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ASIC expenses scandal reveals trust, structural issues

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The recent expenses fallout has raised questions around ASIC’s governance, with the acting chair pointing to problems around the organisation’s structure, accountability and opaqueness from both James Shipton and Daniel Crennan.

ASIC acting chair Karen Chester told the parliamentary joint committee on corporations and financial services committee on Wednesday afternoon that the recent scandal around ASIC’s higher-ups has not reflected cultural issues within the organisation, but rather, a lack of transparency. 

Mr Shipton has been stood aside on unpaid leave since his approved payment of $118,000 for tax advice expenses was publicly revealed, with Treasurer Josh Frydenberg to decide if he will return to the regulator. 

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Ms Chester signalled that the decision is likely to coincide with the conclusion of the independent review of the payments, currently being undertaken by former inspector-general of intelligence, Vivienne Thom.

Former deputy chair, Mr Crennan had also recently resigned after the National Audit Office raised concerns about him being rewarded $70,000 for housing costs, for when he relocated to Sydney from Melbourne. 

ASIC was said to have raised Mr Crennan’s payments to ANAO, which then recommended the corporate regulator disclose to the Remuneration Tribunal. ASIC instead chose to seek legal advice, both internally and externally, with AGS (the Australian government’s central legal service), before it decided to not seek out the Remuneration Tribunal.

According to Ms Chester, it was ASIC’s understanding that the Remuneration Tribunal could not make a retrospective determination on the manner.

She also commented the four currently remaining commissioners had not received full disclosure around Mr Shipton and Mr Crennan’s payments. 

“We were informed in a way that I would describe as perhaps the most generous description, would be opaque. We were told that it was a relocation payment for his family,” she told the committee, speaking on Mr Crennan’s expenses.

“We asked the quantum, what form of relocation payments it was, what was the issue with the ANAO [Australian National Audit Office]. No one ever told us… that it was ongoing rental payments because that would have been a red flag for me immediately.”

Later in the proceedings, Ms Chester said: “I think it is fair to say that that does raise a trust issue”.

The commissioners supposedly were advised that the ANAO suggested the Remuneration Tribunal check the payments, before they checked the audit committee was watching it and it was being monitored. 

Senator James Paterson, who is chair of the joint parliamentary committee, asked who was responsible for the “opaque presentation of the issue”, to which Ms Chester responded, “the accountable authority”. 

However, she did not confirm that responsibility for the affair rested with the chair instead of the regulator’s culture or governance, saying it would be for the Thom review to decide. But the organisation’s structure and how its staff and lines of accountability are set is another issue.

Structural issues signalled

“Do you think this affair has identified any issues with ASIC’s current structure?” Mr Paterson asked.

After a pause, Ms Chester responded, “yes”. 

ASIC can have up to eight commissioners and it has a large number of executive directors. It recently promoted its executive director for assessment and intelligence, Warren Day, to a newly formed role of chief operating officer – who Ms Chester said now manages the majority of the body’s operational matters.

But the regulator has not fully implemented the governance arrangements recommended by the 2015 ASIC Capability Review. 

The evaluation, which was a result of the Financial System Inquiry, recommended the watchdog restructure its governance, create a head of office or chief executive role with accountability for executive line management and elevate commissioner roles to a full-time non-executive function.

Ms Chester said she had sided with the vision of appointing a chief, four or five commissioners and five or six executive directors with a clear delineation of responsibilities. The model would have mirrored that of the ACCC and Productivity Commission. 

“I think it indirectly contributed to the situation we’re in at the moment, chair, in terms of making sure there’s someone in a very senior position, who is also playing a role around accountability in respect to the payments and expenses of portions,” she said.  

What stopped ASIC from appointing a head of office? Ms Chester said the model had been discussed and was set to be implemented when she joined the regulator in 2019, “but there was a change in the view at the most senior level”. 

“Are you saying that Mr Shipton, or others, did not agree, and did not wish to implement those recommendations?” Mr Paterson asked. 

“Yes,” Ms Chester responded.

The Thom review is expected to be complete by the end of the year.

 

ASIC expenses scandal reveals trust, structural issues
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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