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RC focus on public ‘expectations’ questioned

By Jessica Yun
 — 1 minute read

KPMG partner and former AWU national secretary Paul Howes has questioned the royal commission's fixation on ‘community expectations’.

The royal commission’s terms of reference mandates the commissioner to look into “whether any conduct, practices, behaviour or business activities by financial services entities fall below community standards and expectations”.

The line of questioning from the counsels assisting the royal commission has also featured repeated transgressions of ‘community standards and expectations’ in the duration of the ongoing inquiry, with senior counsel assisting Rowena Orr QC making 13 references to the phrase just within her summary of round two.


Speaking as part of a panel at a forum in Sydney on Tuesday, Mr Howes and Herbert Smith Freehills partner Michael Vrisakis discussed the way in which the term ‘community expectations’ was being used, noting its nebulous and ambiguous nature.

“This is one of the issues around the terms of reference,” Mr Howes said. “Australia is a community, but there [are] lots of different communities.”

Ultimately, community expectations, in the context of financial services, would “contradict themselves”, and he cautioned against making “blanket statements” about it.

“People expect and have expectations of a strong, secure, robust financial services industry, particularly around banking,” pointing to research that showed Australians were proud of how the country had navigated the GFC.

“But there are also expectations that levels of executive remuneration … for a number of these institutions should be lower. Which of course, one does tend to contradict the other,” Mr Howes said.

“People will want greater diversification and greater competition in services but stronger and more trust in institutions. Again, things that contradict each other.”

“It's actually the role of policymakers to work through these contradictions and come out with the best consensus outcome for our society.”

Mr Howes said that the banking institutions’ tendencies towards “groupthink and echo chambers” have led to an insulated community, and thereby a lack of understanding of what the wider community’s expectations were.

“The reality is that community expectations is an interesting lens,” Mr Vrisakis added. “It's a hard lens in some ways because it's very fluid. The law changes.”

“The law is affected by community expectations. Community expectations are built into the way in which judges decide cases, the way in which statutes are made; but to see community expectations be presented [in real time] is quite interesting.”

This phrase would “no doubt” have an impact on the way in which existing legal concepts, such as ‘efficiently, honestly and fairly’ as well as ‘good faith’, would be interpreted, Mr Vrisakis said.

RC focus on public ‘expectations’ questioned

KPMG partner and former AWU national secretary Paul Howes has questioned the royal commission's fixation on ‘community expectations’.

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