Large caps get a fail for codes of conduct in superannuation investor report
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Poor corporate culture at Australia’s biggest ASX-listed companies has been linked to weaknesses in codes of conduct and whistleblowing systems.
Research by the Australian Council of Superannuation Investors, whose members are big investors in ASX-listed companies, shows that ASX200 companies are failing to address key risk topics in their codes of conduct.
“I find it hard to fathom that so many of Australia’s largest listed companies tolerate such significant gaps in their codes of conduct and whistleblowing systems,” says Louise Davidson, CEO of the Australian Council of Superannuation Investors.
“This represents a material risk to their reputation, licence to operate and value.”
Corporate culture has been under scrutiny in Australia with the major banks before a royal commission following a series of scandals and the Australian Prime Minister, Malcolm Turnbull, banning his ministers having sex with staff following the fall of his former deputy prime minister Barnaby Joyce who had an affair with a staff member.
Codes of conduct and whistleblowing systems are key foundations for good corporate culture, Ms Davidson says.
The fact that 199 of the ASX200 companies now disclose a code of conduct is a great improvement on a decade ago, she says.
But only 14 of those meet the Australian Council of Superannuation Investors’ definition of leading practice.
And only 67 per cent of companies cover five of the 13 recommended topics in their codes of conduct, as this chart shows:
Source: Australian Council of Superannuation Investors
The omissions include fair dealing, cybercrime, anti-money laundering and human rights.
“I’m also concerned that many companies don’t properly support the implementation of their codes of conduct,” says Davidson.
The research shows that most ASX200 codes of conduct do not include an introduction by the CEO, don’t provide practical tools to assist employees to apply the code of conduct and are not regularly reviewed.
Davidson says whistleblowing is intrinsically linked to ethical conduct and is also the initial source for a significant number of detected frauds.
“Anonymity, accessibility and the avoidance of retaliation are key features of an effective whistleblowing system,” she says. “These critical features are missing from many of the whistleblowing systems we examined.”
Almost one in five ASX200 companies (19 per cent) do not mention whistleblowing in their code of conduct.
“Unless codes of conduct provide guidance to employees on where to go to report misconduct and other important information such as how reporters will be protected then how can companies expect their whistleblowing systems to be effective?” says Davidson.
“We think this is a significant missed opportunity.”
Members of the Australian Council of Superannuation Investors collectively manage $2.2 trillion in assets and own on average 10 per cent of every ASX200 company.