Corporate Governance and Social Responsibility: A Case Study of AMP Limited

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Corporate governance and social responsibility
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Executive summary
Unethical malpractices have been rampant in the financial sector in Australia, despite
many regulations and various bodies being in place to control unethical behaviour. This paper
strives to look at AMP Limited, a company that has been on the spotlight regarding the issue
of deducting premiums from the superannuation accounts of the deceased. The paper starts by
introducing the company’s background, then analysing the corporate governance and moves
on toCSR, CSV, and Corporate Social Performance. There is also an analysis of the
stakeholders, ASX principles and ethics. After that, a recommendation is provided in the best
way which the company can deal with the issue of ethics.
Background and ethical question
Banking royal commission, also known as the commission into misconduct in the
banking, superannuation, and financial service industry is tasked with the role of inquiring
and reporting misconduct in the superannuation, banking and financial sector. One of the
latest reports that have caused ripples in the market is the case AMP, which has been
charging dead customers in unethical ways (Moir, 2018). . The AMP limited company has
found itself in the spotlight after it was discovered that the company has been deducting
insurance premiums despite being notified about the concerned member’s death. According
to the company’s customer and wealth executive, Mr. Paul Sainsbury, AMP has continued to
deduct premiums from the superannuation accounts since 2016 despite being notified of the
customer’s death (Derick, 2017). However, Paul emphasized that the company intended to
refund the amount when paying out the death benefits. The pay out, according to Mr.
Sainsbury did not; include any additional money that would have been earned if the premium
were not deducted from the superannuation account.
The investigations into the case commenced in April when it was discovered that after
several complaints regarding the premium charges on the superannuation accounts of dead
customers (Farrar, and Hanrahan, 2014). Further investigations revealed that premiums were
incorrectly refunded and at times not refunded at all. Moreover, it was identified that more
than 4,645 dead customers were owed $1.3 million on premiums and lost earnings that were
not refunded. Despite this, the investigations are still ongoing to determine whether there
were other fees that have been charged apart from the premiums (Filatotchev and Nakajima,
2014).

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It has been discovered that the practice of financial advisors churning customers using
life insurance policies has been rampant and the insurance companies are ignoring the issue
and failed to take reasonable measures to deal with the issue. The practice has left the
customers exposed to less cover as well as the extended waiting period for the cover.
Corporate Governance, CSR, CSV and Corporate Social Performance
Corporate social governance
According to the AMP corporate governance policy, the company is committed to
excellence which is essential for the long-term performance and sustainability of the
company as well as the delivery of the company’s strategy.
The company’s corporate governance statement is issued each year and sets out the
corporate governance framework which outlines the company’s governance arrangements for
the previous financial year (Filatotchev and Nakajima, 2014).
The corporate governance charter is designed to promote high standards of corporate
governance by outlining the roles and responsibilities of the management team and those of
the directors in conjunction with the AMP constitution.
Theories of corporate governance
The agency theory strives to explain the relationship between the principal business
and the agent as well as address the problems. The theory is based due to the interests of the
agent, which are not in line with the interest on the principal. This prompted by the actions
taken by the agent in which the principal is not aware. In such a case, the AMP Company has
been delivering financial reports that portray high profits to impress the shareholders. On the
other hand, the management has been unethically deducting premiums from superannuation
accounts of deceased clients, hence the increased profits. The principal or shareholder was
not aware of the agents or management actions until it was too late. The shareholders have
appointed the management to create assets and make profits. The agent, on the other hand,
wishes to ensure that they have a job security (Fordham and Robinson, 2018). For instance,
the management may wish to ensure that the company grows and stabilizes by expanding its
operations. However, the shareholders might be against the growth and expansion as the
process means decreased profits in the short term. AMP struggled to balance the interest of

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the two parties, which eventually led to using unethical means to earn an extra margin(Staff,
2018).
In the same case, the management may create various levels of risks between them
and the shareholders. Given that the agent acts in the position of the principal, the agent
makes independent decisions. However, as the decisions are made the principal is responsible
for providing all the resources. This means the principal faces the risks because of the
decisions made by the agent. This creates uneven risk tolerance between the agent and the
principal (Masoud, 2017).
The decision-making powers bestowed on the agent, the agent represents the
principal, while dealing with the third party. This result in problems such as that in AMP as
the agent wants to please the principal while the same time oppressing the third party.
Corporate social responsibility at AMP
The AMP Limited is committed to managing its business in a sustainable manner to
ensure the future, as well as the present, is well looked after through building the community,
customer and the shareholders’ value (Mildred, 2018).
The company has a commitment to supporting its clients and ensure that the business
endures sustainably as well as the community being served. The company acknowledges
long-term business success that is brought about by social impact, the organization's
environment and customer support as well as corporate governance. The company ensures all
the above is achieved through (Fordham and Robinson, 2018),
Ensuring that the customer gets the best quality investment product, advice, informing
and educating the community on matters related to investment decisions. Moreover, the
company strives to improve on its resource efficiency and minimize the environmental
impact, encourage responsible investing and invest in the community through AMP
foundation. The company gets involved in the community through fundraising, payroll giving
program, mentoring and team volunteering (Harjoto, 2017).
The company ensures inclusivity at the workplace by accommodating the wide range
of employees, regardless of identity, cultural background, age, and gender. Moreover, taking
care of the environment is one of the company's priorities as it strives to support
environmental initiatives, minimize carbon footprint and improve on resource efficiency
(Masoud, 2017).