The failure of fines to reform big business

Despite record-breaking fines, corporate abuses continue unchecked, showing that fines alone have failed to reform big business. Carl Rhodes reports.

WHEN OPTUS it was fine Last month the Australian Federal Court awarded $100 million for exploiting vulnerable customers, the Australian Competition and Consumer Commission (ACCC) vice president Katriona Lowe declared:

“We welcome the heavy sentence given by the court and the message of deterrence it will give.”

Just a few weeks ago, the Australian Securities and Investments Commission (ASIC) chair Joe Longo struck a similar tone. ANZ bank hit $240 million Penalties for lying to the government and deceiving customers:

“The penalty will send a clear message to ANZ and all other banks that the cost of breaking the law is not an acceptable cost of doing business.”

In August, Qantas took a recording 90 million dollars Fines for unlawful dismissal of more than 1,800 ground workers. Federal Court Judge announcing the decision michael lee he said it would happen “Send a message to Qantas and other well-resourced employers.”.

Given the scale and frequency of these record-breaking fines, it is worth asking: What message is actually being conveyed? It certainly doesn’t seem to be a deterrent.

Message not received

If penalties are meant to keep corporate Australia on the right track, they are failing.

Check out last year’s “messages”:

Common thread? There are people in Australia’s biggest companies who are willing to lie, cheat and steal for profit. Various leadership changes resulting from scandals caused confusion, of course, but none of these scandals resulted in any criminal charges.

Between 2020 and 2024There have been 369 corporate fines imposed in Australia totaling just under $30 billion. The vast majority were due to violations related to the environment, consumer protection, safety, financial management, employment and competition. Penalties are serious, but scandals continue to mount.

So what’s the real message? For a significant portion of corporate Australia, breaking the law still appears to be a cost of doing business. This is a hefty cost, but it seems worth paying to ensure that no structural changes are made to the system in which criminal companies operate.

trust deficit

If the intended but unheard message to companies is deterrence, there is an unintended message to the public that is heard loud and clear. And this is something even more damaging: big companies cannot be trusted.

Australians’ trust in big companies is not only low, it’s also it’s getting worse. This is not just because some companies violate the rules, but because the system tolerates it. Even companies that play by the rules run the risk of being tainted by associations. If abuse is met only with fines and not meaningful reform or accountability, public trust will continue to decline.

Restoring trust will require more than punishments; It will require a cultural shift in how business views its role in society. Unfortunately that doesn’t seem close.

Institutional resistance

When it comes to regulating corporate behavior, the response of the business community is, at least insofar as it is represented by management. Business Council of Australiais that increased productivity requires us to have less regulation.

Council compliance a ‘burden of bureaucracy’ and earlier this year they called for the cost of regulation to be reduced by 25 percent by 2030.

Reducing unnecessary bureaucracy makes sense. But as recent fines show, regulation is essential to keep companies compliant with legal and societal expectations. If companies can’t do the right thing without strict laws, they have only themselves to blame. Pointing the finger at the government is tantamount to shirking this responsibility.

This stance reminds us that Business Council response To the Australian Law Reform Commission 2020 review Corporate criminal liability, which they argue should be consistent with regulation “economic growth objectives.” Translation? If compliance slows profits, lower the rules. So some mistakes are an acceptable price of progress.

In conclusion

Businesses can do better, and many are already doing so. But lasting change requires more than treating fines, no matter how large, as accounting expenses. It will require leadership, transparency and a genuine commitment to doing what is right, not just what is profitable.

Until this message is delivered, trust will continue to erode and social license to operate will continue to erode.

Carl Rhodes is Professor of Business and Society at the University of Technology Sydney. Wrote several books On the relationship between liberal democracy and contemporary capitalism. You can follow him on X/Twitter @ProfCarlRhodes.

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