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AMP’s woes not caused by social licence principles
August 02 2018
It is ludicrous for David Murray and his peers to want to reduce boards’ focus on ASX principles. It might save time, energy and confusion, but it won’t save their companies. The principles exist for good reason – including a focus on their companies’ social licence to operate.
Boards should not be confused by the requirement to consider social licence to operate and its cost on the company’s bottom line. Understanding community expectations of a company must be part of the strategic discussions so that a company can appropriately plan – and manage.
Denying proper social licence assessment and reducing oversight at the same time is crazy.
The problems for boards is not the ASX principles, the paperwork and the board committees. The problem is their focus on detailed technical issues of compliance, rather than public intuition, which is driven by outrage.
Fully understanding a company’s social licence – its public responsibility – will certainly aid a board’s focus on the big picture and reduce its commercial risk.
Here’s some news: AMP conceded it had continued to charge some customers for financial advice that they were not receiving, and had misled the corporate regulator, the Australian Securities and Investments Commission, about the practice, claiming that its fee-for-no-service was a mistake, despite it being a deliberate policy.
This deliberate policy was not caused by the board’s focus on ASX principles. It was caused by the board – and the management – focusing on the bottom line and the technical details, rather than the big picture of reputation and responsibility to customers. The board had allowed the company’s culture to become one of profit at any cost – ignoring the risk that community outrage would actually impact that profit.
Investors care about results. But results will be impacted by a company’s commitment to its social licence to operate. In the longer term, investors benefit when a company understands its critics and has a commitment to its customers.
Understanding community expectations can be complex, but Futureye has been doing this successfully for almost two decades. Social licence assessment can be specific to the commercial risks of a business. It’s worth the investment. It’s an investment in a company’s future. Social licence makes good business sense – community confidence in a company leads to a strong bottom line.