Corporate Governance and Ethics: Case of AMP

This report evaluates the corporate governance and ethics system of AMP, identifies deficiencies in the system, and recommends strategies to avoid scandals. It discusses the breakdown of AMP due to unethical practices of senior level management and the failure of the corporate governance policies. It also evaluates the whistleblowing policies of the company and recommends strategies such as implementing effective CSR structure, training facility, punishment policies, and overseeing provisions.

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Corporate Governance and Ethics

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Executive Summary
In this report, the case of AMP is selected to evaluate the relationship between
corporate governance and corporate performance. Various deficiencies in the corporate
governance and ethics system of AMP are identified in the report due to which the senior
level management of the company was involved in unethical practices in which they
blatantly lied to the ASIC and also interface with the independence of the audit. The failure
of effective corporate governance policies which are strictly adhered by the management of
the company resulted in breakdown of the enterprise. To protect the interest of whistle-
blowers, a whistleblowing policy is implemented by AMP which assists them in reporting the
unethical actions of the corporation while keeping their identity hidden. However, these
policies are not sufficient to protect the interest of stakeholders and whistle-blowers since
no actions are taken by the management to address these issues. Various strategies are
recommended such as the implementation of effective CSR structure for transparency,
training facility, punishment policies and overseeing provisions which would have avoided
the scandal of the organisation.

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Table of Contents
1. Introduction........................................................................................................................3
2. Issues in Corporate Governance System of AMP...............................................................4
3. Reasons for breakdown......................................................................................................4
4. Whistleblowing policies and whether they are sufficient..................................................6
5. Recommended Strategies...................................................................................................7
6. Conclusion...........................................................................................................................8
7. References..........................................................................................................................9

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1. Introduction
AMP Limited or AMP is an Australia-based financial services company which offer its
services in Australia and New Zealand. The services of the company include financial advice,
superannuation, and investment products, banking products, saving accounts, home loans,
and others. Recently, the company has been involved in the investigation of the Australian
Securities and Investments Commission (ASIC) and Banking Royal Commission due to its
unethical behaviour (Ferguson, 2018). The top level management of the corporation has
failed to ensure that a standard of care is maintained by them to ensure that the company is
performing its operations in an ethical manner. The public reputation of the company is
adversely affected after the Banking Royal Commission 2018. This report will evaluate the
corporate governance and ethics system which is implemented by AMP in order to perform
its operations ethically. Various deficiencies in the corporate governance structure of AMP
will be highlighted in this report. The circumstances due to which the breakdown of AMP
occurred will be analysed in the report. The mechanism which is implemented by the
company to protect whistle-blowers will be discussed in the report to evaluate whether
these policies are sufficient to protect the interest of stakeholders. Lastly, various strategies
will be recommended for AMP which should have been used by the company to avoid the
scandal.

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2. Issues in Corporate Governance System of AMP
AMP is a leading organisation in Australia which operates in the finance industry. The
operations of the company affect a large number of people based on which it has adopted a
corporate governance structure which directs the management in conducting their
operations ethically. Under this structure, the company focuses on maintaining
transparency by issuing a corporate governance statement each year. The company includes
information regarding its operations under this statement which could raise certain ethical
concerns. The company has established a corporate governance charter which provides
outlines for the operations of the board and other managerial personnel. It provides key
provisions which they have to follow in order to maintain a high ethical standard. Various
roles and responsibilities are also included in the charter of the company which is followed
by the board and management team of the company (Aspris, 2018). These policies are in
conjunction with the constitution of the company along with various laws. The corporate
governance structure also includes a code of conduct of the organisation based on which
the company takes its business decision while complying with legal and ethical principles.
This code sets out the behaviour of the company who represents AMP and its values.
This code is supported by the employee policies of the company which ensure that the
company serves its customers while complying with regulatory obligations (AMP, 2018a).
However, there are various deficiencies in this system which affects the stakeholders of the
company. Firstly, there is no facility for ethical training which is given to the management
team of the company. Due to lack of training, it is easy for the management to violate the
policies given under the corporate governance structure of the company along with ethical
values. There are not strict adherence policies implemented by the company on those
individuals who breach the corporate governance policies (Jo & Harjoto, 2012). There is no
procedure for overseeing the operations of the enterprise due to which it is difficult for the
company to ensure the management and the board is complying with the corporate
governance and ethical policies.

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3. Reasons for breakdown
There are around 20 occasions in which the company has found blatantly lying to the
corporate regulator (Ferguson, 2018). Moreover, a whistle-blower has leaked various
information regarding unethical practices of the corporation which shows that the
management of the company did not care regarding its customers or employees. The board
of the company has also alleged for interfering with “independent” investigation conducted
by the ASIC (Ferguson, 2018). These issues have raised many concerns such as whether it is
justified to give the company the social licence to operate its business. Anthony Regan
provided that the company knew about the fact that it is charging fees from customers due
to administrative error, however, the reality was that it was a deliberate decision which was
made by the management of AMP. The corporation becomes aware regarding this issue in
2008, however, it continued till 2013 after which the report was breached by the ASIC (Royal
Commission, 2018). In 2015, the company told ASIC that “no systemic issues were
identified” in its audit which was conducted by PwC, however, this was a false statement.
The internal emails of the company and draft reports reveal that the audit was not
independent. These breakdowns are the result of a weak corporate governance system due
to which the company is unable to comply with ethical policies.
The board and the management team of the company did not comply with the
provisions given under the code of conduct, and they have certainly failed to fulfil corporate
governance principles. To ensure that corporations are acting ethically, it is important that
they maintain transparency in their corporate governance structure. They are also required
to comply with the principles and recommendations which are issued by the Australian
Securities Exchange (ASX). The company has failed to comply with first principle issued by
ASX which provides that organisations should lay a solid foundation for management and
oversight (ASX, 2010). Due to lack of oversight policies, the management of the company
was able to act unethically. Another principle which is violated is failure of the company to
promote ethical and responsible decision making since its board of directors have been
indulging in unethical activities such as charging fees with customers and told them
administrative error. It has also failed to comply with the principle of making timely and
balanced disclosure because the company has not maintained transparency in its operations
(Boatright, 2017). Due to these failures, the breakdown of the company occurred in which

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the company was found guilty of interfering with independent audit and failed to comply
with its corporate governance policies.
4. Whistleblowing policies and whether they are sufficient
AMP has implemented a whistleblowing policy in its corporate governance structure
which is focused on encouraging and protecting whistle-blowers to report the unethical
behaviour of the company. Under this policy, the company is focused on building a
supportive work environment which aligns this policy with the values of the corporation.
The culture of the company fosters values such as professionalism, integrity, and honesty
based on which its whistleblowing policy is created (AMP, 2018b). The company has
provided People & Culture Advice Line for its employees where they can call anonymously
to report any unethical or immoral actions of the company in order to protect them.
Moreover, whistle-blowers are encouraged by the management to report regarding the
wrongdoing of the company to their managers. However, all these policies are not effective
since they did not protect the interest of the whistle-blowers or the stakeholders of the
enterprise (Rachagan & Kuppusamy, 2013). There are a number of incidences reported in
which the board of directors and senior executives of the company were found guilty of
violating the corporate governance policies.
There are various examples in which employees reported regarding the unethical
behaviour of the company, however, the managers did not take any actions or hold them
liable for reporting the same (Chanticleer, 2018). The whistle-blowers are not protected in
the company since the management fired them for reporting the wrongdoing of the
company. Moreover, these policies are not sufficient to ensure that the interest of the
stakeholders of the company is protected (Ayuso, Rodriguez, Garcia-Castro & Arino, 2014).
The stakeholders of the company include customers, employees, government, environment,
and others. The company has made false claims to the ASIC regarding the independence of
the audit and other details which show that it has failed to consider the interest of ASIC
(Ferguson, 2018). The company has also continued to charge its customers by providing that
it was an administrative error whereas it was a decision which was made by the board. The
employees have also accused the corporation of acting as dictators while they report the

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wrongdoing to their senior management. Thus, the policies which are implemented by the
corporations are not sufficient to ensure that the rights of its stakeholders are protected.
5. Recommended Strategies
Since the corporate governance structure of the company has failed, following strategies
can be implemented by the company. These strategies are based on ASX principles and
recommendations along with effective corporate governance policies.
 The company should adopt a Corporate Social Responsibility (CSR) under which its
board should foster transparency by making continuous disclosure regarding the
operations of the company. These disclosures should include both ethical and
unethical practices of the enterprise to ensure that the senior level managers are not
misusing their position to conduct and promote unethical activities (Carroll, 2015).
This was the case with AMP, and an effective CSR structure would have solved the
problem.
 Training is a key part of effective corporate governance policies which ensure that
the management along with employees is able to understand their role in adherence
to ethical policies. No training was given to the management and employees had no
idea how to deal with the situation in case of AMP. Therefore, training would have
prevented the scandal of AMP, and it would have prevented the need of whistle-
blowers to highlight the unethical behaviour of the corporation.
 There were not strict measures implemented by the company in its corporate
governance structure to punish those individuals who violate these policies. Most of
the senior level managerial personnel were involved in the process, and they were
promoted by the company even after receiving information regarding their
involvement in unethical practices. In a way, the company is promoting those
individuals who engage in unethical practices. Instead, the corporation should be
strictly punishing those individuals who engage in these activities to teach a lesson to
others as well.
 The enterprise should have adopted a procedure for overseeing the actions and
functions of the management and employees. Without overseeing, it becomes easier
for the management and employees to violate the corporate governance policies

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since they did not have to report to anyone else. By implementing effective
overseeing policies, the company could have prevented the scandal.
6. Conclusion
In conclusion, AMP has been involved in over 20 incidents in which it blatantly lied to
regulatory authorities and its senior level management was also involved in unethical
practices which adversely affected the independence of the audit of the organisation. These
examples show that there are various deficiencies available in the corporate governance
and ethics system of the company. The corporate governance system of the corporation did
not provide training, and it did not oversee the operations of the management and
employees due to which the breakdown of AMP occurred. Although various policies are
implemented by the company for the protection of whistle-blowers, however, these policies
are not sufficient. They did not enforce the management to take any actions to protect the
interest of whistle-blowers or stakeholders. Various strategies are recommendations which
should have implemented by AMP to avoid the scandal. An effective CSR structure would
have increased transparency in the operations of the company which would have leaked the
information regarding unethical practices of senior level management. Proving training to
employees and punishing them for violating these policies would have ensured the
compliance of these policies. Moreover, a system to oversee the functions of the
management and the board would have assisted AMP in avoiding the scandal.

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7. References
AMP. (2018a). Corporate governance. Retrieved from https://corporate.amp.com.au/about-
amp/corporate-governance
AMP. (2018b). Whistleblowing policy. Retrieved from
https://www.amp.com.au/content/dam/amp/digitalhub/common/Documents/
global/whistleblowing_policy_website.pdf
Aspris, A. (2018). AMP’s Murray right to question the value of corporate governance rules.
Retrieved from http://theconversation.com/amps-murray-right-to-question-the-
value-of-corporate-governance-rules-100954
ASX. (2010). Corporate Governance Principles and Recommendations with 2010
Amendments. Retrieved from https://www.asx.com.au/documents/asx-
compliance/cg_principles_recommendations_with_2010_amendments.pdf
Ayuso, S., Rodríguez, M. A., García-Castro, R., & Ariño, M. A. (2014). Maximizing
stakeholders’ interests: An empirical analysis of the stakeholder approach to
corporate governance. Business & society, 53(3), 414-439.
Boatright, J. R. (2017). Ethics and corporate governance: Justifying the role of
shareholder. The Blackwell Guide to Business Ethics, 38-60.
Carroll, A. B. (2015). Corporate social responsibility. Organizational dynamics, 44(2), 87-96.
Chanticleer. (2018). Whistleblower reveals more unethical behaviour inside AMP. Retrieved
from https://www.afr.com/brand/chanticleer/whistleblower-reveals-more-
unethical-behaviour-inside-amp-20180510-h0zx4g
Ferguson, A. (2018). Stinking AMP reveals our soft line on corporate dishonesty. Retrieved
from https://www.smh.com.au/business/banking-and-finance/stinking-amp-reveals-
our-soft-line-on-corporate-dishonesty-20180417-p4za66.html
Jo, H., & Harjoto, M. A. (2012). The causal effect of corporate governance on corporate
social responsibility. Journal of business ethics, 106(1), 53-72.

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Rachagan, S., & Kuppusamy, K. (2013). Encouraging whistle blowing to improve corporate
governance? A Malaysian initiative. Journal of business ethics, 115(2), 367-382.
Royal Commission. (2018). AMP. Retrieved from
https://financialservices.royalcommission.gov.au/public-hearings/Documents/
Round-2-written-submissions/amp-case-study-1-fees-for-no-service.pdf