A new report indicates that consumers place a high value on ethical business practices – but that these ethical expectations are not being met across a range of sectors, notably financial services.
The third annual Governance Institute of Australia Ethics Index found that the public believes Australia operates on a ‘somewhat ethical’ level, with an Index score of 35, down from 41 last year. The overall perception of the importance of ethics stands at 75, highlighting a 34-point gap between expectation and reality for the wider business community.
The index surveyed close to 1000 Australians and asked them to rank industry sectors from 100 (very ethical) to -100 (very unethical). The education sector continues to be seen as the most ethical industry in the country, with a score of 80, followed by health (70) and charities/not-for-profit (61).
On the other end of the spectrum, three industries were given a negative ethical score with finance, banking and insurance rated as the least ethical industry with a score of -15. The corporate sector (-9) and the media (-1) joined the financial services at the bottom of the rankings.
Steven Burrell, Chief Executive of Governance Institute of Australia, said that high-profile incidents such as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services sector are “undermining confidence in the sector”.
“Australians expect high standards from their financial institutions, but our research suggests that these are far from being met,” Burrell said. “The community’s faith in some of the country’s biggest corporations has been sorely tested following a turbulent 12 months.
“For the third year in a row, banking, finance and insurance was the lowest category in the index. Its net score has dropped dramatically from last year — 55% of respondents consider the sector unethical and only 28% view it as ethical.”
The overall importance of ethics rose from 75 to 78, with each generation (millennials, Gen X and Baby Boomers) rating the importance of ethics higher than 77, the report found.
For the financial services sector, ethical business practices are increasingly important to consumers. The index found that the public rated the importance of ethical business practices as 84, some 6 points higher than the national average, but saw actual ethical behaviour as -15, a 111-point swing – the biggest of any surveyed sector.
A worrying trend?
The findings of the index are consistent with the 2018 Edelman Trust Barometer, which indicated that Australia has transitioned into a low-trust environment, and Gallagher’s Q2-18 market overview report, which cites the Royal Commission, ‘fake news’, high-profile sporting scandals and the #metoo movement as factors contributing to diminishing consumer confidence in national institutions.
“Trust is the currency of all commercial relationships. Once broken, it is not easily fixed,” said Gallagher Chief Executive Sarah Lyons.
“Major data breaches, suspect corporate governance and increased regulatory scrutiny have raised the question of whether a significant cultural shift is needed to put Australia’s corporate house in order to get a firmer grip on the basis of trust with their customers.”
Gallagher, meanwhile, remains the only insurance broker to be globally recognised for ethical business practices, having been named amongst the ‘World’s Most Ethical Companies’ by the Ethisphere Institute for 7 consecutive years between 2012-2018.
Our commitment to ethical business
See how Gallagher’s commitment to supporting the communities where we operate translates as a real life ‘blueprint for better’ in our 2018 Corporate Social Responsibility Report, which features two of Gallagher Australia's volunteering programs.