Leadership Misconduct, Fraud, And Breach Of Corporate Social Responsibility In Australia's Leading Banks: An Essay.

Select a contemporary business ethics case that has been raised in the media within the past three months, within Australia. Areas covered may include (but not limited to( business fraud, corporate social responsibility, leadership misconduct). Student’s must incorporate individual research to support their argument e.g a summary of the company’s code of conduct and or corporate social responsibility policy.

Ethical Issues in Australian Banking Industry

The Financial Review posted an article on the topic of leadership misconduct and failure of Australia’s leading banks to fulfil their social responsibility. This article was written by James Frost and James Eyers on 7^th November 2018 which is titled ‘CBS, Westpac admit pursuit of profits led to misconduct’ (Frost and Eyers, 2018). In this article, the chairmen of two leading banking corporations admitted that they had put profits ahead of the customer outcomes which lead to unethical behaviour in the organisation. This article highlighted different ethical issues in these banks which include sexual harassment, data breach and fraud. The investigation conducted by the Banking Royal Commission shows the unethical side of the operations of Australia’s leading banking organisations (Frost and Eyers, 2018). This article provided that Westpac is too slow when it comes to investigating, analysing and understanding the complaints of its customers. More than 200 documents were published by the royal commission in which summaries were included regarding decade worth of misconduct in the company (Frost and Eyers, 2018). These misconducts range from sexual harassment at Commonwealth Bank’s (CBA) event to simulation of accounts by the employees of Westpac to receive bonus by falsifying the records. In this essay, the key arguments and ethical issues raised by the article will be evaluated. This article will evaluate whether an ethical solution to the problem has given or not. Relevant ethical theories will be discussed in this essay, and the ethical decision making process will be used to provide ethical solutions to the key ethical dilemmas.

The banking corporations in Australia contribute significantly to the economy of the country; however, they have engaged in many unethical practices which negatively affect the interest of Australians. This article outlines the major ethical issues which provide that these banks have prioritised profits before the interest of their customers. These banks avoid resolving the problems of their customers and harass their workers for generating more profits. Many employees have falsified the books of accounts of Westpac to show false account deposits in order to earn bonuses (Viral News Trends, 2018). They have conducted fraud in the company, and the top level executives have not taken corrective measures to ensure that similar fraudulent activities do not occur in the future. The chief executive of CBA, Matt Comyn, provided that the corporation received over 10,000 responses from the customers regarding misconduct by the employees or other staff members (Condie, 2018a). Although the chief executive issued a public apology; however, no strict action is taken to address this issue in the company. It shows leadership misconduct in the organisation since its senior executives are focusing on earning more profits rather than resolving the queries of their customers. It was provided that CBA is in the process of improving transparency in its operations; however, no effective actions are taken yet by the management.

Utilitarianism Ethics and Deontological Ethics

Along with fraud and leadership misconduct, this article also highlighted that these corporations have failed to comply with their code of conduct which is a part of their corporate social responsibility (CSR) structure. For example, the CSR policies of Westpac provides that the company focuses on implementing best practice governance policies in its business model which focuses on core values such as integrity, performance and teamwork (Westpac, 2018). As per its business strategy, the company’s first priority is to deliver superior services to customers and broadening customer relationship. However, the company has failed to resolve queries raised by its customers and the company has avoided taking actions on issues such as sexual harassment. Similarly, the code of conduct of CBA provides that the company focuses on pursuing excellence when it comes to maintaining a high standard in the business (Commbank, 2018). The corporation prioritises its customers and employees above others in its code of conduct; however, it has failed to comply with this code since the company avoids the complaints of its customers and its employees conduct fraud to earn bonus.

An ethical decision is not taken in this case since no strict regulations are imposed on either bank to ensure that they comply with their social responsibilities. Although evidence is available against the failure of both banks to comply with their social responsibilities; however, they are not penalised for their actions (Yeates and Danckert, 2018). No strict action is taken against the banking corporations to enforce them to take immediate actions to resolve this ethical dilemma. Utilitarianism and Deontological ethical theory can be evaluated in this case to determine whether the actions of banks are ethical or not. The deontology ethical theory provides that parties should comply with set rules and they should not breach their duties to act in an ethical manner (Grant, Arjoon and McGhee, 2017). These banks have violated their duties towards their customers and employees to ensure that their rights are not violated by them. These banks have failed to comply with their rules given under the code of conduct to avoid prioritising profits above the interest of customers.

Another relevant theory is utilitarianism which is also called consequentialism. According to this theory, the actions of parties should have positive consequences based on which they are considered as ethical. The actions should focus on achieving greater happiness for a greater number of people (Yazdani and Murad, 2015). If the actions have positive consequences which benefit a large number of people, then they are considered as ethical. The actions of the banking corporations are unethical because they did not focus on achieving greater happiness for a greater number of people. These corporations prioritise the benefits of few employees and executives above the interests of a large number of customers. They have neglected the protection of employees and avoided the complaints of customers. They have engaged in fraudulent practices to earn more profits in the business. The leaders in these banking corporations have failed to act ethically while considering the interest of the customers and employees. They have made apologies to the public; however, they failed to take an effective measure which allows them to resolve these issues (Condie, 2018b). It has created a hostile environment in Australia and happiness of a greater number of people has affected adversely; thus, these actions are considered as unethical.

Ethical Decision Making Process

As per the ethical decision making process, relevant ethical options available in this scenario can be evaluated. The key ethical dilemma in this case is the failure of these banking corporations to comply with corporate governance policies since the prioritised profits above the interest of customers (Yeates, 2018). The article highlighted key information about many incidents which include leadership misconduct, fraud and sexual harassment. Based on this information, it can be evaluated that these corporations have adopted a poor CSR structure which did not encourage transparency in the operations. These actions have negatively affected the customers and employees in these companies. The ethical decision in this scenario is that these corporations should work with the authorities to adopt relevant policies which promote transparency in their operations and impose obligations on the management to take corrective actions. The alternative option is imposing of financial penalties on the companies for the violation of their code of conduct. However, it will not resolve this problem in the long run. Therefore, the operations of these corporations should be reviewed continuously by authorities to promote transparency in their operations which will assist them in holding their executives and employees accountable for their actions. It will create an ethical environment in the banking corporation which will allow them to focus on the issues of their customers and employees rather than engaging in unethical practices to promote profits in the company. It will enable the banks to fulfil their social responsibilities and sustaining their profits in the future.  

To conclude, major ethical issues relating to business fraud, breach of CSR policies and leadership misconduct are highlighted in this article. The two of the leading banks in Australia have prioritised profits above the benefit of their customers. They have continuously neglected the problems faced by customers and employees to continue generating more profits. The decision taken in this article is not unethical since no actions are taken against these banks to ensure that they comply with their code of conduct. They have violated the policies of the CSR structure which resulted in the violation of their own code of conduct. The principles of utilitarianism and deontology ethical theories are evaluated in this essay to provide that the actions taken by the management of these banking corporations are unethical. The ethical decision making process is used in this essay to identify ethical option along with relevant alternatives to ensure that this ethical dilemma is resolved accordingly.

References

Commbank. (2019) Commonwealth Bank Code of Conduct. [PDF] Available at: https://www.commbank.com.au/content/dam/commbank-assets/about-us/2018-09/CBA-code-of-conduct.pdf [Accessed on 22^nd January 2019].

Condie, S. (2018a) 10,000 CBA customers answer CEO letter. [Online] Available at: https://www.news.com.au/finance/business/banking/10000-cba-customers-answer-ceo-letter/news-story/49733c44ee0963814f1f7aa6f9747476 [Accessed on 22^nd January 2019].

Condie, S. (2018b) CBA customers inundate CEO with complaints, compliments, and suggestions. [Online] Available at: https://thenewdaily.com.au/money/finance-news/2018/11/07/cba-10000-customers-complaints/ [Accessed on 22^nd January 2019].

Frost, J. and Eyers, J. (2018) CBA, Westpac admit pursuit of profits led to misconduct. [Online] Available at: https://www.afr.com/business/banking-and-finance/cba-westpac-admit-pursuit-of-profits-led-to-misconduct-20181107-h17ltl [Accessed on 22^nd January 2019].

Grant, P., Arjoon, S. and McGhee, P. (2017) Reconciling Ethical Theory and Practice: Toward Developing a Business Ethics Pedagogical Model. Business and Professional Ethics Journal, 36(1), pp.41-65.

Viral News Trends. (2018) Hayne Royal Commission: Banks Confess To Forgery, Bullying, Sexual Harassment. [Online] Available at: https://viralnewstrends.com/hayne-royal-commission-banks-confess-to-forgery-bullying-sexual-harassment/ [Accessed on 22^nd January 2019].

Westpac. (2018) Corporate responsibility and our business. [PDF] Available at: https://www.westpac.com.au/docs/pdf/aw/Corporate_Responsibility03.pdf [Accessed on 22^nd January 2019].

Yazdani, N. and Murad, H.S. (2015) Toward an ethical theory of organizing. Journal of Business Ethics, 127(2), pp.399-417.

Yeates, C. (2018) New CBA chief Matt Comyn says sorry for 'unacceptable' failures. [Online] Available at: https://www.smh.com.au/business/banking-and-finance/new-cba-chief-matt-comyn-says-sorry-for-unacceptable-failures-20180409-p4z8il.html [Accessed on 22^nd January 2019].

Yeates, C. and Danckert, S. (2018) CBA admits to putting profits over customers in historic grilling. [Online] Available at: https://www.smh.com.au/business/banking-and-finance/cba-admits-to-putting-profits-over-customers-in-historic-grilling-20181119-p50h00.html [Accessed on 22^nd January 2019].