Australian corporate governance has rarely been more sophisticated. Boards have charters, committees, risk appetite statements, whistleblower policies, ESG frameworks, cyber dashboards, conduct policies and external advisers. Yet the past two years have produced a striking series of governance failures, scandals and enforcement outcomes across listed companies, financial institutions, professional services firms, media companies, superannuation trustees, universities, not-for-profits and member-based organisations.

That is the governance paradox.

The problem is not that governance frameworks do not exist. The problem is that, too often, they do not work when pressure, incentives, hierarchy, ego or commercial urgency are greatest.

Recent examples are sobering. ANZ was ordered to pay $250 million in penalties after admitting misconduct across institutional and retail banking, with ASIC describing the matters as significant failures in managing non-financial risk. Qantas has faced major penalties arising from misleading representations about cancelled flights and unlawful outsourcing of ground-handling employees. ASIC has secured significant greenwashing penalties against Vanguard, Mercer and Active Super, confirming that ESG and ethical investment claims are now hard legal representations, not marketing flourishes. The Star litigation confirmed serious duties issues for two former senior executives, while also reminding boards and commentators to be precise: ASIC did not succeed against the former non-executive directors.

Other matters, including Nine Entertainment’s cultural review, MinRes’ founder-related controversy, WiseTech’s leadership turmoil, KPMG’s current audit confidentiality controversy and the Royal Australasian College of Physicians’ governance difficulties, point to broader concerns about culture, power, conflicts, escalation and institutional trust.

What are the common themes?

The first theme is power without sufficient challenge. Founder-led, personality-led and high-performing organisations are particularly vulnerable. Strong individuals can create value, but they can also distort information flows, suppress challenge and normalise exceptions.

The second is incentives that reward the wrong things. APRA’s CPS 511 is instructive because it requires APRA-regulated entities to align variable remuneration with risk outcomes, apply malus and clawback, and adjust remuneration downwards for misconduct, poor risk management, accountability failures and adverse customer outcomes. That approach should not be confined to regulated financial institutions.

The third is culture as a governance issue. AICD’s 2026 culture guidance states that governance of organisational culture is a core board responsibility. This is no longer “soft” governance. Culture determines whether bad news travels, whether people speak up, whether conflicts are disclosed, whether policies are followed and whether senior people are held to the same standards as everyone else.

The fourth is poor escalation. Many scandals are not invisible. They are preceded by complaints, rumours, near misses, internal reviews, audit findings, staff departures, customer complaints or whistleblower disclosures.

The fifth is weak consequence management. Where the benefits of misconduct appear to exceed the realistic consequences, governance will fail. Qantas’ outsourcing case is a reminder that penalties must be large enough to deter major companies from treating compliance breaches as a cost of doing business.

Intentional or negligent?

The answer is both. Some failures involve deliberate misconduct. Others involve recklessness, wilful blindness or institutional negligence. But boards should not take comfort from the distinction. A negligent governance failure can destroy value, careers and trust just as effectively as intentional wrongdoing.

The practical board question is not merely: “Did anyone intend to do the wrong thing?” It is: “Did our system make the wrong thing too easy, too rewarding, too invisible or too consequence-free?”

Is shareholder primacy part of the problem?

Acting in the best interests of the company remains a core legal concept. The problem is not the legal duty itself. The problem is a narrow, short-term and sometimes distorted interpretation of it. Boards that pursue short-term financial outcomes at the expense of customers, employees, regulators, safety, sustainability or trust may not be protecting shareholder value at all. They may simply be borrowing from the future.

Are executives paid too much?

This is not just a fairness question. It is a governance design question. Heavy reliance on short-term financial incentives can distort behaviour, especially where risk, customer, culture and sustainability measures are weak or symbolic. Regulators should continue scrutinising remuneration structures where they create conduct risk. Boards should do the same, even where not legally required.

Has whistleblowing worked?

Whistleblowing remains essential, but it is often a last-resort mechanism rather than a healthy first line of defence. ASIC’s whistleblower guidance emphasises confidentiality and protection from detriment, while AICD notes the importance of whistleblowers in exposing misconduct and systemic cultural issues. A board should be concerned if serious issues only surface through external whistleblowing, media reporting or parliamentary privilege.

Are boards part of the problem?

Sometimes, yes. Not because directors intend failure, but because boards can become too busy, too trusting, too slow, too deferential or too distant from the real operating culture of the organisation. A board does not manage the company, but it must govern the conditions in which management operates.

The lesson is clear: governance must move beyond structure to behaviour. Beyond policies to proof. Beyond assurance to insight. Beyond compliance to judgement.

With many years of experience, Governance in Action Pty Ltd is well placed to assist boards and company secretaries (and other governance professionals) in managing the issues raised in this article.

IMPORTANT: This article / blog has been prepared with the aid of AI (including refining structure, wording and readability).Final judgement, editing and accountability remain with the author.