Turning business in to the public service

In yet another amazing innovation from the Australian Securities Regulator ASIC:

inserting a psychologist in the boardrooms of some of the country’s biggest companies.

According to ASIC Commission John Price:

“Questions we will consider include: How are directors and officers ensuring that they know enough about the entity to ask the right questions? How do they know what they are not being told?

“How are they holding their executive teams to account? In large, complex entities, how do they ensure that they have meaningful oversight of all material non-financial risks of the entity?

“How are they satisfied that the compliance and risk functions of the entity are being adequately funded?”

There was a famous organisational behaviour study many moons ago.  The study was trying to see the effect of different levels of light brightness on productivity.  The study had people in white coats with clipboards walking around offices to see what was going on.

In the end, it was worked out that it was the presence of the observers rather than the lighting that affected productivity.

What will happen when an ASIC agent sits in a board room to see how directors and executives review and manage risk?  Directors and executives will basically take no risk.  And thus big business will become a quasi public service.  Or perhaps more of a quasi public service.

TAFKAS waits for the annual general meeting where the Chairman of Westpac declares they will increase spending by 15% and when asked about profit, will repeat the line about increasing spending by 15%.

Who comes up with this insanity because we will all pay for it.

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17 Responses to Turning business in to the public service

  1. Questions we will consider include: How are directors and officers ensuring that they know enough about the entity to ask the right questions? How do they know what they are not being told?

    “How are they holding their executive teams to account? In large, complex entities, how do they ensure that they have meaningful oversight of all material non-financial risks of the entity?

    “How are they satisfied that the compliance and risk functions of the entity are being adequately funded?”

    This sounds like something that afflicts every government department and Parliament.

  2. stackja

    These new board public servants to get extra super?

  3. Rafe Champion

    What a great idea. Perhaps borrowed from the People’s Republic of China where there must be a party member on the board of every enterprise in the country, public and private.

  4. Walter

    The example of people in white coats observing (measuring) outcomes or performance is called the Hawthorne Effect. The simple idea of measuring performance improves performance, maybe they will make better decisions ….. then again maybe make no decisions.

  5. Rex Mango

    In the early 90’s, as lawyers were flooding HQ units of the ADF, I remember thinking this will not turn out well. It hasn’t.

  6. Mak Siccar

    If ASIC intend to have a psych in the boardroom then there is a high-up person there who is a educated fan of the show Billions. Perhaps that was the source of such an inspirational decision.

  7. Mak Siccar

    educated = dedicated. Damn autocorrect.

  8. Lilliana

    Directors and CEO’s know what is expected of them. If they don’t do their job then they should be out the door. A few changes to their remuneration packages will sort things out far more efficiently than this silly suggestion.

  9. Dr Faustus

    “Questions we will consider include: How are directors and officers ensuring that they know enough about the entity to ask the right questions? How do they know what they are not being told?

    “How are they holding their executive teams to account? In large, complex entities, how do they ensure that they have meaningful oversight of all material non-financial risks of the entity?

    I wonder how ASIC, or its shrinks, expect to know enough about the entity and all of its non-financial risks to exercise meaningful oversight of the people exercising oversight. Do they employ some special breed of super overseers?

    How are they satisfied that the compliance and risk functions of the entity are being adequately funded?”

    How? What a bizarre question from ASIC.

    One of the major functions of the independent auditors is to check compliance and risk management – particularly including reviews, sampling and testing systems for adequacy. The Audit Report covers off on this in great detail and will always identify deficiencies and contain improvement suggestions.

    Sounds like ASIC has been asleep at the wheel for the past 20 years.

  10. tombell

    go to the ASIC website. click on “regulatory resources” and behold. ASIC is forever “consulting” . But its Consultation Papers inevitably have the seeds of the expected regulatory outcome. Bit like a fix at the gee-gees. And yes more reporting, more compliance oversight, more third party monitoring, more self flagellation and more moral posturing eg the ASIC guidelines on Board responsibility re climate change .

  11. feelthebern

    ASIC is awesome spending time & our money on things that can’t be measured.
    Example, they’ve been hanging their hat on changing “culture” for the last couple of years.
    They are awesome tax hoovers.

  12. Do the ASIC boards and committees get their own Shrinks? And what about the meeting where the Company Shrinks report to ASIC is that overseen by other shrinks. Will the second set of shrinks be considering if the first set of shrinks have adequate shrink wraps? I need need to talk to someone. Does anyone know a good shrink?

  13. It also begs the question as to how any ‘psychologist’ will know any better than the board and its advisors.

    On a different note, I’ve known a lot of psychologists through work and acquaintances and, to be brutally honest, most of them appear to have their own issues that need sorting out.

  14. @ Stressed.

    And can there be psychologists and psychiatrists in attendance at both Cabinet and Shadow Cabinet meetings. And said psychologists and psychiatrists would prepare a “confidential” report for the Business Council of Australia.

  15. Dr Fred Lenin

    Where are they going to find psychiatrists ? The Victorian ones will be too occupied killing people under andrews extermination of the useless act ,love it !like poofter “marriage” the whole thing will expand to include involuntary killings ,like hitlers socialists did in national SOCIALIST Germany . Theres also andrews major stuff up with the injection rooms,turned a nice area into a crime ridden shitheap,socialists have the Schmidas Touch every thing they touch turns to Scheisse .

  16. John A

    There was a famous organisational behaviour study many moons ago. The study was trying to see the effect of different levels of light brightness on productivity. The study had people in white coats with clipboards walking around offices to see what was going on.

    In the end, it was worked out that it was the presence of the observers rather than the lighting that affected productivity.

    Walter, the effect is called that because at the Hawthorne plant of Western Electric (now part of AT&T), they conducted the tests, only to discover that the employees improved their productivity because they were noticed not simply because they were measured.

    See https://courses.lumenlearning.com/baycollege-introbusiness/chapter/video-hawthorne-studies-at-att/

  17. Empire 5:5

    More spakfilla from a failed institution. Keep rogering that chicken fellas, that’ll fix it.

    As systems become more complex, the need for a professional class to manage the overwhelming complexity grows. This class excels at appearing to manage complexity while ignoring the larger dynamics driving the system over the cliff.
    And so we have endless meetings of highly paid people over trivial issues while the entire system careens toward meltdown. “Stakeholders” multiply in endless profusion, dooming every project to a glacial process that increases the sums paid to manage the glacial process and pushes the final cost to the moon.

    The self-serving managerial elite always has one answer for every problem: give us more money. If the budget expands by 10% and nothing actually changes for the better, then the “solution” is a 25% increase in funding.

    Budgets expand by leaps and bounds, but none of the systemic problems are ever resolved.

    It’s not hard to figure out why: look at the system’s incentives. If systems were radically simplified and made more efficient, the need for an ever-expanding class of permanent managers would diminish. And so the solution is always more fodder for the managerial elite: more complexity, more meetings, more accumulation of power, more managers and always, more money.

    http://charleshughsmith.blogspot.com/2019/06/americas-managerial-elite-has-failed.html?m=1

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