Leadership coach and former senior partner of a law firm, Tony Frost, writes about ethical blindness in his new book 'The Professional' (Wiley, 2025). Quoting Dr Simon Longstaff from The Ethics Centre, Tony reminds us that a major cause of ethical failure is 'unthinking custom and practice'. Absent strong leadership, he says an organisation's culture erodes. Over time, individuals that work there become blind to these failures. 'That's the way it's always been done here' becomes the gold standard.
What triggered the latest LinkedIn controversy?
A case of ethical blindness in strata erupted on LinkedIn last weekend. A well-known recruiter was at the centre of the fracas, advertising a senior strata management position. It offered a generous salary plus 'Schedule B's'. For the uninitiated, Schedule B's describe additional fees payable by a strata entity. These fees are set out in a schedule to standard strata management agency agreements. There's nothing wrong with Schedule B's. It's just a conflict of interest to share them with strata managers who are racking them up.
Is there any real doubt that this practice is unethical?
Despite the views of the recruiter, and a respected strata manager who joined in the exchange, there is no doubt this practice is unethical. The McGrath Nicol report on NetStrata raised the red flag. Dr Nicole Johnston agrees. In her report 'At the Crossroads: Addressing Pervasive Conflicts of Interest in Strata Management' (October 2025), she found these arrangements to be a conflict with no way of adequately managing the risk of overcharging.
Haven't we seen this before — in banking?
None of this is new. Over 5 years ago, the Hayne Royal Commission into Banking and Finance found that paying front-line bank staff based on the products and services they sold created conflicted remuneration. This drove misconduct, poor advice, and consumer harm, so it needed fundamental change.
What did the Hayne Royal Commission actually find about sales-linked pay?
From the executive suite to the front line, staff were 'measured and rewarded by reference to profit and sales'. This meant selling products became more important than serving customers' interests. Conflicted remuneration — like commissions, bonuses, and incentives linked to sales volumes, revenue or products — was found to be a central cause of misconduct and 'shabby' treatment of customers. Sales incentives turned staff from service providers or advisers into product sellers. This blurred their roles and undermined their duty to act in the customer's best interests.
So, what changed in banking —and what does it mean for strata?
As a result, retail banks and finance companies have eliminated the practice. New methods now reward staff for high performance. These are more nuanced and focus on a broader range of client outcomes, not just what they pay for services. These methods may not be as convenient for the banks to oversee and may not be as lucrative for hungry bankers, but they are more ethical — and that's the point.
Was the recruiter's response ethical blindness or something worse?
What was most alarming in this social media exchange was the recruiter’s response when they were called out. Their position was 'it's industry practice and we just do what our clients want us to do.' That's not ethical blindness — that's unethical enabling.
Michael Teys advises strata management businesses on improving profitability through professionalisation and streamlined operating systems.
He has more than 30 years’ experience as a strata lawyer and academic and has owned 11 strata management agencies throughout Australia. He has a Master of Philosophy (Built Environment) and Bachelor of Laws. He lectures and writes widely about strata management issues in Australia and internationally.
