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Background of Commonwealth Bank Australia and the Scandal

Discuss about the Comparative business ethics and social responsibilities in your chosen business Organization.

Ethics is an integral part of every business and it refers to an individual’s moral judgements related to right or wrong.  In business ethical responsibility and corporate social responsibility holds significant benefits. It helps attract customers, employees and investors and retain them and increase the business productivity. On the other hand the unethical behaviour in business damages the reputation of the company and profit reduces as the stakeholders lack interest (Crane and Matten 2016). The aim of the essay is to investigate the recent ethical issue related to business within last three months. In regards to the identified issue in the online news article, related to breach of ethics by Commonwealth Bank Australia, the essay explores if there was any legal implications. The essay highlights the keys ethical issue/s related to news/article. The essay then discusses if ethical decision has been made supported with literature evidence.

According to news published in the website abc.net.au, Commonwealth Bank admits to have manipulated the children’s account. This news posted on 19th of this month has created havoc in Australia. The news highlighted conformation by the Commonwealth Bank about fraudulently manipulating the accounts of children by staff of the retail branch. Indulging in such scam was out of the greed for earning bonuses and meet targets (abc.net.au 2018).  Commonwealth Bank is the multinational bank in Australia, with its branches in UK, USA and New Zealand. The organisation is popular for provision of variety of services including institutional banking, funds management, retail business, investment and broking services. It is the largest company listed on the Australian securities exchange and was fully privatised in 1966 (Gollan 1968). 


As the new article unfolds, it was found that Matt Comyn, CBA chief executive officer confessed about the manipulation done by the staff. He apologised for the breach of trust. He further informed that the purpose of the staff behind such unethical behaviour is to illegitimately activate Youthsaver accounts also known as Dollarmites, based on which the staff can get incentive compensation.  These Youth saver accounts in Australia were opened for young people to cultivate the saving behaviour since early life. These accounts were created by taking parents’ consent (abc.net.au 2018).  The bank’s staff activated accounts those that were left undeposited by many days by adding small amounts from personal profit such as ten cents. It fetched $2 per year to the bank staff. It was argued by the Federal Opposition finance spokesman, “Jim Chalmers” that such action of CBA staff depicts need of culture change as it is troubling to see meddling with children’s bank accounts. Mr Comyn apologised and asserted that such action did not harm anyone financially (Knaus 2018). Further, the news article highlighted that CBA mentioned it new priority to expedite changes undermining the customer’s trust and terminate employees involved in such unethical behaviour knowingly. Mr Comyn argued that changes were made to such unethical behaviour when observed in 2013 and asserts to not have noticed such practice in past five years. However, now he agrees to have put zero-tolerance for such behaviour, irrespective of any harm to the customer (abc.net.au 2018).

Key Ethical Issues Demonstrated by the Scandal

 This ethical issue in this scenario as per concerns raised in this article is corporate governance, corporate social responsibility and corporate citizenship. Corporate governance in any business is established to prevent any major disaster similar to the popular Enron scandal. Such governance refers to processes and policies by which the company is directed and controlled allowing building the stakeholder’s value and confidence (Crane and Matten 2016). Transparency is one of the key elements of the good governance which seems to have been breached by the Commonwealth bank staff. The action taken by them for personal profit earning is not in compliance with the established rules and regulations of the bank. The investors do not get the true picture of company’s financial actions and non-financial aspects. The staffs were deviant with the concept of discipline as they showed behaviour that is not universally recognised as correct (Crane and Matten 2016).


Another key ethical issue is corporate social responsibility as the staff did not establish the corporate ethics and behaviour of good corporate ethics. The key ethical issue demonstrated by the manipulation is the breach of trust. According to Kolk (2016) corporate social responsibility refers to balancing the needs of the stakeholders and ensuring the social and environmental well being.  Considering the breach of ethics by Commonwealth Bank it can be said that there was a lack of transparency about human right practices. It can be interpreted that the staff of the bank do not comply with law and wider social expectations. The staff did not pay high priority to ethical standard, or was responsible to human rights issues. The staffs do not demonstrate the social responsibility which is also one of the elements of the corporate governance (Saeidi et al. 2015). Corporate citizenship refers to ethical treatment of stakeholders while meeting the economic, legal, ethical and social responsibilities (Dion 2017). Analysing the act of Commonwealth bank staff, it can be interpreted that they did not demonstrate ethical/moral leadership by manipulating the children’s accounts, indicating poor strength of character.  It does not appear that ethics is not a clear part of their agenda. There lacks an ethical culture as the part of their function in organisation.

 Legal action against the employee depends on the company’s code of conduct. In case of Commonwealth Bank the employees did violate the code of conduct and is also confirmed by Mr Comyn. It involves legal implications and it was right decision announced by him to terminate the staff involved in this unethical behaviour knowingly. In the documented list of commitments of the commonwealth bank, it is clearly stated that the bank is committed to honesty.  However, the staff did not demonstrate ethics in manipulating accounts.  Therefore, Mr Comyn’s decision of termination as per zero tolerance behaviour is justified. If such action is not taken it will further decline the public’s trust and confidence in the large corporation, who may further fear corruption due to past scandals like Enron, Volkswagen and others (Ndedi et al. 2015). By taking the decision to terminate the employees at Commonwealth bank, Mr Comyn demonstrated the behaviour of accountability and responsiveness through his decision. Both are the key elements of the corporate governance. Mr Comyn had taken responsibility for ethical issue occurring in the company. It provides the investors a medium to query and asses the committee and board’s actions on this. Mr Comyn also demonstrated responsibility by taking corrective action to penalise the mismanagement of accounts in the Bank. It demonstrates the social responsibility towards the stakeholders (Saeidi et al. 2015). Such action will set a good example for other employees who may be set on right path and restrain from ethical lapse in future. This decision of the company demonstrates the commitment to good governance. There is growing literature related to firing of CEO of several companies for breach of ethics. More number of firings for ethical lapses was observed in BRIC countries and in Western Europe.  According to Cole (2017) six employees at KPMG were terminated from job after an internal probe of ethical breach in 2017. In March 2018, six of the Howard workers were fired for misappropriates using the university based funds for nine years. The decision was considered justified based on negligence of duties (Pennamon 2018). In 2067, Wells Fargo fired 5300 workers for creating fake bank accounts and indulging in unethical sales practice (Egan 2018).

Legal Implications of the Scandal


Decision making in business issues is complicated especially due to different notions of right and wrong action. In the global marketplace considering the competiveness of the business, applying the moral philosophy is not a simple task. Extension of moral philosophy into practical context refers to business ethics (Ferrell, Fraedrich and Ferrell 2015).  Different moral philosophies exist in business world. As per utilitarian philosophy a moral action is the one that promotes the greater good off the people and maximises the total utility. On the other hand the philosophy of egoism is the one that defines acceptable or right actions as those maximising the interest of the particular person as defined by him or her. The deontological theory focuses on preserving the rights of a person associated and intentions associated with the behaviour rather than its consequences. Business decisions are also based on the virtue ethics that is focusing in what is conventional morality as well as what is considered appropriate by the person with good moral character. In contrast to the above philosophies, the philosophy of teleology defines right action as anything that is acceptable if produce some desired result such as utility or realisation of self-interest. Again, the theory of relativist evaluates the ethics of the situation based on the individual or group experiences. The theory of justice defines ethics based on fairness that are interactional, procedural and distributive (Ferrell, Fraedrich, and Ferrell 2015).

Applying these philosophies in the present context, it can be said that Mr Comyn’s decision to terminate employees for manipulating the children’s bank accounts for personal profit, is justified. It can be concluded that his decision is based on virtue ethics of business. His decision depicts his willingness to serve the society’s demand and promote public good. It demonstrates his virtue and integrity. It is true as per Ferrell, Fraedrich, and Ferrell (2015) because individual excellence and the well being of community goes hand in hand.  This is the inductive application of the problem whereas the philosophy of deontology and teleology. The behaviour of the staff to manipulate the children accounts for personal greediness can be considered as approach of egoism where only self interest was given preference. Self control and tryst are main virtues of a business but the staff had breached both as they could not control exploiting accounts for self gain.


It can be concluded from the essay that ethics is vital in business and breach of ethics leads to ethico-legal consequences as in the case of Commonwealth Bank.  The decision making in business is difficult as ethics is defined in various forms due to different moral philosophies of an individual. However, as per literature, the key virtues that support business transactions are trust, self-control, empathy, fairness, truthfulness, learning, gratitude, moral leadership and civility. In case Commonwealth Bank, the staff breached the ethics by violating public trust and lack of self control and moral leadership. Their behaviour demonstrated the poor corporate governance, social responsibility and corporate citizenship.  In this regard the decision to terminate the employees is justified considering the virtues of ethics in business

References

abc.net.au 2018. 'Breach of trust': CBA apologises for manipulating children's accounts. [online] ABC News. Available at: https://www.abc.net.au/news/2018-05-19/commonwealth-bank-staff-manipulated-childrens-accounts/9779010?section=business [Accessed 20 May 2018].

Cole, C., 2017. KPMG IT Audit Overview and Introduction: A Classroom Exercise.

Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Dion, M., 2017. Corporate citizenship as an ethic of care: corporate values, codes of ethics and global governance. In Perspectives on corporate citizenship (pp. 118-138). Routledge.

Egan, M. 2018. I called the Wells Fargo ethics line and was fired. [online] CNNMoney. Available at: https://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-fake-accounts/?iid=EL [Accessed 21 May 2018].

Ferrell, O.C., Fraedrich, J. and Ferrell, L., 2015. Business ethics. Ethical decision making and cases.

Gollan, R., 1968. The Commonwealth Bank of Australia; origins and early history. Canberra, Australian National University Press.

Knaus, C. 2018. Commonwealth Bank apologises for staff manipulation of children's accounts. [online] the Guardian. Available at: https://www.theguardian.com/australia-news/2018/may/19/commonwealth-bank-apologises-for-staff-manipulation-of-childrens-accounts [Accessed 20 May 2018].

Kolk, A., 2016. The social responsibility of international business: From ethics and the environment to CSR and sustainable development. Journal of World Business, 51(1), pp.23-34.

Ndedi, A., Kuete, Y.D., Mua, K.K. and Kouwos, M.B., 2015. What Can Companies Learn from Volkswagen Business Unethical Behaviour?.

Pennamon, T. 2018. Six Howard Workers Fired After Nine-Year Financial Scandal. [online] Diverse. Available at: https://diverseeducation.com/article/113177/ [Accessed 21 May 2018].

Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. and Saaeidi, S.A., 2015. How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), pp.341-350.

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My Assignment Help. Commonwealth Bank Australia's Recent Ethical Issue: Legal Implications And Ethical Consequences Essay. [Internet]. My Assignment Help. 2019 [cited 30 May 2024]. Available from: https://myassignmenthelp.com/free-samples/business-ethics-commonwealth-bank-case-study.

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