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Being held to account
Ron Browne • February 12, 2021
Good governance is hard to achieve
Good governance is not just about strategic planning, risk management and operational oversight. It is also about ensuring that the organisation operates in an honest, morally and ethically sound framework. Two high profile organisations have been called to task in the past week, and even if you are not interested in governance and its execution, you could hardly miss the news items relating to Collingwood Football Club and Crown Casinos.
I happen to be a Collingwood supporter (for my sins) and this week’s news brought no joy in that capacity. I am embarrassed by the report findings into systemic racism within the club and was appalled at Eddie McGuire’s attempt to sell it as ‘good news’.
As President of the club, Eddie has overseen a return to some level of glory for the club with a flag in 2010, and he has been universally praised for being ‘incredibly positive for the club and the game at a macro level’.
However, the role of the President and the rest of the board (who are not blameless in this) is to ensure everything is done according to legislative compliance, industry best practice and in a morally and ethically sound manner.
Crown Casinos, especially James Packer and the board of Crown, has also been under the spotlight this week with the Independent Liquor and Gaming Authority (ILGA) NSW refusing to grant the company a licence to operate the Barangaroo casino, due to issues in Crown Melbourne and Burswood Perth Casinos.
Anti-Money Laundering and Counter Terrorism Financing (AML/CTF) activities have never been more in the spotlight since Kenneth Hayne brought down his findings in February 2019 and two years on, on the surface not a lot seems to have changed.
Whilst Hayne’s primary focus was banking and superannuation there was also a focus on financial services, which in its full gamut, includes clubs, pubs and casinos due to the money handling related to legal gambling services – electronic gaming machines and wagering services.
Much has been said about the goings on at Crown Melbourne e.g. ‘Aldi shopping bags full of cash’ (hundreds of thousands of dollars regularly being swapped for gaming chips by cash mules, apparently) with management and the board focused on the profitable business they were enjoying. Under the AML/CTF legislation there is a standing requirement to ‘know your customer’,
with the explicit legislative guidance being to report any suspicious matters – especially transactions over the $10,000 threshold limit – to the Australian Transaction Reports and Analysis Centre (AUSTRAC).
The clash is the conundrum of profit over ethics and here is where governance gets hard. Whether you are a director of Collingwood Football club trying to rid the club of systemic racism, or a director of Crown trying to maximise shareholder profits with high rollers, and no interest in where their stake comes from, you are compelled to govern in the best interests of the organisation, in good faith
and for proper purpose.
Clubs too are under fire from the anti-gambling lobby and are being called to account on AML/CTF compliance and harm minimisation for the small percentage of patrons with a problem relationship with gambling. And this is but one challenge of governance.
Every organisation is subject to various legislation mandating certain practices and procedures to be compliant. Then the ‘good governance’ filter needs to be applied over this guidance, to ensure no harm is created from the organisation’s activities.
I always advocate the Sydney Morning Herald test – would you be happy for this board decision or management practice to be reported on the on the front page of the Sydney Morning Herald? If the answer is yes, then it is probably an OK decision or practice, however if the answer is no, then maybe you need to rethink that decision or practice and apply the honesty, ethically and morally sound filter.
Director Independence
One of the great challenges of governance, as a director, is to raise your concern(s) in these areas, especially when the rest of the board is in agreement on an issue that is contrary to your position. Directors must think independently, however can only act in concert of course, so if you think something is not right, it is your duty (good faith and proper purpose) to raise those concern(s) in the board room with your fellow directors and resolve the concern(s).
You may be the only director thinking straight and may need to work very hard to get your colleagues to change their opinion to your view. Of course in clubs, you are a member who probably has the same expectations of your club as the rest of the board and the members, but you have been elected by your peers to govern the club and oversee the operations of the club in the best interests of all concerned.
What about management?
Management must work hand in glove with the board to achieve, not only good management driven by the key performance indicators (KPIs) established by the board, but also work to deliver good governance. In addition to the combination of policies and procedures to guide operations, the management must establish the right culture within the management and staff of the organisation to deliver everything in an honest, morally and ethically sound manner.
Lower level workers can be enticed to do the wrong thing to achieve (what appear to be) simple targets/KPIs, like bank and superannuation staff overselling products that customers don’t need, to continuing to bill clients after they have left this mortal coil! Or casino workers turning a blind eye to AML/CTF reporting obligations to keep the high rollers coming back to maintain profits.
Clubs and other organisations can easily fall foul of conflict of interest issues too, all of which are part of this huge umbrella of governance that needs to be addressed.
Governance Secret Sauce
Where can directors and managers turn to get the ‘Secret Sauce’ for good governance? There is plenty of help out there and I would challenge that anyone has all the answers, but here are some useful tips for organisations to follow:
X Have directors do governance training (this is mandatory for directors in the NSW Registered Club Industry and a great idea that ASIC should adopt for everyone who registers a company);
X Have a Governance Audit done of your organisation to ensure you are compliant with all the legislation relating to your industry, industry best practice and apply the honest, moral and ethical filter to the operations;
X Ensure the culture of your organisation is on the right track – avoid putting profits above all else. Ensure your staff and patrons are being served with everyone’s best interests in mind;
X Conduct a Risk Assessment to identify the greatest points of vulnerability in your business and if issues are identified, work with the relevant subject matter experts to address these weak spots;
X The board must respectfully challenge the management to provide clear evidence of compliance with what is required, to ensure they can prove compliance, not just say it is happening;
X The board must lead by example in all matters of ethics, moral standing and honesty, to ensure their role modelling filters down from the top;
X Ensure there are checks and balances in place so that no unscrupulous director(s) or management personnel can conspire to cover up the wrongdoing they are committing.
If this article raises any concerns you may have, with your organisation’s governance or management practices that need addressing, contact Ron Browne, Managing Consultant on 0414 633 423, via the Project Brief
request on our website, or email at info@extrapreneurservices.com.au.
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