Consumer Banking and Wealth

UNETHICAL PRACTICES BY NATIONAL AUSTRALIA BANK 1 University Name Student Name Student ID Course Date UNETHICAL PRACTICES BY NATIONAL AUSTRALIA BANK 2 Research Plan Background National Australia Bank(NAB) is a public company. The company offers banking services such as wealth management, investment banking, access to credit and credit card facilities. NAB also offers trustee and nominee services. The bank is domiciled in Australia , with its operations in the United States and the United Kingdom. The Head Office of the bank is located in Docklands, Victoria. The bank has been l isted in ASX under the NAB code . The operations of the bank are carried out through divisions. NA B divisions include Business & Private Banking, New Zealand Banking, Consumer Banking and Wealth, Corporate and Institutional Banking. Business and Private Banking offers banking services to the small and medium size business and investors . The provision of these services is through t he business banking sector. Private Bank and JBWere UNETHICAL PRACTICES BY NATIONAL AUSTRALIA BANK 3 brands are used for servicing high net worth customers. NZW offers financial products to business and corporate agribusiness. Through the NAB and UBank networks and mortgage brokers, Consumer Banking and Wealth offers personal banking and loans. The corporate and institutional banking operations are carried out in Australia, the UK, and the US. The division is tasked with providing banking services (Daly and Gebremedhin, 2015.pp 131) . The banking services offered relate to financial markets, specialized capital, and alternative investments. The Bank of New Zealand’s Markets Trading operations is also included in this division. Legal frameworks and Protections After its establishment , a firm is required to comply with the established legislation. The legislations may be locally, nationally , or internationally established. The legislations may be specific for a particular industry or are general and applicable to all the organizations within the locality. Generally , a firm is required to adhere to the primary business principles. The principles include; integrity, objectivity as well as professional behavior. Integrity enables the company to act straightforward ly and avert the trust bestowed o n them by the customers. Being objective enables the organization to concentrate on its objectives while avoiding the conflict of interest (Batten, Lončarski and Szilagyi, 2018. , pp 781) . Professional behavior ensures that the firm can maintain its positive reputation in the sight of the public. However , this wasn’t the situation with NAB. The bank had started well , but an overcharging scheme to rip off the consumers ensue from the bank. Due to greed and self -interest of yearning for m ore profits, the firm ’ s executives overcharged its clients. The bank overcharged the customers for the advisory services which were not offered. NAB continue s to charge this periodic payment even when it was fully aware of its existence. The bank also fail ed to establish a system for reducing overcharging. The executives of the NAB failed to comply with the code of ethics, laws , and regulations. Several complaint s from the customers being overcharged were reported to the Australian Securities Investment Commission (ASIC). The malpractices by NAB didn’t last as its actions were reve aled by the bank when it reported about the breach of the contract to the ASIC (Rafeld et al ., 2019 .pp 19) . UNETHICAL PRACTICES BY NATIONAL AUSTRALIA BANK 4 NAB acknowledge s its overcharging practice, which the company attributed to an error in its system. NAB license had not entitled the company to charg e the periodic fees. The firm executives opted to charge an incorrect fee during the establishment of the customer payment arrangement. The company a cted misleadingly by charging the fee by stating it had contractual capacity enabled to levy the fees even when its license provided such entitlements. The acts of the NAB show a lack of ethical and professional behavior (Montague, Larkin , and Burgess, 2016. , pp 80) . The consumers were overcharged even for the advisory services not offered. Between 2015 and 2019, NAB had charged periodic payments that amounted to $365,454 to its customers. The fees included 4874 customers in personal banking as well a s 913 customers in business banking. The acts of the NAB are a clear indication of its deceptive conduct. The bank realized its overcharging error in personal and business banking at the end of 2016. Nevertheless , the situation continued until 2018 that the company tabled a breach of the contract with the ASIC and issue d a notification to its customers about the error (Wishart and Wardrop, 2018 .pp 85) . Even after identifying the error in its system, NAB failed to establish systems aimed at preventing the charge of incorrect fees. The bank participated in unacceptable behavior and violated its obligation as an Australian financial services licensee to make sure that the services that have been entitled to it by the license are offered in a manner that is efficient, honest, and fair. The NAB acts are depicted by its continuous charging of the periodic payments when it had no contractual capacity to do it. The bank ’ s failure to control systems to prevent overcharging on periodic payments i s also proof. NAB also failed to provide its customers with an opportunity of reviewing their accoun ts to identify the overcharging . The Corporations Act requires the company ’ s executives to act with due care, diligence and display the ability. However, this wasn’t the case with NAB , which violated both the general law duties and the covenants established under Trust Deeds. NAB executives breach the provisions of the Corporations Act by failing to act in the best interest of the members (Quttainah and Almutairi, 2017. , pp 823) . UNETHICAL PRACTICES BY NATIONAL AUSTRALIA BANK 5 Workplace situations that required ethical considerations The accountability means th e company used that to provide information to its customers wasn’t appropriate. The bank failed to link some offset account s to the broker -originated loans. As a result of this negligence, the customers were overcharged on interest on their home loan s. According to the Gen erally Accepted Accounting Principles (GAAP) , an offset account is either a transaction or a savings account linked to a home loan account. The money in the offset account reduces the amount payable as interest on the home loan linked account. In the case of NAB, the company failed to link the offset accounts to the home loan accounts. The result of this was the lack of reduction in the interest payable on the home loan accounts (Higgins, Tang , and Stubbs, 2020 . pp 407) . Due to this , the consumers paid mor e than the y required. The employees an expected to be bound by ethical considerations in the performance of their work. The accountants of the NAB, however , failed to take into consideration the ethical values. In some instances , the executives manually forced the workers to insert the particulars into the periodic payment systems . The result of this wrongful insertion is the consumers being UNETHICAL PRACTICES BY NATIONAL AUSTRALIA BANK 6 overcharged. The executive of the firms is expected to be guided by ethical values in their undertakings and not to act in a manner contravening the ethical value s to please their employers. The code of ethics should have guided the executives in the NAB bank . The executives should perform their duties with due care, diligence , and objectivity to promote th e best interest of the consumers. The executives were forced to use manual systems for entering the periodic payments on the system . They proceeded to undertake it even when they knew it was going to overcharge the consumers. If the workers had adhered to the code of ethics, they would have been the whistleblowers (Matthews, 2016.pp 37) . But since they were guided by greed and self –interest, they chose to become part of the scheme against the interest of the consumers. The Stakeholder theory states that organizations should be mindful of the plight of all their stakeholders. The theory identifies the stakeholders in an organization are crucial for the company ’ s growth and success . The stakeholder theory identifies the specific stakeholders of the organization. NAB failed to take care of the interest of its major stakeholder, the consumers. Driven by greed and self -interest, the executives and the NAB employees opted for higher profits at the expense of the interest of its consumers. Stakeholder theory requires the organizations not to be much obsessed with the generation of profits at the expense of the welfare of the society in general. The other crucial ethical consideration is the Carrolls Pyramid. Carroll , in the pyramid , identified four levels of Corporate Social Responsibility. The levels are Economic, Legal, Ethical , and Philant hropic. Economic responsibility is the priority of the company to be profitable. Legal responsibility requires the business to obey the law. Ethical responsibility requires the firms to undertake what is right in the performance of their duties. The p hilanthropic activity requires businesses to give back to society. This constitutes the highest CSR level. NAB failed to adhere to the CSR pyram id as proposed by Carroll. The UNETHICAL PRACTICES BY NATIONAL AUSTRALIA BANK 7 company only adhered to the CSR model's economic responsibility and used dishonest means to attain this objective. Overcharging the consumers is a violation of the ethical responsibility of NAB. NAB employees also breach the legal responsibility by Carroll by overcharging the consumers when its license hadn’t provided it with such entitlements. Conclusion Businesses are required to comply with the established legislation in their areas of operations. However , with the case o f the NAB, the business was driven by greed and self -interest , which made the executives engage in schemes orchestrated to benefit the company at the expense of its consumers. Failure to take into consideration the legal provisions is very costly to the business. This is evidenced by the lawsuit filed by ASIC against NAB in the court. The mistake is also costly for NAB as it will be required to put in place ethical approaches that are aimed at winning back the trust of the customers. The approaches to be adopted should practically prove to the customers that the company has opted out of its initial practices and that it is currently ethical. If this approach isn’t adopted, the bank risks further damage to its reputation. Bibliography UNETHICAL PRACTICES BY NATIONAL AUSTRALIA BANK 8 Batten, J.A., Lončarski, I. and Szilagyi, P.G., 2018. When may met hill: Organisational ethics in practice. Journal of Business Ethics , 147 (4), pp.779 -792. Daly, A. and Gebremedhin, T.A., 2015. Can an “Indigenous employment program” work? A case study of National Australia Bank. Economic Papers: A journal of applied economics and policy , 34 (3), pp.128 -138. Higgins, C., Tang, S. , and Stubbs, W., 2020. On managing hypocrisy: The transpa rency of sustainability reports. 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