Corporate Governance and Ethics at AMP: Deficiencies and Strategies

This report analyzes the relationship between corporate governance and corporate performance at AMP, highlighting deficiencies in the system and recommending strategies to reduce scandals. It also discusses the mechanisms to protect stakeholders and whistleblowers.

Corporate governance and ethics

Corporate governance and ethics
Executive Summary
In this report, the case on which discussion will be made is related to AMP. In this proper
analysis will be made on the relationship between the corporate governance and corporate
performance. There are also many deficiencies related to corporate governance and ethics system
of AMP. Also it has been analyzed that the corporate governance policies considered by the
company resulted in the breakdown. So, to secure the interest of the whistle blower, the policy is
considered which help to report the actions which are not ethical. Therefore, the entire policies
are not sufficient to secure the interest of the whistle blowers and stakeholders. In the last part
the strategies will be discussed that should be considered to maintain proper transparency and
effective policies which can reduce these types of scandals in the workplace.
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Corporate governance and ethics
Table of Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................1
Problems in the system of corporate governance and ethics at AMP..............................................2
Reasons for breakdown....................................................................................................................3
Whistle blowers and the mechanisms sufficient to protect the various stakeholders......................4
Recommended Strategies.................................................................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................8
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Corporate governance and ethics
Introduction
AMP is one of the Australian based financial services organizations which are situated in
Australia and New Zealand. The services which are offered by the company are financial advice,
superannuation, banking products, saving accounts and home loans. In the present scenario, the
company engaged in the investigation of the Australian securities and investment commission
just because of its unethical behavior. It has been investigated that managers of the company
failed to focus on the standards related to care which is important to be maintained by them so
that the activities can be completed in an ethical manner. The impact is seen on the entire image
of the company after the Banking Royal Commission 2018 (Ferguson, 2018).
So, in this report the emphasis will be given on the corporate governance and ethics system
which should be implemented by AMP so that it can be easy to perform the activities in an
ethical manner. It can be investigated that there are many deficiencies in the structure of
corporate governance of AMP which will be focused in this report.
In the next phase of the report the evaluation will be made of the circumstances due to which the
breakdown of AMP took place. Also the mechanism that should be considered by the
organization to secure the whistle blowers will be elaborated in this report to analyze whether
these policies are effective to secure the overall interest of the stakeholders. In the last phase of
the report there are various strategies which will be recommended for AMP so that these types of
scandal can be reduced.
Problems in the system of corporate governance and ethics at AMP
AMP is one of the largest companies in the finance sector. The activities of the organization
affected the large number of individuals and just because of this the company considered a
corporate governance structure which directs the management of the company to complete the
activities in an ethical manner. By taking into consideration this structure, the company
emphasizes on maintaining the transparency by giving the statement of governance in every year.
The organization considers the data related with the activities under this statement and it can also
help to enhance the ethical concerns. The organization created a corporate governance charter
which offers outline for the activities of the board and managerial personnel. Also the provisions
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Corporate governance and ethics
are given which they have to follow so that it can be easy to maintain the high ethical standard
(Filatotchev & Nakajima, 2014).
There are various roles and responsibilities which are considered in the charter of the
organization and it is important to be followed by the board and management team of the
organization. All these policies are related with the constitution of the organization along with
different laws. It can be stated that corporate governance structure considers a proper code of
conduct of the organization which is also related with the decision of the business while
complying the overall ethical and legal principles. The code also focuses on the behavior of the
organization that represents AMP and also the overall values. Also employee’s policies are
considered which ensures that company manages its activities with the customers by considering
the overall regulatory obligations (AMP, 2018a).
Also, it can be analyzed that there are many deficiencies in the entire system which impact the
stakeholders of the organization. One of the deficiencies is related with lack of ethical training. It
can be analyzed that there is no proper training given to the team of the organization. Just
because of lack of training, it is simple for the team to violate the overall policies given under the
structure of the corporate governance and the values. It can be evaluated that company do not
have any strict policies on the people who breach the overall policies of the corporate
governance. There is also no method to focus on the activities of the company due to which it is
not easy for the company to emphasize on the management and board to comply with the
policies of corporate governance and ethics (Gulen & O'Brien, 2017).
Reasons for breakdown
It has been seen that there are almost 20 occasions in which the organization has not followed the
corporate regulations. Also, there are information related to the unethical practice of the
company which a whistle blower has leaked and this simply states that the management of the
company does not take care of its customers. Board of the company also said that interference is
seen in the independent investigation which is done by ASIC (AMP, 2018b). These problems
have enhanced various concerns related to the social license. The concern raised related to
whether the company should be given social license to manage the activities of the company.
Anthony Regan also states that the organization have the data of the activities in which it has
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Corporate governance and ethics
been stated that they charged fees from the customers and also the truth is that, it was the
intentional decision which was taken by the management of AMP (AMP, 2018b). The company
became aware about this problem in 2008, and it still continued till 2013. In 2015, it has been
said by the company to ASIC that “there are no systematic problems that were analyzed” in the
audit which was done by PwC, but the statement given by the company was not correct
(Matthews, 2016). The internal emails of the organization and draft reports states that the audit
was not done on the independent platform. These breakdowns are the overall result of the
ineffective corporate governance system as the organization is not able not considers the ethical
policies.
It has also been investigated that board and management of the organization did not considered
with the provisions which were offered under the code of conduct and also they have not able to
satisfy the principles of corporate governance. To confirm that companies are maintaining the
activities ethically, it is necessary to focus on maintaining proper transparency in the structure of
corporate governance. They should also consider complying with the principles and also
recommendations which are given by the Australian securities exchange. The organization has
not been successful to comply with the initial principle given by ASX which offers that
companies should have a good foundation for the team. Just because if the lack of oversight
policies the team of the organization was conducting the activities unethically (Rodriguez-
Fernandez, 2016).
The next principle which is violated is related with the overall failure of the organization to
encourage ethical and proper decision making as its board of directors consider the unethical
activities like taking fees from the customers. The principles related to time and disclosure was
not taken into consideration as the organization has not focused on maintaining the transparency
in its entire activities. Just because of these failures the breakdown of the organization took
place, in which the organization was guilty of engaging with the independent audit and also was
not successful to consider its policies related to corporate governance (Klettner, Clarke &
Boersma, 2014).
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Corporate governance and ethics
Whistle blowers and the mechanisms sufficient to protect the various stakeholders
AMP has considered a whistleblowing policy in the overall structure of corporate governance
which emphasized on boosting and securing whistle blowers to inform about the ethical behavior
of the organization. By considering this policy, the organization is emphasized on creating a
supportive work culture which also comply this policy with the overall organizational values
(Stahl & Sully de Luque, 2014).
It has been seen that organizational culture boosts the values like professionalism, integrity and
also honesty in which the policy related to whistleblowing is made. The organization also offered
people and culture advice line for its workers in which they can report any act which is not
ethical so that it can be easy to maintain security. Also the management encouraged the whistle
blowers to report related to the unethical act of the organization to the top management. So, all
these policies are not proper as they do not focus on securing the interest of the whistle blowers
of the company. There are many incidences which are considered in which the board of directors
and also the top management of the organization were guilty of the not considering the policies
of the corporate governance (Khan, Khan & Liaqat, 2017).
There are also many examples in which the workers are reported related to the unethical
behavior of the organization. The top management did not consider any actions by considering
the report. The whistle blowers are not secured in the organization as the tem fired them for
giving wrong information of the company. Also, these policies are not enough to ensure that the
stakeholder interest is secured. The stakeholders of the organization also consist of the
customers, employees, government and environment (Tricker & Tricker, 2015). It has been seen
that company has made many wrong claims to ASIC related to the independence of the audit
and other information which states that it has been unsuccessful to consider the entire interest of
ASIC. The organization has also focused on charging from the customers by knowing that it was
an administrative error as it was the decision which was considered by the board of directors.
The workers have also accused the organization of acting as dictators as they report the wrong
act to the top management. So, the policies which are considered by the companies are not
satisfactory to ensure that the security will be maintained of the stakeholders (Chanticleer, 2018).
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Corporate governance and ethics
Recommended Strategies
It has been analyzed that corporate governance structure of the organization has not been
successful, so it is important for the company to consider these strategies. These strategies
consider the principles of ASX and also recommended along with the policies of the corporate
governance.
The strategies that should be considered are related to the corporate social responsibility. It is
important for the company to consider a strategy related to corporate social responsibility. In this
strategy the board of director should boost the transparency by creating continuous disclosure
related to the overall activities of the organization. These disclosures should also consider both
ethical and unethical practices of the company so that it can be ensured that the people on the top
management are not using their position to boost the unethical operations (Jain & Jamali, 2016).
This was the case related with AMP, and if proper CSR structure was considered then it have
solve the issue.
The next strategy is related with training. In this, it has been analyzed that training is considered
as one of the important factor for maintaining proper corporate governance policies which also
ensures that the management with the employees can understand their role in the entire ethical
policies. If no training was given to the team then it is not possible to manage the case. Training
can also boost the ethical practice and can maintain the behavior of the employees towards the
activities. This same situation took place in the case of AMP. So, training should be offered so
that the scandal of AMP can be prevented and it would also prevent the requirement of the
whistle blowers to showcase the ethical behavior of the company (Tai & Chuang, 2014).
It can be investigated that there were no proper measures considered by the organization in its
corporate governance structure to give punishment to the people who violated the policies. There
are many people from top management who were engaged in these activities or in this method
and they were also promoted by the organization after knowing about the involvement of the
people in the unethical activities. The step taken by the company to promote the people who are
doing unethical practice was not right (Palmer, Greenwood & Smith-Crowe, 2016).
They should punish the people who are involved in the unethical practices so that it can be
simple to boost the ethical practice in the company. The punishment should be given to the
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Corporate governance and ethics
people who are engaged in the unethical act as they should know the drawback of taking wrong
steps in the workplace. If punishment is given to the people who are engaged in unethical
practice then only it can be possible to reduce unethical practices in the company. So, it is
important for the company to stop promoting the employees who are involved in the wrong act
as it can give positive impact on the entire activities of the company (McCahery, Sautner &
Starks, 2016).
The company should also consider a method for overseeing the acts and functions of the
management and workers. If the actions are not overseen then it can be easy for the employees
and the team to ignore the corporate governance policies as they do not give any information to
anyone. So, by focusing on implementing these policies it can be easy for the company to
reduce these types of scandal in future. It can also enhance the ethical practices in the workplace
which will affect the operation of the company in a positive manner (Shi, Connelly & Hoskisson,
2017).
Conclusion
By analyzing the paper it has been concluded that, AMP has been engaged in more than 20
incidents in which the regulatory authorities are not considered and also the top management was
also engaged in the practices which are not ethical and affect the overall independence of the
audit of the organization. These examples can state that there are many deficiencies which are
there in the corporate governance and ethics system of the organization. Also the corporate
governance system of the company does not focus on training and also the activities are not
considered by the management and employees which resulted in the breakdown of the AMP.
Also there are many policies which are implemented by the organization for securing the whistle
blowers and also these policies are not sufficient.
It has been stated that they did not enforce the management to consider the acts to maintain
security so that the interest of the stakeholders can be maintained. There are also many strategies
which are recommended and it is important for AMP to consider these strategies so that it can be
easy to reduce the scandal in future. It can also help in maintaining the entire activities of the
workplace. So, it can be stated that unethical practices should not be done by the top
management as it can affect the overall image of the company.
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Corporate governance and ethics
If there is proper CSR structure then it can help in enhancing the overall transparency in the
activities of the company. But in this case the information was leaked of the senior management
involved in the unethical practices of the company. The next strategy relates to the training
which is necessary to be given to the employees so that the employees would not be able to
violate the policies and can consider the policies in a proper manner. Training is considered as
one of the strategies that can help the employees to consider the right or ethical practices in the
workplace. Also it is important to oversee the functions of the workplace and also of the board
so that it can be easy to maintain the activities of the company. If proper functions are
considered by the company then it can be simple to avoid the scandal related to AMP. So, these
strategies can also help to maintain the overall activities of the company.
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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
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
Filatotchev, I., & Nakajima, C. (2014). Corporate governance, responsible managerial behavior,
and corporate social responsibility: Organizational efficiency versus organizational
legitimacy?. Academy of Management Perspectives, 28(3), 289-306.
Gulen, H., & O'Brien, W. J. (2017). Option repricing, corporate governance, and the effect of
shareholder empowerment. Journal of Financial Economics, 125(2), 389-415.
Jain, T., & Jamali, D. (2016). Looking inside the black box: The effect of corporate governance
on corporate social responsibility. Corporate Governance: An International Review, 24(3),
253-273.
Khan, M. A., Khan, M. A., & Liaqat, I. (2017). Role of Corporate Governance in Shareholders
Value Creation. International Journal of Strategic Decision Sciences (IJSDS), 8(2), 70-82.
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Klettner, A., Clarke, T., & Boersma, M. (2014). The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics, 122(1), 145-165.
Matthews, A. (2016). The financial services industry: Whistleblowing and calls for a royal
commission. Precedent (Sydney, NSW),136(6), 35.
McCahery, J. A., Sautner, Z., & Starks, L. T. (2016). Behind the scenes: The corporate
governance preferences of institutional investors. The Journal of Finance, 71(6), 2905-
2932.
Palmer, D., Greenwood, R., & Smith-Crowe, K. (Eds.). (2016). Organizational Wrongdoing:
Key Perspectives and New Directions. Cambridge University Press.
Rodriguez-Fernandez, M. (2016). Social responsibility and financial performance: The role of
good corporate governance. BRQ Business Research Quarterly, 19(2), 137-151.
Shi, W., Connelly, B. L., & Hoskisson, R. E. (2017). External corporate governance and
financial fraud: Cognitive evaluation theory insights on agency theory prescriptions.
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Stahl, G. K., & Sully de Luque, M. (2014). Antecedents of responsible leader behavior: A
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Management Perspectives, 28(3), 235-254.
Tai, F. M., & Chuang, S. H. (2014). Corporate social responsibility. Ibusiness, 6(03), 117.
Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.
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