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Discuss about the Comparative Business  Values & Morals And Social Responsibility.

Ethics, in their literal sense, means the values and morals which are followed by a person (Corrigan and Farrell, (2010). Business ethics denote these morals and values as are followed by the businesses when they conduct their business. Even though the businesses are required to conduct their operations in an ethical manner, it is often seen that businesses resort to unethical conduct, majorly due to personal motivations (Nill, 2015). A recent article which was published in The West Australian (2018) highlighted one of such instances where the conduct of a leading bank of Australia in terms of being unethical conduct was highlighted.

This discussion is focused on highlighting what really happened in this instance, the arguments which were made in the article, the key ethical issues in terms of lack of ethical leadership and corporate citizenship. Once this is done, the case study would be analysed based on ethical theories, and the opinion related to this would be given. Lastly, before concluding, the discussion would highlight the process of ethical decision making which should have been adopted in this case through the use of utilitarian approach.  

The article covered in the quoted newspaper shed light on the incident which impact hundreds of thousands of Australian, who successfully got $380 million as a compensation, as they had to suffer financial losses owing to the dodgy financial advice given to them. The published article is less than a month old and highlights the examination undertaken by the financial service royal commission regarding the consumers being made to pay an ongoing fee to the bank (The West Australian, 2018).

However, they did not get any proper advice reviews, misconduct which included documents being falsified and examples of inappropriate advice (Myer, 2018). The Commission heard that $383.117 million had been paid as compensation in the last decade to the customers of the bank, as they had suffered major financial loss owing to failure in providing the ongoing advice services or financial advice. In Feb of this year, nearly 306,000 customers of AMP and four big banks had paid $216.42 owning to fees paid for the clients not being given any service (The West Australian, 2018).

The articles highlight big names like Westpac and BT Financial Group, Millennium 3 Financial Services, ANZ, RI Advice Group, CBA, AMP, and NAB (Frost, 2018). The big names attached to this case made it even more significant. There was not only the problem of inappropriate financial advice, but also of improper conduct by the financial advisers. This led to regulators being involved in the matter and the inquiry was set to be heard by ASIC, Dover Group, the Financial Planning Association of Australia, and the Association of Financial Advisers. The inquiry heard on the matters of no service or service not being received which the clients were entitled to. The AMP inquiry predominantly involved the conduct of AMP regarding charging of fees to clients for advice licensees brought back by advisers as they did not receive the stated services (The West Australian, 2018).

Key ethical issues/ concerns

The main ethical concerns or the issues of this case revolved around the consumers not being any financial advice and still the fees for such advice was charged from the clients. This led to the ASIC, i.e. the Australian Securities and Investments Commission ordering the big four banks and AMP to pay proper compensation to the consumers, as they had been charged fees for such financial advice which was never given to them. The high number of consumers who were affected, i.e. 306,000 had to be paid over two hundred million as compensation for giving no service. The final value of this compensation is set to be higher, with a higher customer base of 310,000 (The West Australian, 2018). AMP had admitted to making false and misleading statements to ASIC, the corporate regulators, before the royal commission regarding the wrongly charged fees from the customers where the customers had never been given any advice (Pash, 2018).

Corporate citizenship refers to the social responsibility of the business where they are expected to meet or fulfil their ethical, economic and legal obligations, particularly the ones which have been established by the shareholders (Andriof and McIntosh, 2017). The theme of corporate citizenship is producing quality of life and higher standards of living for communities which are around the business, along with maintaining of profitability for the different stakeholders at the same time. At the present age, there is a high demand for socially responsible companies and is the need of time (Crane and Matten, 2016).

In the article highlighted in The West Australian (2018), the conduct of the big banks clearly goes against this concept of corporate citizenship. The banks were indulged in such a conduct, which in no way was meeting or fulfilling ethical, economic and legal obligations. This is the reason why inquiries were conducted into the affairs of the big banks and led to the decision that the banks had to compensate the high base of clients, as they had been wrongly charged sum for something which they never got (The West Australian, 2018). Due to the problems which were highlighted as a result of this instance, certain shortfalls were identified in the system. This has resulted in new codes of ethics being brought into the scenario, which is set to be applicable from Jan 01st 2020 (Janda, 2018).

Leadership is something which has the power of leading the group to the best, or to leading it to blunders like the article published in The West Australian (2018) highlighted. An effective leader has the capacity of leading the group to greatness. Where the leadership is not strong, or is ethically flawed, the group indulges in unethical acts (Shapiro and Stefkovich, 2016). This is the reason why after majority scandals coming to light, the leadership reigns. Such leaders understand their failure in leading the group to the right direction and often leave their posts as being responsible for the failed leadership. This is what happened with AMP as well. Even though there is nothing to show, as of now, that the top management was involved in this entire scandal, Craig Meller, the CEO of AMP, stepped down from the bank. He further apologized for the conduct of the bank after the final services royal commission revealed the wrong interest being charged from clients. Meller not only stepped down from the role of chief executive office but also stepped down from the board of the bank (Pash, 2018).

Was it an ethical decision?

The entire scandal which took place in this case was the consumers being mislead for being charged for a service which was never provided by the banks to them. So the innocents clients were paying for something which they either never asked for, or for something which they did ask for but never got. Such sort of behaviour or conduct is out rightly unethical. The magnitude of this unethical conduct was enhanced when such a conduct was undertaken by not one but a number of leading banks, including AMP and Commonwealth Bank (Janda, 2018).

Had this conduct being undertaken by a single small bank, it would have been serious, but this matter became grave as the clients lost their faith in giants like AMP, and Commonwealth bank.

If the article published by The West Australian (2018) is seen in light of the article written by Myer (2018), the gravity of the situation is further highlighted. This is because the combinations of these articles highlight that when the regulatory authorities were conducted their investigation in the AMP bank, it deliberately mislead the authority on wrong path. This is the reason why the royal commission ordered the bank to pay compensation to the hundreds of thousands of clients which had to bear this misleading and false behaviour of the bank, and were duped.

The reason for the role of ASIC and royal commission to be made proactive in such cases is due to the number of rising scandals in the banking sector in the recent history. Some of the prominent scandals include staff of NAB being involved in the bribery ring, CBA being accused of contravention of the money laundering laws, Westpac paying compensations for contravention of consumer protections, Westpac being sued for manipulating market, ANZ breaching dispute resolution requirements, ANZ breaching lending laws, NAB adviser being banned by ASIC for forging client signatures and for misleading and deceptive conduct, and ANZ having to compensate for failure in paying bonus interest (Karp, Evershed and Knau, 2018). These are just handful cases which highlight that the clients of banking industry are being put in unfavourable position time and again. And each time, similar ruling was given by the regulatory bodies, as was seen in the article published in The West Australian (2018), in terms of compensating the victims.

Ferrell, Fraedrich and Ferrell (2016) have provided seven different ethical philosophies which help in making ethical business decisions. These include teleology, egoism, utilitarianism, deontology, relativist, virtue ethics, and justice. For the purpose of this discussion, the utilitarian view has been taken for outlining the ethical decision making process, which could have helped in banks in making ethical decisions.

The ethical theory of utilitarianism, which is a consequentialist theory, provides that the action would be considered as ethical, only when it results in the utility of such action being maximized (Albee, 2014). To put it in more simple terms, when the happiness of majority of people is enhanced or is maximized, that is the action which would be deemed as ethical (Mill, 2017). The reason for calling this theory as a consequentialist is because the end results of any action are evaluated under the utilitarian view to classify such action as ethical or unethical (Bykvist, 2010). It is an ethical theory which is most commonly used and is not only taken help of in cases of personal ethical dilemma cases but also when businesses are faced with ethical issues. The reason for this stems from the fact that a single decision of business affects a large number of stakeholders (Mizzoni, 2009).

In this case, if the banks really wanted to ethically conduct their business, utilitarian view provides that they would have thought about the utility of their actions. However, this was not done. What had actually happened in this case, the instances which took place resulted in majority being unhappy, bearing opposite results of what the utilitarianism theory dictates. In order for thus being ethical, the big banks need to be vigilant in the fees which they charge from their clients. This becomes particularly important for cases like the one highlighted in The West Australian (2018), where the services were not even given to the clients. There is a need to be more responsible towards the clients, particularly when their money is being taken from them. Otherwise, it would bear negative results for the banks, as did happen in the article published in The West Australian (2018), where the banks had to pay millions as compensation.

Conclusion 

The previous discussion covered a holistic analysis of the article published in The West Australian, where the unethical conduct of the different banks was highlighted. The article covered the manner in which the clients had been charged money for services never given to them. The analysis of this article highlighted that the banks had to bear consequences of such unethical conduct, as had been established through application of concepts like utilitarianism, corporate citizenship and leadership, in terms of being made to pay compensation to the clients by the regulatory authority. The case also highlighted the manner in which the banks amplified their unethical conduct where they lied to ASIC and were later on found to be indulged in misleading conduct. This has led to the conclusion that there is a need to bring reform to the banking industry, particularly in light of the high number of such unethical instances taking place in the recent history.

References 

Albee, E. (2014) A history of English utilitarianism. Oxon: Routledge.

Andriof, J., and McIntosh, M. (2017) Perspectives on corporate citizenship. Oxon: Routledge.

Bykvist, K. (2010) Utilitarianism: A Guide for the Perplexed. London: Bloomsbury Academic.

Corrigan, ‎R.H., and Farrell, M.E. (2010) Ethics: A University Guide. Gloucester: Progressive Frontiers press.

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

Ferrell, O.C., Fraedrich, J., and Ferrell, L. (2016) Business Ethics: Ethical Decision Making & Cases. 11th ed. Boston, MA: Cengage Learning.

Frost, J. (2018) AMP fee revenue soars in face of FOFA. [online] Available from: https://webcache.googleusercontent.com/search?q=cache:DprYwlYSduUJ:www.afr.com/business/banking-and-finance/financial-services/amp-fee-revenue-soars-in-face-of-fofa-20180422-h0z3c3+&cd=3&hl=en&ct=clnk&gl=in [Accessed 11/05/18]

Janda, M. (2018) Banking royal commission: AMP says it misled ASIC over fee-for-no-service financial advice. [online] Available from: https://www.abc.net.au/news/2018-04-16/banking-royal-commission-financial-planners/9662166 [Accessed 11/05/18]

Karp, P., Evershed, N., and Knau, C. (2018) A recent history of Australia's banking scandals. [online] Available from: https://www.theguardian.com/australia-news/ng-interactive/2018/apr/19/a-recent-history-of-australias-banking-scandals [Accessed 11/05/18]

Mill, J.S. (2017) Utilitarianism. Dublin, OH: Coventry House Publishing.

Mizzoni, J. (2009) Ethics: The Basics. West Sussex: John Wiley & Sons.

Myer, R. (2018) AMP misled regulator 10 times over illegal advisory fees. [online] Available from: https://thenewdaily.com.au/money/finance-news/2018/04/16/amp-misled-asic-10-times/ [Accessed 11/05/18]

Nill, A. (2015) Handbook on Ethics and Marketing. Massachusetts: Edward Elgar Publishing Inc.

Pash, C. (2018) AMP CEO resigns over scandals. [online] Available from: https://www.businessinsider.com.au/amp-ceo-resigns-over-scandals-2018-4 [Accessed 11/05/18]

Shapiro, J. P., and Stefkovich, J. A. (2016) Ethical leadership and decision making in education: Applying theoretical perspectives to complex dilemmas. Oxon: Routledge.

The West Australian. (2018) Banking royal commission: $380m paid back to hundreds of thousands of victims of dodgy financial advice. [online] Available from: https://thewest.com.au/business/banking/banking-royal-commission-380m-paid-back-to-hundreds-of-thousands-of-victims-of-dodgy-financial-advice-ng-b88807872z [Accessed 11/05/18]

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