
Meet James Shipton, our new Fellow uncovering the ethics of regulation
READBusiness + Leadership
BY The Ethics Centre 23 JUL 2024
We’re thrilled to announce we’ve appointed James Shipton as an Ethics Centre Fellow.
Former chair of ASIC and one of Australia’s top corporate regulators, James has over 20 years experience in regulation, financial markets, the law and academia, both internationally and in Australia.
Most recently, he was the Executive Director of Harvard Law School’s Program on International Financial Systems. Prior to that, his career has included Executive Director and Commission member of the Securities and Futures Commission (SFC) of Hong Kong and almost a decade at Goldman Sachs in Hong Kong.
To welcome him, we sat down with James to discuss the role ethics plays when it comes to regulation and the banking and financial services industry.
Tell us, what draw you to a career in the financial services sector?
Finance always fascinated me ever since my father took me to the Melbourne Stock Exchange after school one day in the 1970s. I remember him taking me into the ‘open outcry’ market and explaining how the ‘chalkies’ wrote the bid and offer prices on black board on a mezzanine. It was exciting, noisy, and thrilling. I was hooked.
As I got older, I realised the important societal role finance played; in addition to its economic one. It facilitated modern life and allowed us all to plan for the future and prepare against risks. It is this interconnection between finance’s economic and social roles that fascinates me; that is also an intersection that is under-appreciated, including by people working in finance.
Reflecting on the Hayne Royal Commission and your role at ASIC are you now seeing some positive changes to the industry?
Yes and no. Paradoxically, the larger financial institutions were the ones who have moved in a more positive direction whilst various governments and government agencies have let the momentum slip from the Royal Commission. Perhaps, in part this was because of the pandemic but it was also ideological and/or political. The way I have described it, the Royal Commission provided a ‘sugar hit’ to ASIC and APRA; but that was fleeting, and we have returned to the status quo of lack of policy and funding prioritisation for those all-important regulators.
What kind of work will you be engaging with at The Ethics Centre?
I am currently writing a book on optimising regulation by improving regulatory design, governance, and strategy. As part of this project, I am developing ways and means for regulators and regulated persons to better understand each other; by doing so the purpose of regulation will more likely be achieved. There is a wonderful expression in Cantonese, ‘gai tong aap gong’ which translates to ‘the duck is talking to the chicken’. That is how I see regulators and the regulated; they both look similar, but they are each talking a completely different language and cannot understand the other.
Accordingly, I am working with the Centre to develop greater understanding between regulators and those regulated using ethics and professional integrity as a bridge.
I am also contributing to The Ethics Alliance & the BFSO Young Ambassadors by helping them to better understand the purpose of regulation as well as pass on some of my own professional challenges and experiences.
What does regulation mean to you? And where does ethics sit in the regulatory world?
‘Regulation’ is a much-misunderstood concept; particularly by regulators. Regulation is the modification of behaviours pursuant to norms in a sector of importance to society. Put simply, ‘regulators are in the behavioural modification business’. And since regulation is all about ‘norms’ and ‘behaviour’, ethics plays a large part in this equation.
Australia is commonly called a ‘nanny state’. From an international perspective do you think this is a fair label? As a society are we overregulating?
We have to move beyond the debate of ‘over’ or ‘under’ regulating and, instead, get regulation ‘right’. Regulatory systems are far from their optimal state because of a series or structural flaws. First of which is a lack of precision in the objectives or purpose of regulatory systems. My research suggests that most regulators lack a meaningfully precise articulation of their job; that articulation via their statutory purpose or ‘objectives’ is, usually, either as ‘wide a as the Nullarbor Plain’ or highly prescriptive but full of inconsistencies. Unlike central banks who have a clear, precise, and measurable mandates (financial stability, price stability, employment, and/or economic growth), regulators are left to interpret, execute, and then explain unclear, imprecise, and ultimately unmeasurable objectives. From this flows a raft of structural flaws that prevent regulators from ever succeeding (how can they if their definition of ‘success’ is unclear or absent!?).
Self-regulation has proven to realistically not be enough to steer people to making good choices, what do you think are the driving factors that prevent people from doing the right thing?
Self-regulation often (not always) fails for the same reason regulators fail; their objectives are unclear and/or they do not use the full suite of regulatory tools to change behaviour (especially enforcement). Regulation is the utilisation of incentives and disincentives to modify behaviour; rarely does one work without the other.
Do you think people who break the rules are bad or is it our systems that are bad?
A criminal barrister once described his clients to me as “bad, mad, or sad”, adding quickly that ‘most of them are just sad’. In the world of white colour crime, it is probably more a mixture of bad and sad; the latter usually seeing the person descend into the abyss of misconduct. Two must read books about this are: Nick Leeson’s Rogue Trader (how he triggered the collapse of Baring Bros.) and Wizard of Lies: Bernie Madoff and the Death of Trust by Diana Henriques.
Taking the ‘bad’ and ‘sad’ analogy further, our regulatory system needs to account for both. It must be as effective and credible as possible to disincentivise the ‘bad’ against wrongdoing; and incentivise the ‘sad’ to adhere to the purpose of regulation (again, this is why ‘regulatory purpose and objectives’ are so vital).
If you were to be an Australian ambassador to a country, which country would you choose and why?
India in a heartbeat. We have so much in common with India and the potential there – economic, cultural, and societal – is vast. (I also love the food).
And lastly the big one – what does ethics mean to you?
Its everything; its my guiding light. My personal motto is to ‘be a good person by doing good things in a good way’.
Image by Aaron Francis

BY The Ethics Centre
The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
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