Fels: '7-11 still don't get it'
Describing what he considers a "sacking," Prof Allen Fels told Leigh Sales he thinks 7-11 are trying to minimise their payout to underpaid workers, and that a culture of illegality could return to the troubled company. Vision courtesy the 7.30 Report, ABC.
PT2M9S 620 349Investigations into the life insurance sector, banking scandals, compensation schemes and a focus on company cultures is proving to be a dollar bonanza for consultants, accounting firms, lawyers and consumer advocates.
All seems well with this approach until the expert decides their reputation is worth more than the gig, in which case things can become embarrassing.
It has happened twice in the past two weeks. Professor Allan Fels was sacked because he was too independent and Catriona Lowe resigned from a hardship program with Timbercorp because she couldn't endorse some of the settlements being pushed.
7-Eleven has attracted scorn over its behaviour. Photo: Paul Jeffers
In most cases it is, in fact, a big multi-national brand that is hired to be the frontman, the gun for hire. Or as the old saying goes: corporations have no bodies to be kicked or souls to be damned.
But they do have pockets that need to be filled. With the recent scandals, their pockets are bursting at the seams.
Life insurers in the frame
Last month ASIC wrote to 13 life insurance companies asking them to assess five years' worth of their claims management records and get an independent party to verify their findings.
If the findings highlight some issues, most notably that legitimate claims are being denied, the regulator will return for a deeper dive. For the consultants who are being paid by the organisations, it is money for jam.
ASIC has been told by the Turnbull government to do a more significant investigation into Commonwealth Bank's life insurance division. That means even more consultants for hire.
(CBA currently has a compensation scheme running for its financial planning disaster, which has made a lot of money for a lot of lawyers and consultants but victims have seen barely a dribble.)
CommInsure announces review
CBA has announced Deloitte to "independently" select a sample of life insurance claims dating back to 2011. It has also hired law firm DLA Piper to investigate ethical concerns, including policy wording and definitions.
After a Fairfax Media and Four Corners joint investigation revealed unethical behaviour in CommInsure, including rejecting legitimate claims, the bank announced it would also set up a claims review panel.
The various panels, compensation schemes, and reviews will translate into tens of millions of dollars for the consultants.
Interestingly, Deloitte was appointed as the forensic accountant in the 7-Eleven scandal to review wage fraud claims of vulnerable workers who had been ripped off by franchisees.
The scheme was set up by 7-Eleven to rebuild credibility. It paid former ACCC chairman Allan Fels and Dr David Cousins to spearhead the scheme on the proviso certain conditions were met to ensure their independence.
That changed two weeks ago when 7-Eleven decided to change the rules, which Professor Fels said would have made a mockery of the panel's independence and returned the business to "lawlessness".
Fels and Cousins were abruptly sacked. Deloitte agreed to the new rules and stayed on.
Deloitte stayed on
7-Eleven's chairman Mike Smith said the motivation to do it inhouse, with the help of Deloitte, was "you cannot outsource morality".
Fels was not convinced. "Be under no illusions. This is code for 7-Eleven taking over the handling of claims after systemic underpayment of wages to minimise the company's costs."
In Fels' view, a company cannot "in-source morality".
Companies embroiled in misconduct often hire independent experts to conduct a review. It's a handy way to look like you are doing something.
But in reality they lack transparency, are conducted outside the gaze of the regulator or the public, its contents never see the light of day and its terms of reference are a mystery.
They do, though, give the company the ability to say an issue has been examined and no significant issues were found.
IOOF uses playbook
The best example of this is IOOF, which followed the consultant playbook. Last year it hired PwC to investigate a series of allegations by a whistleblower, including front running. The report was not publicly released, so the company could declare that the investigation had found "nil" issues.
Unfortunately for IOOF, it was forced to table the report at a Senate inquiry, which gave a rare insight into exactly how one of these "investigations" is conducted.
The PwC report turned out to be full of qualifications and disclaimers and had narrow terms of reference that excluded key issues and prevented the IOOF whistleblower and others being interviewed.
Indeed, most of his allegations were outside the scope of the report. Outcomes and conclusions can be easily shaped and moulded, depending on the scope.
As Sir Humphrey Appleby from Yes Minister would say: "Never start an inquiry unless you know what its findings will be."
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