Ethical Issues in NAB Banking Scandal

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Comparative Business
Ethics and Social
Responsibility

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The article published by the
Financial Review is selected in this essay
which is written by James Eyers. The title of this article is “Banking royal
commission: Where NAB went wrong on a fee for no service” (Eyers,
2019). This article was posted on February 5, 2019, which highlighted a
key ethical and legal issue raised by the misconduct of the National
Australia Bank (NAB). The key argument that is highlighted in this article
is that NAB is found guilty of charging fees to its customers without
providing them any services. In this scandal, the company charged
millions of dollars from more than 200,000 customers. It is an ethical issue
because the officers of the company were aware that they are charging
“advisor service fees” and “plan service fee” on their customers from
2015 (SBS, 2018). Despite knowing this fact, no action was taken by the
company or its officials to address this problem and compensate for the
loss suffered by the customers. As per the Australian Securities and
Investments Commission (ASIC), the officers of the company that were
involved in these practices have violated provisions given under the
Corporations Act 2001 (Cth) (Eyers, 2019). The objective of this essay is to
evaluate the key ethical issues which are raised in this article and
evaluate whether an ethical decision is taken in this scenario while
complying with ethical theories and comparing with other ethical cases.
This essay will also outline the ethical decision-making process while
relying on the principles given under the most relevant moral philosophies
to determine how similar ethical issue can be resolved.
There are various ethical concerns raised in this article due to the failure
of NAB and its members to comply with ethical principles while taking
business decisions. In this scandal, the company violated the principle of
corporate governance. It is referred to a set of rules and policies which
provides provisions for direction and controlling of a company to make
sure that it maintains a balance between the interests of its stakeholders
(Tricker, 2015). As per these principles, NAB has implemented a corporate
social responsibility (CSR) structure which enables the company to ensure
that it positively affects the interest of its stakeholders by imposing an
obligation on its management (NAB, 2019). This structure provides that

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NAB and members who represent the company will prioritise the interest
of customers above profit maximisation. However, this provision is
violated by the company since its charged fees from its customers without
providing them any services. Another issue is that the officers were aware
regarding this fact still they did not take any actions to stop these illegal
operations. The officers can be held liable under section 1041G of the
Corporations Act for engaging in dishonest conduct (Austlii, 2019). As per
this section, they can face civil or criminal penalties for their actions. This
scandal also raises the ethical issue involving lack of ethical leadership in
the organisation. The Banking Royal Commission provided that the
leaders of the company are trying to hide this scandal and they are
avoiding their obligation to compensate customers for their loss. The
actual compensation ($34.3 million) is more than twice the number that
was given in the report of ASIC (Eyers, 2019). As a corporate citizen, NAB
has failed its duties towards society by engaging in illegal operations. The
company and its officers are misleading its customers, and they are
violating their rights which show that the company has violated ethical
principles.
In this case, the most appropriate ethical decision is not taken. Currently,
no legal obligations are imposed on the company or its officers who were
aware of this scandal but continued to say nothing (Eyers, 2019). They
have acted dishonestly due to which they violated the provisions given
under the Corporations Act; however, no legal action has taken against
them. This case can be evaluated based on Utilitarianism ethical
philosophy which emphasises on the consequences of judging the
morality of a situation. This theory argues that ethical decisions focus on
achieving greater happiness for a greater number of people. If the
consequences of a situation are positive, then it is considered as an
ethical decision. In the case of NAB, the consequences of the actions of
the company and its officers resulted in violating the interest of over
200,000 due to which they are considered as unethical (Frost, 2019). The
failure of the directors of the company to take proactive measures to stop
this issue in 2015 is also considered as an unethical decision. Since no

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actions are currently taken to make sure that similar actions are not taken
by the company or its officers, an ethical decision is not taken in this case.
Another relevant philosophy which applies to this scenario is that
Deontology ethical theory. This theory provides opposite views than
compared to Utilitarianism approach because it emphasises on actions of
parties rather than the consequences of their actions while deciding the
morality of a situation (Mill, 2016). This theory evaluates the maxim of
parties to determine whether or not they have violated their duties while
taking the decision or not to determine whether their actions are ethical
or not. Since NAB and its officers violated their legal duties given under
the Corporations Act and ethical duties given under the CSR structure of
the company, their actions are unethical. The decision taken in this
scenario is not ethical because the company and its officers are not
punished for their illegal and unethical actions.
Applying these principles on the ethical decision-making process, an
ethical decision can be taken in this scenario. The first step is the
identification of the problem and the second step is collecting relevant
information about the issue. In this case, information regarding the action
of NAB and its negative impact on customers should be evaluated.
Relevant information of officers that were involved in this scandal should
be collected to determine why they have not taken any measures to stop
this issue (Gray and Schein, 2012). The third step is the evaluation of the
information, and the fourth step is considering alternatives. Based on the
evaluation of the information, the actions of NAB and its officers violated
the rights of its customers. They also violated the duties which were
imposed on them under the Corporations Act and the CSR structure of the
company (Korner and Volk, 2014). Alternative actions in this scenario
include leaving the directors of the company without imposing any legal
penalties or holding the directors and the company liable for its actions.
The fifth step is making a decision based on which the second decision is
considered as ethical in this scenario.