So far I have posted all my discussion about AWB and the Cole (Oil-for-food) Inquiry on my AWB Index on External Insights but I think it’s time I did a cross-post discussing corporate culture and compliance .
If, as I noted at the beginning of the Inquiry, breaching the UN sanctions was not an offence under Australian law, what has the Inquiry been all about? According to the Terms of Reference, the Inquiry has been set up to determine:
whether any decision, action, conduct, payment or writing of:
(i) any of the three Australian companies that are mentioned in the Final Report ("Manipulation of the Oil-for-Food Programme by the Iraqi Regime") of the Independent Inquiry Committee into the United Nations Oil-for-Food Programme; or
(ii) any person associated with one of those companies;
might have constituted a breach of any law of the Commonwealth, a State or Territory
The Inquiry has clearly shown how the culture of a public company tasked with serving its shareholders in a politically and economically sensitive environment (ie selling wheat to Iraq) affects its actions.
But there has been a misunderstanding about "corporate culture". Having a non-compliant corporate culture is not an offence in itself. Section 12.3 of the Commonwealth Criminal Code is a provision that, for the purposes of Commonwealth law (including the Corporations Act), sets out when a company is deemed to be at fault when an offence requires fault to be proved: fault .. must be attributed to a body corporate that expressly, tacitly or impliedly authorised or permitted the commission of the offence.
The means by which such an authorisation or permission may be established include:
(c) proving that a corporate culture existed within the body corporate that directed, encouraged, tolerated or led to non-compliance with the relevant provision; or
(d) proving that the body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision.
Factors relevant to the application of paragraph (2)(c) or (d) include:
(a) whether authority to commit an offence of the same or a similar character had been given by a high managerial agent of the body corporate; and
(b) whether the employee, agent or officer of the body corporate who committed the offence believed on reasonable grounds, or entertained a reasonable expectation, that a high
managerial agent of the body corporate would have authorised or permitted the commission of the offence.
corporate culture means an attitude, policy, rule, course of conduct or practice existing within the body corporate generally or in the part of the body corporate in which the relevant activities takes place.
So the nature of an organisation’s corporate cultute is relevant to determining whether a company has committed a fault offence. Commissioner Cole has not identified that offence yet.
Achieving a risk management and compliance-focussed culture means that in addition to organisation values staff need to understand what the risks are and who is responsible for managing and monitoring them. It means being willing to report problems as they go wrong.