013 speech of a “No-deal Brexit”. However, the referendum question put to the voters was a stark, binary choice between “Remain” or “Leave”. As some have argued, the design of the referendum should have been enough to render it invalid: both because the voters were not given enough reliable data upon which to make an informed decision; and because there was no explanation or guidance as to what type of “Leave” (or “Remain”) outcome the government and Parliament would be obliged or expected to negotiate and implement. Simply put, the people did not and could not know what they were actually voting for (or against). I am not suggesting that the voters were ignorant, rather they were largely ill- or under-informed (although some would argue they were actually misinformed).

Third, the respective Leave and Remain campaigns in the 2016 referendum were both equally flawed. The Leave campaign was totally silent on their proposed terms of withdrawal (I certainly don’t recall the terms “Hard Brexit” or “No-deal Brexit” being used), and their “policy” was predicated on the magic number of “£350m a week“. And the Remain campaign failed to galvanize bipartisan support, and was totally hindered by the Labour leadership’s equivocation and ambivalence towards the EU (which has only deepened as Jeremy Corbyn refuses to confirm what his policy actually is).

Finally, the Parliamentary process to implement Brexit was flawed from the start. Cameron jumped ship and ending up passing the poisoned chalice to Theresa May. The latter had supported Remain, but now had to lead the UK’s withdrawal from the EU. However, rather than trying to build consensus and broker a truly bipartisan solution (this is not, after all, a simple, one-dimensional party political issue), May proved to be a stubborn, inflexible and thick-skinned operator. Now, there are threats to prorogue Parliament in the event that MPs vote against a No-Deal or Hard Brexit, if a negotiated agreement cannot be achieved by the October 31 deadline. May’s negotiation tactics have only resulted in deeply entrenched and highly polarised positions, while she ended up painting herself into a corner. Good luck to her successor, because if nothing else, Brexit is casting division and national malaise across the UK.

Next week: Pitch X’s Winter Solstice

 

Postscript on the Federal Election

Well, what just happened there? In a Federal election that was Labor’s to lose (based on all the published opinion polls), the opposition ended up conceding defeat within just a few hours of the ballot closing. Despite the negative national swing away from the Coalition, Labor suffered an even greater negative swing.

Although populist parties gained votes at the expense of the two major parties, they failed to pick up any seats – rather, Labor lost too many seats. The Greens held on to their one seat, while the balance held by other minor parties also remained the same. All of which enabled the Coalition to form majority government. Sure, there were some significant variations in each State (and the Coalition will have to rely on minority parties in the Senate), but overall Labor was the biggest loser.

Yet it was still a pretty close outcome, and as I expected, the deciding factor was Queensland (and Adani).

A key problem for Labor was that rather than beating up “the big end of town”, and advocating a form of class war (thru the implied politics of envy), it should have found a way to help the working population adapt to the reality of a changing economy. Plus, instead of just imposing a carbon tax, it should have offered more incentives to decarbonise.

Equally, during the campaign there was no discussion by either major party on the need for structural economic reforms around competition, productivity and the tangible outcomes of public services.

Labor has since pretty much abandoned key fiscal policies it took to the electorate, with its new leader claiming that the party must appeal to “aspirational Australians” (whatever that means). For me, this implies that people need to feel incentivised to contribute more, while also feeling they are able to keep more of what they earn, through their additional efforts. In fact, the new shadow finance minister has commented on the lack of productivity gains (reflected in large part by wage stagnation?). Whereas, the previous Labor leadership talked endlessly about “ordinary Australians” (whatever that means).

The re-elected Prime Minister, meanwhile, credited “quiet Australians” (whatever that means) for the Coalition’s success.

Somewhat worryingly, the Prime Minister described his win as a “miracle”, and has made a significant personal statement through his own churchgoing habits, while a former Labor Prime Minister said his party needed to “reconnect with people of faith”. The sacking of a leading sportsman for making bigoted comments on social media (because his religion wanted him to say those things) has led to a prominent Coalition senator to seek an administrative review of the decision, on the grounds that expressing religious views cannot be cause for dismissal. The consequence of such a position is that “religious freedoms” effectively protect hate speech. And there was I thinking that we lived in a secular country…

Both major parties have to overcome continuing and significant internal divisions in the wake of their respective election results. Labor’s factionalism has already been on display again with the way its uncontested leadership contest was stitched up in more murky back room deals. And the Coalition’s more conservative members from Queensland will be expecting huge rewards for having delivered the party a surprise win.

Whether or not Australia’s Federal poll result was another example of the populist trend that was started by the Brexit referendum, confirmed with Trump’s success, and now extended following the EU elections, is open to debate. But it’s clear that traditional assumptions concerning the western democratic process have been subverted, in large part by the arrogance and complacency of the very same political parties that have hitherto underpinned them, that were also forged by them, but which now appear willing to undermine them.

Next week: The Finnies

 

 

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