Super funds should not use “simple levers” when faced with competitive pressures and instead take account of four factors, if they want to keep members trust.
These four factors are: how leadership works, both formally and informally; the organisation’s narrative and messaging; peoples’ capabilities; and rewards; said Rufus Black, Master of Ormond College, Melbourne University.
“It’s all too easy to start well with high ethical performance, but find competitive pressures undermines this,” Black told delegates at FEAL’s annual conference.
“The classic response in any disrupted environment is to adopt practices of the competitors that lead to high-performance … [but] when that starts to happen you will get the kinds of pressures that can lead to conflict-of-interest.”
He added as super funds think about changing strategy they needed to be careful about what this meant for behaviours flowing through the organisation and across into the industry.
“In the finance sector we end up making changes that are geared towards the reward system.
“What I’ve really come to understand is those factors together construct the culture. And the danger is when you change one of them, we may end up changing the ecology of the whole.”
He added that it was the unintended consequences, usually in the second order effects, that really drove ethical losses – something he had seen time and again in his time consulting in the banking sector.
“They are trying to re-construct the culture of high trust environments and until you are prepared to line all of the pieces up it is not possible to do.
“We leap to simple levers that are easy to pull when faced with competitive pressures, which ultimately undermines our ability to manage the conflict-of-interest.”
As such, every executive needs to have acute attention to the forces that construct culture.
“You must take the leap of faith yourself that not driving people to behave in quite these maximising ways will actually serve the super fund well in the long term [because you keep the trust of the members].”