Australia: What are we learning from Royal Commissions and Inquiries?

Last Updated: 19 September 2019
Article by Jonathan Casson

Working steadily with broad coercive powers, numerous and highly visible Royal Commissions in Australia have uncovered shocking examples of corrupted cultures in organisations that must be concentrating the minds of directors everywhere.

The Royal Commission into Aged Care Quality and Safety began hearings in Adelaide last month (just as calls for a recently announced separate Royal Commission into abuse in the disability sector gathered force) to investigate standards and practices within the sector, as well as " any matter reasonably incidental...that [the Commissioners] believe is reasonably relevant to the inquiry".

The Commissioners will submit their final report in April next year.

Acknowledging the dedication of those in the sector, Commissioner Briggs noted " there has been a rising torrent of concern that the aged care system is faltering in certain areas of safety and quality and that it may not be fit for purpose". Over one million people currently receive aged care services in Australia with 64 per cent of the providers being single facility operations. The impact on governance from any outcomes of aged care royal commission, and also from the recent Financial Services Royal Commission, will have implications for board members of all organisations.

The Banking Royal Commission

As one Commission begins, another concludes with only weeks passing since Royal Commissioner, Kenneth Hayne delivered his report on the banking sector, where he singled out National Australia Bank's CEO, Andrew Thorburn and well-respected professional director and chairman, Ken Henry, as representatives of an organisation he was 'not persuaded' was " willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly".

The Commission uncovered, among other issues, fees charged by the banks for no services, failures to inform customers about the value of commissions to mortgage brokers and charges to the deceased for life insurance. The terms of reference required Hayne to determine whether misconduct, falling short of community standards, was attributable to particular culture and governance practices and the result of other practices, including risk management, recruitment and remuneration practices.

Hayne found that " everything that is said in this Report is to be understood in the light of that one undeniable fact: it is those who engaged in misconduct who are responsible for what they did and for the consequences that followed". Adding further, "because that is so, every financial services entity, named in the Commission's reports or not, must look to its culture...In looking at culture and governance, every entity must consider how it manages regulatory, compliance and conduct risks".

This, surely, must resonate with all organisations providing regulated services to the public.

The Bergin Inquiry

Similarly, in NSW, it is impossible to ignore the parallels of failings of corporate cultures discovered in the findings of the Banking Royal Commission and the Inquiry into the NSW State Branch of the RSL (the Bergin Inquiry) because of the valuable insights they provide as to how boards should address the problem of culture and its primary and idiosyncratic effects on quality standards within organisations.

The Bergin inquiry found significant breaches of fiduciary duty at a board level within its aged care subsidiary, LifeCare, particularly highlighting a shift in culture over decades leading to a catastrophic drift toward declining levels of accountability, which, at its most egregiousness, included unauthorised director remuneration and inappropriate perks of office.

In hearings, directors were asked to give evidence about their decision to award themselves consultancy fees seemingly to evade the prohibition, under its constitution, of not remunerating directors as directors.

The Constitution stipulated that directors may not "be paid any fees for their ordinary service as directors", but that "each director is entitled to be paid for all expenses carrying out the duties of a director".

The Bergin inquiry found that, despite advice to amend the Constitution, the board resolved unanimously to pay all directors for "consulting services". Payments were then justified on the basis that directors attended committee meetings, which is surprising, as generally, committee meetings might be considered as part of a director's usual duties, though one director, who received payment, in fact did not sit on a committee.

Recommendations were made to the Inquiry suggesting the appointment of independent skill-based directors, rotation of elected directors, board membership of at least a director with accounting experience and one with aged and clinical care experience, a diverse and appropriately skilled board, accountability to the members, and any remuneration of directors must be made without conflict of interest and comply with a Directors Remuneration Policy ( see 11.132 of the Report of the Inquiry under the Charitable Fundraising Act 1992). Significantly, the recommendations included the development of a culture of compliance with ethical and legal responsibilities by clear communication and leadership ( see 11.136).

Culture and leadership go hand-in-hand. Bergin recognised the "enormous efforts that have been made [by the new board of RSL Lifecare] rid themselves of the leaders who let them down and the compromised structures and practices that fostered toxic cultures and created dysfunctional systems" ( see 1.37). She made it clear RSL Lifecare's right to fundraise in NSW hung in the balance, noting that, if the culture had been different, and not so ingrained, some of the awful consequences might have been avoided.

According to Dominique Hogan-Doran, SC, who specialises in public inquiries involving governance and cultural integrity issues:

"NFP directors have an even greater structural reliance on management than for profits, and often defer to management in a trusting manner that can be misguided".

The Bergin Inquiry made 29 recommendations, including the referral of former and current Directors and the CEO to ASIC, and investigations are ongoing. In addition, only a month before Commissioner Hayne released his report, the former New South Wales RSL State President and Director of LifeCare was arrested and charged with fraud.

Because the RSL and its related bodies are registered with the ACNC, its power was enlivened. But, with its extensive regulatory powers, it is a source of continuing regret that the secrecy provisions of the ACNC Act prevents publication of reasons for the outcome of investigation it undertakes, which would be instructive to the not-for-profit sector, generally.

Fallout From the Banking Royal Commission

A fundamental tenant of being a director requires individuals act in good faith and avoid self-interest. In addition to duties under the Corporations Act or the ACNC Act and Regulations, aged care providers have overriding duties under State and Federal law including the Aged Care Act 1997 and various charters and principles including the Charter of Aged Care Rights as well as Accreditation Standards.

Criticism of Statutory Authorities responsible for enforcing punishment of breaches of statutory obligations (including Director's Duties) has been acute in the Hayne Commission's report and supervising authorities in aged care should expect tough questions as hearings continue throughout the year.

Noting corporate Australia's notorious short-term memory, Graeme Samuel (Chair of the recently appointed panel conducting a capability review of the Australian Prudential Regulation Authority) said it ' tends to fall asleep again, become complacent and lapse into old behaviour', requiring regulators ' to be constantly on the job to ensure corporate Australia heeds the wake-up call to change its culture, governance and remuneration practices'.

No doubt this applies to the aged care sector. The Hayne Royal Commission stated:

"But it now must be accepted that regulators have an important role to play in supervision of these matters. Supervision must extend beyond financial risk to non-financial risk and that requires attention to culture, governance and remuneration"

On one level, fallout from the Hayne Royal Commission has resulted in the resignation of Thorburn, Henry, AMP's Chair Catherine Brenner and may other board members, but it may have deeper significance following 24 recommendations to the DPP of bank officers, and for increased statutory user oversights where Criminal and Civil penalties have been significantly increased.

ASIC has tended to negotiate rather than litigate corporate breaches since at least 2005. It is likely that regulators will tend to undertake prosecutions where they might once have negotiated an outcome. This is now preferred government policy.

ASIC deputy chair Peter Kell foreshadowed commencement of proceedings in August last year. Potential criminal proceedings against officers at AMP were reported last month. In February, the Government announced the establishment of an inquiry in three years to ensure banks "have improved their behaviour".

Addressing Cultural Issues in Aged Care Organisations

The problem is also one of great risk for organisations in the aged care sector, producing as it does catastrophic consequences when commissions of inquiry investigate or regulatory authorities find their teeth. And this risk will most likely influence stakeholders including, funding bodies and donors in the long-term.

The catastrophic effects of cultural drift and bad governance that struck the NSW RSL continues to reverberate with board resignations and court proceedings. An attempt by the NSW RSL to adopt a new constitution aimed at entrenching an improved, consultative culture, increasing transparency and legal compliance, reportedly in the hope of restoring the organisation's fundraising capabilities, was defeated in December 2018, but will be voted on again in May 2019.

Aged Care has no fundamental place of security for the economy, though its users represent the most vulnerable. The Royal Commission into Institutional Responses to Child Sexual Abuse exposed cultural failings where the recipients of services are vulnerable people who may be unable or too frightened to make complaints. It showed the increased level of reputational damage and fall from grace of organisations involved in providing services to the vulnerable.

Directors must address cultural issues within the organisations in a focused and forensic manner particularly by looking at communication between an organisation and its regulators. It's a salient point that the Hayne Royal Commission found the NAB lacked reference to communications that related to oversight.

As change comes in response to these crises, greater roles for internal auditing in monitoring the health of an organisation's culture. One way to do this is to look at indicators such as complaint reports, client satisfaction surveys levels of care, and protection of whistleblowers. Cultural intervention can and should be an early priority - making the organisation more compliant and attractive. Because culture changes slowly over time, there is every incentive to start now.

For at least one aged care provider the Royal Commission into Aged Care Quality and Safety has served as a catalyst to strengthen its strategic focus on workforce and sector capacity to improve training and employment conditions. Rosemary Bishop of Three Bridges Community, says 'it's an opportunity to professionalise our workforce, which means qualifications, conditions and pay rates will all need to improve.'

Murray Baird, Assistant Commissioner and General Counsel at the Australian Charities and Not-For-Profits Commission, stresses the need for directors to jealously guard the cultural health of their organisation, without becoming overwhelmed, saying, 'Boards should not, however, be paralysed with the enormity of their tasks'.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions