Gemma Acton: Let’s hope the recent wave of corporate scandals stimulates more long-term introspection

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” They don’t call legendary investor, Warren Buffet, the “Sage of Omaha” for nothing. He is renowned for making his personal fortune of nearly $200 billion through keeping it simple, so it’s unsurprising that this straightforward advice comes from the 93-year-old, who has seen many people and companies trip themselves up by trying to cut corners with consumers over the decades. It’s a shame more local companies’ bosses and boards haven’t heeded the advice. It’s becoming apparent that many of the brands Australians have long regarded with affection and respect — sometimes for years, decades or even more than a century — have failed to support us during the past year when growing financial pressures have increasingly sapped our morale and resilience. Companies do have a duty to serve shareholders — but there comes a point where repeatedly disappointing your customers becomes a costly business decision. Customers can always vote with their feet, especially at a time when value decisions will often trump longstanding loyalties and switching costs can be far lower than in the past. Yes, inflation and supply chain issues have aggravated input prices for many companies, making the cost of doing business sharply more expensive since the pandemic. Yet, there’s mounting evidence that businesses we rely on for staples have been sneakily pushing through additional hikes to prices and opportunistic cuts to services, catching a convenient ride on the relentless messaging the public has been fed about the cost-of-living crisis and skills shortages. Coles and Woolworths have not only succeeded in raising profits amid the soaring price of groceries — but also their margins — a reflection of how much profit they’re pocketing from every dollar spent by customers. While the floods of early last year were often blamed by the supermarket duopoly for grocery supply shortages and spiking prices, the deluge has receded long before the prices have. Our consumer watchdog, the ACCC says it’s keeping a close eye but while supermarket executives did make fleeting appearances at the Senate’s cost-of-living inquiry earlier this year, there’s little being actively done to bring relief to Australians. That contrasts with other major economies — including New Zealand, the UK and Canada where measures to make it easier for smaller independents to compete such as price limits — have been implemented. It’s a tricky line to walk between boasting to shareholders about a $10.2 billion profit and reassuring customers that actually, this is great for them too as it means Australia has a strong banking system. Yet that’s the position Commonwealth Bank CEO Matt Comyn found himself in last month when announcing another record profit, which partly owed to the alacrity and fullness with which all major banks pushed through rate hikes to borrowers, and the simultaneous feet-dragging over extending the same increases to savers. Enough (justified) ink has been spilt in recent weeks on the litany of ways in which Qantas has abused our trust and sacrificed customer loyalty at the altar of greed. But it’s an acute example of how quickly and holistically you can obliterate brand value. It’s not just aggrieved customers the airline will need to convince that it’s been through rehab and is a thoroughly changed entity. It’s the employees who are no longer working for a beloved national icon but Australia’s primary corporate villain. As someone who worked for a global investment bank before, during and after the Global Financial Crisis, I can tell you that when the public turns on your employer, you end up losing a lot of motivation — especially as you watch many of your best and brightest colleagues voluntarily choose to exit. A word count limit prevents me from delving into more recent examples but it’s worth highlighting Australian Super’s shameful foray into the limelight. Back in 2018, it realised it had been breaching its duties to 90,000-odd members by failing to merge their duplicate super accounts — and stop profiting from charging them multiple sets of fees and insurance premiums. That was the year of the Royal Banking Commission, so you would have hoped to see financial services providers on their best behaviour. But apparently not, with Australian Super not fixing the problem — and continuing to cost their members significant retirement savings — until 2021. The welcome news is that the corporate watchdog, ASIC, and the competition watchdog, the ACCC, have both pushed in the past week to pursue heavy fines and high publicity legal actions against Australian Super and Qantas respectively, saying that they want penalties which send a broader message to corporate Australia about despicable behaviour being closely scrutinised. In reality, a small population means competition and choice for consumers is sparser here than in more densely peopled peer countries. The Government has been disappointingly slow in providing the necessary frameworks to promote vigorous competition in many of our essential industries and — in the absence of being forced to behave in their customers’ interests — companies have increasingly failed to do so. Let’s hope the recent wave of corporate scandals stimulates a little more long-term introspection from both. Gemma Acton is Seven Network finance editor.