Corporate Governance and Ethics at AMP Limited

This report evaluates the corporate governance and ethical practices at the company AMP Limited concerning the principles of corporate governance. The report concludes with the recommendations for improving the said area of operations and for overall development of the organisation.

Corporate
Governance and
Ethics
AMP Limited
2018

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EXECUTIVE SUMMARY
The principles of governance and ethics are the matter of importance not just for the
individuals in their professions, but also for the organisations. The aim of the work is to
evaluate the corporate governance and ethical practices at the company AMP Limited
concerning the principles of corporate governance. Recently, the organisation was in the
news because of the investigations initiated by the Banking Royal Commission in Australia.
This report will evaluate the various facets of the role of the ethics and corporate
governance in the operations of multinational organisations of the 21st century. The
corporation has acted unethically while managing its business and its top level management
has indulged in illegal activities in order to generate more profits. The whistle blower policy
of the enterprise is not suitable to ensure that the rights of stakeholders are protected since
the whistle blowers are dismissed from the organisation, and no action is taken against their
reporting. Recommendations are included in the report such as ethics training program,
monitoring of actions, and CSR framework which should have implemented the corporation
in its corporate governance program to avoid the scandal.

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TABLE OF CONTENTS
Introduction...............................................................................................................................3
Background of the incidents......................................................................................................4
Shortcomings in Corporate Governance Policies.......................................................................4
Culture/Circumstances which led to the events........................................................................5
Whistle blower policies and whether they are sufficient to protect stakeholders...................6
Recommended Strategies..........................................................................................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10

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INTRODUCTION
Corporate Governance and ethics are the core values on which the business
operations thrive, and the entities survive in the long run. These are often regarded as the
framework that directs, guides, and controls the actions of the board, employees, and the
overall entity (Mason & Simmons, 2014). These are essential because there is a wide range
of stakeholders, which are affected by the businesses of the entities. The entity AMP Limited
is a company based at Australia and New Zealand, providing a range of services namely,
insurance, financial consultancy, superannuation, and investment products and the banking
products like home loans and savings account as well. The shares of the entity are listed on
the Australian Stock Exchange, as well as the New Zealand Stock Exchange. One of the
striking characteristics of the entity is that it has one of the largest bodies of shareholders in
Australia; this is because the entity had started its operations as a mutual society and on the
event of its demutualisation, all the policyholders had received the shares of the company
(AMP, 2018a). However, the operations of the entity have been in the news since the
Banking Royal Commission has initiated inquiries. Thus, the scope of this report is to assess
the relationship between corporate governance and corporate performance of the entity.
The framework used for the analysis is the corporate governance and ethical theories, and
ASX principles. The report concludes with the recommendations for improving the said area
of operations and for overall development of the organisation.

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BACKGROUND OF THE INCIDENTS
Recently the Baking Royal Commission had initiated investigations against the
operations of the major firms in the financial sector of the country. A number of firm’s
operations were found to be violating the corporate governance and ethical principles,
including that of AMP Limited. The company was accused of charging life insurance
premiums of approximate amount of $1.3 million on account of superannuation from the
profiles of about 4600 deceased individuals (Neil, 2018). The investigations revealed that
there was an error in the system of the entity, due to which the deductions on account of
superannuation of the deceased did not stop. In another incident, earlier this year the firm
was involved in a financial scandal, which included payment of hefty fees and charges, by
the customers, resulting into the eroding of the cash investments and losing of the
retirement savings.
One of the customers of the entity had received an investment return of about 0.47
percent in the year. The net return in terms of the amount was $381.59, which was received
after the deduction of the direct fees of $76.85, the management costs of $1,666.72, and a
rebate of $20.10 (Lannin, 2018). The overall sums combined of fees and charges were high
enough to deliver the negative returns to thousands of customers. In response to the same,
the Banking Royal Commission had instructed the entity and the trustees of the AMP’S
superannuation products to cut the fees charged and refund an approximate of $5 million to
around 12,500 customers. The cash investments made by these customers are reported to
be $43 million in the AMP super accounts (Hutchens, 2018). Whistle blowers of the
company have reported that the senior executives of the enterprise are aware regarding
these issues; however, they did not take any actions to stop the same. They failed to act
ethically in order to ensure that they avoid negatively affecting the interest of the
stakeholders of the enterprise.
SHORTCOMINGS IN CORPORATE GOVERNANCE POLICIES
AMP Limited has implemented a corporate governance structure which is focused on
implementing ethical policies in the organisation. The objective of this structure is to
prioritise the interest of customers in the company and ensure that the top level

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management is not misusing their position and powers. Various roles and responsibilities
are implemented by the corporate governance structure on the top level management to
ensure that they focus on the interest of different stakeholders while conducting the
operations of the business and forming future business strategies. Along with the corporate
governance structure, the company has implemented a whistle blower policy which assists
whistle blowers in hiding their identity while reporting unethical practices of the company
or its management (AMP, 2018b). However, there are various shortcomings or deficiencies
in these policies since they did not stop the top executives from behaving in an unethical
manner.
The investigation conducted by the Banking Royal Commission highlighted that the
senior level executives have indulged in unethical behaviour by charging life insurance
premium from deceased customers and losing the retirement saving. The main objective of
the corporate governance structure is to ensure that the interest of customers is not
violated, however, this goal is violated by the company which shows that shortcomings in its
corporate governance structure. The corporation has also failed to comply with its whistle
blower policies since the serious management did not take any actions to protect the
whistle blowers or take any actions for the issues which were reported by them (Financial
Review, 2018). The ethics policies of the corporation are not complied by its directors since
they focus on increasing the revenues of the enterprise rather than conducting its
operations ethically.
CULTURE/CIRCUMSTANCES WHICH LED TO THE EVENTS
The organisational culture adopted by AMP is not based on ethical policies and
principles. The senior level management of the enterprise did not respect the laws
implemented by the Australian government and the Australian Securities and Investments
Commission (ASIC) to ensure that they avoid violating them. While forming business
policies, they focus on increasing the earning of the enterprise rather than implementing
policies which reinforce the interest and benefits of all stakeholders. The whistle blowers of
the company reported that the managers openly discuss regarding different ways which can
be used by them to bypass or overlook the policies implemented by ASIC for which civil
penalty was imposed (ASIC, 2018). They were also aware regarding the facts that the

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company is charging high-interest rates from its customers; however, they did not take any
action to stop the same.
The organisation culture is hostile as well in which if an employee raises his/her
voice against these unfair practices, then he/she is dismissed without any reasonable
ground. The managers act like a dictatorship under which they force other workers to act
unethically in the organisation while doing their job. In internal audit and monitoring system
is not effective due to which the company was not able to identify that it is charging life
insurance from deceased customers (Duran, 2018). There is no ethics committee in the
corporation which oversees all these operations to ensure that the company is not acting in
an ethical manner. Due to all these circumstances and hostile organisational culture, AMP
Limited was invested under the Banking Royal Commission, and the unfair practices of the
corporation were found.
WHISTLE BLOWER POLICIES AND WHETHER THEY ARE SUFFICIENT
TO PROTECT STAKEHOLDERS
As discussed above, AMP Limited has adopted a whistle blower policy which is
focused on ensuring that the identity of the whistle blower is protected to ensure that they
did not get harm or get unfair dismissal. The whistle blowers can call on a hotline provided
by the company on which they can report regarding the unethical practices of the
management while keeping their identity hidden (AMP Capital, 2018). Due to these policies,
the corporation aims to encourage its employees to report any unfair or unethical
operations which they face in the organisation. The whistle blowers are protected as well,
and they have the option to report the unethical practices to their senior management.
However, these policies are not sufficient for ensuring that the interest of all stakeholders is
protected in the company. The primary issue with these policies is that the senior managers
are not liable to take any action if an unethical practice is reported by the whistle blowers.
Generally, they avoid taking any actions since the senior executives did not
encourage them to do so. Many times, the employees are dismissed unfairly if the report
the unethical behaviour of the company. For instance, a whistle blower reported that she
provided information regarding the workplace harassment and unethical behaviour of the
company in which the senior managers were openly discussing ways to avoid the laws

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implemented by the ASIC. A report was sent by the whistle blower to the CEO of the
company, however, the CEO rejected to accept the report or take any actions regarding
these issues (Financial Review, 2018). Since no action was taken, the customers were
continued to charge higher administration costs. It shows that the whistle blower policies
implement by AMP are not sufficient enough to ensure that the interest of stakeholders of
the corporation. These policies did not enforce the management to take any action when an
unethical practice is reported to protect the interest of stakeholders (Aggarwal, 2013).
RECOMMENDED STRATEGIES
The following mentioned strategies should have been implemented by the top level
management of AMP to avoid the scandal by ensuring that they act in an ethical manner.
 Ethics training program
AMP Limited has not implemented an ethics training program which provides training to
both the management and employees to ensure that they act ethically. The main ethical
issue faced by the company is caused because the senior executives were acting in an
unethical manner themselves. These executives were encouraging employees to act
unethically while doing their job to increase the profits of the company. They were opening
disclosing methods which can be used by them to avoid the laws implemented by ASIC to
ensure that the corporations act in an ethical manner. Therefore, a training program would
assist the managers in ensuring that they did not act ethically while operating their business.
The employees would also be able to effectively handle the situation in case they face any
unethical or unfair practice. Based on the training, the managers would take ethical actions
to ensure that they are not indulging in unethical practices such as charging life insurance
premium from deceased customers or harassing the employees (Beeri, Dayan, Vigoda-Gadot
& Werner, 2013). The employees would also be able to report the practices to the top level
management to put a stop to them. Thus, a training program would have avoided the
scandal faced by AMP in the investigation of the Banking Royal Commission.
 Monitoring of action
Another key issue with the corporate governance and ethical framework of AMP is that
the company did not implement a monitoring structure to oversee the operations and

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decisions taken by its top level management. For instance, the whistle blowers policies were
not monitored by an ethics committee to ensure that after reporting of an incident,
appropriate action is taken to avoid the issue. The managers were openly discussing ways
with employees in order to bypass the laws implemented by ASIC which shows that a
monitoring process would have avoided the scandal. If a proper structure were followed by
the company in which the decisions and policies of the top level management were being
monitored by an ethical committee, then it would have avoided the ethical issues faced by
the organisation. The whistle blowers would not have to report regarding the operations of
the company to outside authority if the managers were thoroughly monitored by an ethics
committee. Therefore, due to the lack of effective monitoring practices in the corporation,
the managers were able to act unethically and violate the law (Filatotchev & Nakajima,
2014). This issue could have been avoided by monitoring the operations of the enterprise.
 Corporate Social Responsibility Framework
AMP Limited has not implemented an effective corporate social responsibility or CSR
framework which is focused on timely disclosure in the company. Under this structure, the
company would have to make a statement regarding its ethical and unethical practices.
Although a similar statement is sent by the enterprise, however, this statement did not
include complete information regarding its operations. Moreover, no action is taken by the
enterprise based on this statement to avoid the ethical dilemmas faced by the enterprise.
Thus, a CSR framework would have ensured that the company would have acted ethically
while conducting its operations.

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CONCLUSION
AMP Limited has failed to take appropriate and ethical decisions to protect the
interest of its stakeholders. The investigation conducted by the Banking Royal Commission
showed that the corporation engages in many immoral and unethical practices under which
it charges high and unfair fees from its customers. These issues are faced by the enterprise
since there are many shortcomings in its corporate governance policies due to which it
becomes easier for the manager s to act unethically in the organisation. The policies
implemented by the corporation to protect its whistle blowers are not sufficient to ensure
that the interest of stakeholders is protected. Various strategies are recommended which
should have been implemented by AMP in order to avoid the unethical practices. Firstly,
training should be given to the management in order to ensure that they are unable to
differentiate between ethical and unethical behaviour in the workplace. Secondly, a
monitoring system should have been implemented to ensure that the actions of the
managers and employees are being monitored to ensure that they did not act unethically
and take actions when an immoral practice is reported by an employee. Lastly, the company
should have adopted a CSR framework under which it should have made continuous
disclosures to ensure these issues are being addressed appropriately to end the unethical
behaviour at the workplace. The lesson learned from this case is that effective
implementation and compliance with these policies would have avoided AMP from
engaging in unethical practices. The lesson is that companies should not just implement
corporate governance policies; they should also ensure that these policies are followed by
the management and employees while doing their job to act ethically.

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REFERENCES
Aggarwal, P. (2013). Impact of corporate governance on corporate financial
performance. IOSR Journal Of Business And Management (IOSR-JBM), 13(3), 01-05.
AMP Capital. (2018). Whistleblowing Policy. Retrieved from
https://www.ampcapital.com/asia/en/about/legal/whistleblowing-policy
AMP. (2018a). Who we are and what we do. Retrieved from
https://corporate.amp.com.au/about-amp/what-we-do/what-we-do-key-facts-our-
history
AMP. (2018b). Corporate governance. Retrieved from https://corporate.amp.com.au/about-
amp/corporate-governance
ASIC. (2018). ASIC takes civil penalty action against AMP Financial Planning for alleged
failures relating to insurance advices. Retrieved from https://asic.gov.au/about-
asic/news-centre/find-a-media-release/2018-releases/18-188mr-asic-takes-civil-
penalty-action-against-amp-financial-planning-for-alleged-failures-relating-to-
insurance-advices/
Beeri, I., Dayan, R., Vigoda-Gadot, E., & Werner, S. B. (2013). Advancing ethics in public
organizations: The impact of an ethics program on employees’ perceptions and
behaviors in a regional council. Journal of Business Ethics, 112(1), 59-78.
Duran, P. (2018). Australia's AMP charged life insurance premiums to dead clients – inquiry.
Retrieved from https://www.cnbc.com/2018/09/17/reuters-america-australias-amp-
charged-life-insurance-premiums-to-dead-clients--inquiry.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.
Financial Review. (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

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Hutchens, G. (2018). AMP to compensate super investors after fresh humiliation at royal
commission. Retrieved from
https://www.theguardian.com/australia-news/2018/aug/16/amp-admits-fees-were-
so-high-100000-super-investment-made-a-loss
Lannin, S. (2018). Banking royal commission: AMP to refund super customers who lost
money to fees and charges. Retrieved from https://www.abc.net.au/news/2018-08-
16/amp-to-pay-back-customers27-fees/10129660
Mason, C., & Simmons, J. (2014). Embedding corporate social responsibility in corporate
governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), 77-
86.
Neil, M. (2018). AMP charged dead people for life insurance. Retrieved from
https://www.thecourier.com.au/story/5648709/amp-charged-dead-people-for-life-
insurance/?cs=7