Casino executive bonuses under scrutiny as lawyers call for clamp down

Bonuses paid to Crown Resorts’ directors and executives are under threat after it has been recommended that the casino giant applies the banking executive accountability regime (BEAR) to its gaming executives.

The Australian Financial Review reports that in their final written submissions to the inquiry, counsel assisting urged the introduction of measures that would include putting directors’ bonuses on ice and pinning clear areas of accountability to specific managers.

They said it would ensure directors “take reasonable steps to ensure Crown’s business is conducted with honesty and integrity and in a transparent manner with the regulator”.

This regime, which would probably ensnare rival casino groups The Star and SkyCity, could be rolled out to whoever ends up running the Southbank casino in Melbourne, which may not be in Crown’s hands for much longer after counsel assisting recommended the state cancel its licence.

The recommendation follows revelations at the Victorian royal commission that many Crown executives and managers knew the casino was underpaying its state gambling taxes and turned a blind eye to problem gamblers and money laundering.

This all took place against the backdrop of revenue-linked bonuses.

Financial services model recommended for casino industry

The BEAR has enjoyed early success in combating wrongdoing in financial services, with counsel assisting drawing parallels between the misconduct of banking executives before its 2017 introduction with that of Crown directors and management.

“A regime analogous to the accountability regime introduced by the BEAR should be considered,” they wrote in their submission, having already recommended an overhaul of governance structures at Crown and a clean-out of remaining executives, including chairman Helen Coonan.

“The BEAR is a dynamic process where entities are expected to have honest discussions internally to develop a clear, transparent and common understanding of who is accountable, what actions are expected from them and how consequences will be applied for any failure to meet those obligations,” they wrote.

“This facilitates opportunities for reflection on, and refinement of, operational and governance structures and practices, which in turn strengthens the risk culture practices at all levels.”

Counsel assisting recently recommended the gaming regulator strip Crown of its casino licence but defer that cancellation for up to 18 months to prevent the “extreme disruption” of immediately doing so on, among other third parties, its 12,000 Victorian staff.

Crown Melbourne could reapply for the licence if it could prove it was suitable, they said in their written closing submission to the inquiry, but warned that it would not reach that point for up to five years.

Experts mixed on rollout of accountability scheme

Corporate governance expert Professor Elizabeth Sheedy, who has been pushing for some time for the rollout of a BEAR-like regime at casinos, said the bonus deferral and clear lines of responsibility imposed by the scheme were the most important aspects to ending wrongdoing at Crown.

“The bonuses don’t get paid out immediately, they get put on ice for a minimum of four years. You usually need a number of years for misconduct to come out – bad stuff never comes out in the short term, it takes years,” Professor Sheedy said.

“If you discover the apparent profits were generated inappropriately, all of these bonuses can be withdrawn or reduced.”

Taking responsibility for a particular area of the business is another core part of the BEAR regime, which was created against the backdrop of the global policy movement that recognises company boards are not the sole sources of accountability.

“Executives can’t say ‘Oh I didn’t know. This is a big, complicated organisation, how can I possibly know what’s going on five levels below me?’ Under these accountability regimes, it’s your job to find out,” Professor Sheedy said.

But Swinburne University corporate governance expert Helen Bird said that while the BEAR provided a blueprint for “good, prudential accountability for a highly regulated industry like banking or casinos,” Australia’s state-based approach to gaming regulation would make consistent enforcement difficult.

“Casinos are state based and you’d be looking at putting another layer of regulation on top of that, so perhaps what we need is a uniform system across all states so we do the BEAR once across them all,” she said.