The purpose of this report is to enlighten the reader about the case where the company Commonwealth Bank Australia faced crisis in the target market. The report evaluate details about the case issue of the company along with the analysis of the case on the basis of various management and ethical theories as well. Every crisis of a multinational company is linked with some of the ethical and unethical measures. So, the report evaluates the ethical breach initiated by the company Commonwealth Bank through its activities. Further, the management theories explain the ways through which an organization can successfully implement their targets in the environment. The theories also explain some do’s and don’ts in the field of management. Further, the analysis of the case along with implementation of various theories on the case is discussed below:
Analysis of Case Study
A report of ABC.net news stated that the Commonwealth bank admits that they have lost the account details of 20 million account users of the company. The news was issued in the current year on May 3 when the bank confirmed that they have lost the financial statements and other information of the 20 million accounts of the company. The financial statements include information like name of the customer, their address, account number and transaction details from the year 2000 to 2016. The company used to store all the financial records of the account in a chip and that chip was supposed to be destroyed by a contractor Fuji-Xerox previous year only after the decommissioning of the data centre (Norman, 2018). However, the bank stated that they never received the documentation that provides information that the tapes have been destroyed by the sub-contractor. After these issues, the Commonwealth Bank ordered an independent forensic investigation by KPMG to analysis the core of the issue and understand what has actually happened. The bank also informed the Office of the Australian Information Commissioner (OAIC) and the bank regulator APRA. The acting head of retail banking system of the Commonwealth Bank stated in the environment that the incident that happened was actually unacceptable and the investigation initiated also stated that the tapes have disposed off as well (ABC.net, 2018).
It was on the part of the management of the bank to which they were unable to believe that the chips have been destroyed due to lack of evidence. However, by the end of investigation, it was found that tapes have been destroyed. Mr Sullivan, the head of retail department also stated that the bank is sorry for the inconvenience and worry caused to the customers but they made sure that the tapes are destroyed. Also, the bank issued the statement that the tapes did not include and password of PINs of the user. So, their privacy was safe with them, however, the bank said that the information that was prone to leak was partial information that was used to generate the account statements of the customers. It was not complete information that can directly lead to fraudulent activities (Oates, & Dias, 2016). After the initiation of the event, the employees regularly monitored the customer accounts to catch if any wrong act is implemented. The bank also hid the information of massive privacy breach from the customers so as to minimize the risks as sharing of such information can lead to bigger risks for the bank and its customers. The OAIC and APRA reports later stated that the event happened due to poor governance and risk management culture of the bank. The authorities now take a strict eye on the bank so as to ensure that the management keep the information of customer entirely private now (Douglas, 2018).
Bureaucracy Theory of Management
Bureaucracy is an organizational structure that is organized into rules, process and procedures that divides the work into various groups in an organization. This theory is given by Max Weber who built his assumptions about this theory on the basis of Frederick Taylor’s scientific management theory. This theory of management applies on the human resource management in such a way that it designs specified role to each and every individual present in the organization so that they can effectively work to achieve success (Niskanen, 2017). This theory of management stresses on the designated to roles for the employees and the management based on their hierarchal structure and streamline authority so as to ensure who is in charge and who is not. This theme helps the management to analyse the roles and responsibilities of each and every person connected with the management and insist them to complete their work effectively. Relating it with the give case, it should be noted that the theory helps the reader to understand that there are specified rules and regulations of every job role under which every employee should work in an organization. Similarly, in the given case of Commonwealth Bank, the bank gave the authority and responsibility to the sub-contractor to discard the tape (Khorasani, & Almasifard, 2017).
However, the contractor failed to comply with the job role for which the company should pay penalty as well. This aspect also provides a mechanical, systematic to manage the human being connected with the organization. According to this theory of management, every person is entitled for a specific job role and they should also comply with the requirements as well in order to successfully help the organization to grow. The systematic flow of work and human resource management helps the organization to gain success in the management (Shafritz, Ott, & Jang, 2015). The company Commonwealth Bank failed to perform such actions in the environment because initially the work of destroying the tapes was given to a person who was not a part of the hierarchy of the company. As the association was not a part of the systematic process of the organization due to which it did not take care of the interest of the organization and kept the information of destroying the chip private. The company should have provided this work to a person who is responsible and a part of hierarchical structure of the company (Bratton, & Gold, 2017).
System Theory of Management
System theory is one of the most prominent theories of management that talks about the system of the organization. The system of a company can be either closed or open, an open system is open that contacts to the external environment and its various attributes while the closed system is concentrated to the internal structure of the company and there is no scope of interaction with the external environment. System is the most distinctive part of an organization that helps them to organize the business functions to attain success in the target market (Rutherford, & Meier, 2015). Relating the system theory with the Commonwealth bank case; it should be noted that the company being part of the open system, it was important for the company to take care of the interest of every person linked to the activities of the company. The inputs of the company should also bring productive output for the external environment. The Commonwealth adequately made use of inputs of the company but it did not bring out successfully effective outcomes for the society. Feedback loop is also an important part of the system theory of the management as it helps the company to attain feedback from the external environment and rectify the business structure as well (Laudon, & Laudon, 2016). The Commonwealth Bank several times faced the negative feedback loop from the external environment because of the issue of privacy. Still the company did not take the feedback seriously due to which they ultimately faced such a major issue in the business (Morgeson, Mitchell, & Liu, 2015).
Feedbacks are important part of the system that the company should understand properly. With the help of a feedback, an organization grows effectively; it also helps the business in realizing the areas where the company is falling back. However, event after giving several feedbacks in the environment, the Commonwealth Bank failed to fully satisfy the customers present in the environment. The company was at fault when it kept such information secret from the customers as well. The customers of the bank are also a part of the system so they were equally responsible to attain information about the privacy breach aspect of the company (Wang, Ouyang, Krishnan, Shu, & He, 2015).
Administrative Theory of Management
The administrative theory of management attempts to find a way design the functions of the organization on a whole. This type of theory is generally related to the formalized organization structure in which companies work. The administrative theory of management was given by Henry Fayol, the theory is based on the concept of departmentalization. This aspect means that different activities in an organization should be performed with an aim to achieve the common purpose of the organization (Rosenbloom, 2016). For the purpose of achieving the objective of the company, the management should classify the manpower into various group so as work is effectively accomplished. In brief, it can be said that this theory talks about the ways in which an organization should implement the process of administration of the business. This theory oppose the scientific theory of management as it concentrate on the organization of work and structure and not on the efficiency of the company (Thompson, 2017).
However, in this case of Commonwealth Bank the company required to work with efficiency and within the given organizational structure as well. According to the administration theory of management, the company failed to successfully work in the target market because of the inefficiency to work and the effectiveness to work within the administrative body as well. The bank also did not manage the functions effectively due to which the threats tampering of tape arouse (Van Dooren, Bouckaert, & Halligan, 2015). Being a part of the banking industry, it is important for the management to take care of the price sensitive information linked with the company and destroy the information properly so that it does not go in the wrong hands. However, the company failed to administer the business functions due to which they faced such problem in the external environment (Otley, 2016).
Utilitarian Theory of Ethics
Ethics is important for the business to apply as it helps them in going on the right track in the industry. There are various theories of ethics that particularly applies of the business and helps them in being an ethical business concern as well. According to the theory of utilitarianism, if an act produces good for the greatest number of people in the society then that act is considered as a good deed. The theory of normative ethics asks for the good or bad in a specific action performed in the environment (Kagan, 2018). The theory of utilitarianism answers all the questions with an economic way as this aspect focuses on the lives of individual and the actions that they make are in favour of the people or not. This theory only believes that the actions are good and right if it provides benefits to a greater level of society. Irrespective of the aspect that the action is wrong in the eye of law, if people get satisfied with the actions then it is right according to this theory. Relating the case of Commonwealth Bank with the theory of utilitarianism, it should be noted that the company did perform well according to this theory (Vaughn, 2015).
The privacy breach of 20 million account users dissatisfied the market on a whole. Resulting to which it can be said that the action implemented by the Commonwealth Bank were immoral. Privacy breach is one of the biggest concerns that affect the satisfaction level of people in the society. The company hired contractor to discard the chips but unfortunately no result were found of the act of destroying the tape (Mill, 2016). Thus, the customer felt a risk that someone illegally make use of their financial information and negative affect their interest as well. No organization has the right to access to circulate the personal information of any person without giving imitation or asking for approval from the specific person. However, the company did one right thing in the case was that kept the information of privacy breach secret from the customers which in one way positively acted in the market (Westermarck, 2017).
Thus in the limelight of above mentioned events, the fact should be noted that the above mentioned report evaluated the privacy breach issue of the company Commonwealth bank. The bank suffered the problem of privacy breach of financial statements of 20 million account users of the bank. The report evaluated details about the bank case along with the justification about the case in relation to four theories. Three management theories were analysed that evaluated the case on the part of the managerial issue. Whereas the theory of utilitarianism evaluated the case on the part of the theory of ethics. Summing up the above statements, it can be said the company did a wrong deed by initiating the privacy breach act as it affected the interest level of customers in the target market.
From the above analysis, below mentioned are some of the recommendations given to the Commonwealth Bank:
Performing critical work within the process: The company should assign the critical work in the internal process as well. It is important for the association to understand the crucially of the work that they perform in the environment and take measures to secure the position of the company as well. So, it should be noted that the bank should provide informative documents only to the organization and employees on whom they have complete faith. Giving the tape to a non-trustable association negative affected to the image of the company.
Issuing notice for the internal actions: The company should also circulate their actions to the customers in the environment. This will help the customers to link with the activities of the company and build its positive reputation in the environment as well. This aspect will also help the organization to attain feedback from the customers present in the open system and rectify the actions accordingly.
ABC.net, (2018). The CBA's data breach of 19 million accounts. Retrieved from: https://www.abc.net.au/news/programs/the-business/2018-05-03/the-cbas-data-breach-of-19-million-accounts/9724984
Bratton, J., & Gold, J. (2017). Human resource management: theory and practice. UK:Palgrave.
Douglas, M. (2018). Characterisation of breach of confidence as a privacy tort in private international law. University of New South Wales Law Journal, The, 41(2), 490.
Kagan, S. (2018). Normative ethics. UK: Routledge.
Khorasani, S. T., & Almasifard, M. (2017). Evolution of management theory within 20 century: A systemic overview of paradigm shifts in management. International Review of Management and Marketing, 7(3), 134-137.
Laudon, K. C., & Laudon, J. P. (2016). Management information system. Pearson Education India.
Mill, J. S. (2016). Utilitarianism. In Seven Masterpieces of Philosophy (pp. 337-383). UK: Routledge.
Morgeson, F. P., Mitchell, T. R., & Liu, D. (2015). Event system theory: An event-oriented approach to the organizational sciences. Academy of Management Review, 40(4), 515-537.
Niskanen, J. (2017). Bureaucracy and representative government. UK: Routledge.
Norman, J. (2018). Commonwealth Bank admits it lost the details of almost 20 million accounts, didn't tell customers. Retrieved from: https://www.abc.net.au/news/2018-05-02/commonwealth-bank-confirms-loss-financial-records-20m-customers/9720928
Oates, G., & Dias, R. (2016). Including ethics in banking and finance programs: teaching “we shouldn’t win at any cost”. Education+ Training, 58(1), 94-111.
Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, 45-62.
Rosenbloom, D. H. (2016). 3a. Public Administrative Theory and the Separation of Powers. In The Constitutional School of American Public Administration (pp. 78-94). Routledge.
Rutherford, A., & Meier, K. J. (2015). Managerial Goals in a Performance?Driven System: Theory and Empirical Tests in Higher Education. Public Administration, 93(1), 17-33.
Shafritz, J. M., Ott, J. S., & Jang, Y. S. (2015). Classics of organization theory. US: Cengage Learning.
Thompson, J. D. (2017). Organizations in action: Social science bases of administrative theory. UK: Routledge.
Van Dooren, W., Bouckaert, G., & Halligan, J. (2015). Performance management in the public sector. UK: Routledge.
Vaughn, L. (2015). Doing ethics: Moral reasoning and contemporary issues. US: WW Norton & Company.
Wang, K., Ouyang, Z., Krishnan, R., Shu, L., & He, L. (2015). A game theory-based energy management system using price elasticity for smart grids. IEEE Transactions on Industrial Informatics, 11(6), 1607-1616.
Westermarck, E. (2017). Ethical relativity. UK: Routledge.