Anyone involved in business, be it big or small, should sit down and read Australia's banking royal commission final report.
The damning analysis of Commissioner Kenneth Hayne is a huge document but it's fascinating in every respect.
While the recommendations may not have been as harsh as some may have expected, the report itself is scathing of the greed-driven, unscrupulous practices that have been prevalent in financial services for too long.
It's extremely hard to process some of the examples cited, such as the case of a young man with Down syndrome being targeted and sold a financial product that he did not want, need or understand.
Even so, there's a sense that none of this is all that surprising.
Anyone coming in cold would do well to check out the chapter on corporate governance about two-thirds of the way through.
This for me was perhaps the most interesting area because the observations are really relevant not just for financial institutions, but to all boards of all kinds of companies.
And it's been obvious over the last decade that while some progress has been made, there are some large companies in New Zealand that have had significant, and maybe still significant, challenges in this area.
Many of the issues highlighted in the Hayne report can, and should, be applied to non-banking sectors.
"Boards cannot operate properly without having the right information. And boards do not operate effectively if they do not challenge management," Hayne said in his 496-page report, not including case studies and appendices.
Even before the dust settles on the banking and insurance industries, and in some cases tried in court, the broad message is: this sort of thing should not happen under the noses of directors doing their job properly.
Hayne refers to, and endorses, the findings of the Australian Prudential Regulation Authority (Apra) report into Commonwealth Bank of Australia (CBA), which caused such a stir in corporate Australia.
He notes that company directors (and their committees) should be asking themselves things like:
- Is there adequate oversight and challenge of emerging non-financial risks?
- Is it clear who's accountable for risk and how should they be held to account?
- Are issues, incidents and risks identified quickly and managed and resolved with sufficient urgency?
- Is there enough attention given to compliance, or is it just box ticking?
- Do compensation and remuneration practices recognise and penalise poor conduct?
These are questions that are not limited to financial services and should be asked by board members in relation to any business.
"When I refer to boards having the right information, I am not referring to boards having more information," Hayne goes on to say.
"… It is the quality, not the quantity, of information that must increase. Often, improving the quality of information given to boards will require giving directors less material and more information."
The task of the board is overall superintendence of the company, not its day-to-day management, he said.
"But an integral part of that task is being able and willing to challenge management on key issues, and doing that whenever necessary."
A case in point is a reference in the report to National Bank of Australia (NAB) chief executive Andrew Thorburn's explanation that fees charged for a service not provided could be put down to a processing error or the product of poor IT infrastructure and legacy system issues.
In other words, no-one knew this was happening. The money just kept "falling into NAB's pocket".
The big question that still needs to be worked out is the extent to which the recommendations for reform in Australia should be also addressed in New Zealand. That will require deep thought, one suspects, given the relative sanguine findings of our own banking inquiry yet much harsher assessment of the life insurance sector that was detailed last week.
But clearly, the comments made by both the Reserve Bank of New Zealand and the Financial Markets Authority in their conduct and culture inquiries into our banks and insurers targeted a lack of conduct and culture supervision as key areas of concern.
"My sense is that a very strong message has been given to financial institutions in Australia that there's a lot to do, still, to lift their game and that will naturally manifest itself in New Zealand as well," says Lloyd Kavanagh, a partner at MinterEllisonRuddWatts.
Indeed, the story has many miles to run yet.
But if there's one takeaway so far, it's that governance is always at the heart of major corporate issues.
Ask the right questions at the right time and you should get the right answers. If they are not to your liking, it's time to dig a little deeper.