Community Expectations – Code or Codification?

By Michael Vrisakis

The Royal Commission has become a channeling medium for community expectations as a standard of conduct.  One of the issues this raises is whether we have to wait for a Royal Commission in order to heed the call of community expectations?

But just exactly what are community expectations? Is there a single homogeneous community and shared values?

The expression “community expectations” assumes some uniformity of expectations and some consensus on their appropriateness.

For present purposes, let us assume that such consensus can and does exist, but we revert to this point in due course.

Legal standards and community expectations must somehow be reconciled as directors face a Damoclean sword of accountability hovering over their heads and a central plank of accountability is role clarity, responsibility and certainty.

But how does the law catch up with community expectations?

Usually this happens over considerable time as judges determine the law or governments reflect community expectations in statute law.

There are faster ways, however, in which legal or quasi legal obligations can catch up with community expectations.

One way is through the use of industry codes.

But it is fair to say that industry codes have not always been easy to introduce.  Take the recent example of the proposed industry code in relation to life insurance in superannuation.  Legal issues arose as to whether a trustee could be bound by a mandatory code and the Government felt forced to intervene in the form of the budget announcements rendering default insurance for persons aged under 25 years impermissible. That said, let us not give up quite yet on industry codes as a means of refreshing the standards expected of the industry.

Industry codes bring with them a lot of advantages that can address the perceived shortfall in addressing community expectations.  The codes are clearly flexible and versatile but first and foremost they represent a nimble way of regulating an industry.  Sure, consensus of industry players is not always easy to obtain and yes, some players will resist change.  But if married up with a constructive dialogue with Government and regulators, a choice model for the industry is on the table: either self-regulate to address community standards that may arise in relation to the manufacture and sale of products or else expect that the Government will intervene through act of parliament, or increasingly the regulators through administrative regulation, in which case community expectations may well enter into the statute and become codified.

Of course the skeptics will point out that community standards are rarely easy to articulate or even if they are, they should not be adopted without careful consultation and due process.  That is a perspective and probably presents a Gordian knot, where the blade of Damoclean sword of accountability is not a resolution tool but rather its edge is only sharpened by the bluntness of the community expectations concept.