Corporate Governance Ethics and Corporate Social Responsibility Assignment 2022

CORPORATE GOVERNANCE, ETHICS AND
CORPORATE SOCIAL RESPONSIBILITY

Introduction
The Royal Commissions Act, 1902 of the Australian Government led to the one of the
greatest regulatory inquires named as “Royal Commission Inquiry into Misconduct in the
Banking, Superannuation and Financial Services Industry.” The commission is also known as
the Banking Royal Commission and the Hayne Royal Commission. The commission to
examine the various aspects of the corporate governance, diversity and inclusion,
remuneration and other misconduct activities, as reported by various stakeholder groups;
conducted the wide scale enquiries. The diversity and inclusion are an essential aspect of the
functioning of the global business organisations which states that the boards of the director
must be constituted fairly, and remunerated efficiently.
The following report is aimed at evaluation of the various aspects of the Culture, Corporate
Governance, and Corporate Social Responsibility with the help of the findings and
recommendations in the Royal Commission report. In addition, the impact on the
stakeholders, the diversity, and inclusion in the boards of the financial institutions
investigated, would be examined.
Background
The mounting public pressure from customers, whistle-blowers, nationals MPs, and other
groups of Labor, led to the establishment of the formation of the commission. The key aim of
the investigation was to examine the misconduct in the business activities of the financial,
and the insurance sector enterprises (Australian Government, 2019). Further, the sufficiency
of the mechanisms in context of the corporate governance, and to curb the misconducts,
compensations to the victims and the ASX and other legal compliances are adjudged in the
said investigation (Hutchens, 2018). The submission of the report of the investigation to the
regulators was done on 1 February 2019, followed by the publicly releasing of the same by
the Government on 4 February 2019. Thus, the investigation work was carried for more than
12 months. The outcome of the inquiry included collection of the evidences from the various
stakeholder groups 76 recommendations, following the 69 days of public hearings, and the
fines and penalties (Gilbert Tobin, 2019).

Evaluation of issue of financial advice from point of view of the
culture, governance and remuneration
It is imperative to note that a range of issues have emerged in provision of financial advice in
the Australian context. The issues are significant because of the revenue generated from the
said industry to the extent of $4.6 billion and the coverage of 41 percent of the industry. The
three major issues that were discovered by the commission were charging of illicit fees even
when no services were provided, the quality of the advice provided leading to the
deterioration of the conditions of the client and the lack of the disciplinary system and
presence of the fragments in the rules of the regulation of the financial advisers. In the year
1970s the deregulation of the financial markets began in Australia. The financial advisers
came from the life insurance industry background where the approach is more of revenue
driven, the corporate culture is focussed more on the commissions, and there was not much
prevalence of the asking or the rendering of the efficient advices (Royal Commission, 2019a).
The same culture endured in the roots of the financial advice industry in Australia. In
addition, the period of the 1990s led to the privatisation and the deregulation of the industry,
followed by the increased complexities of the financial products and introduction of new
products. Some of the major entities that are included in such category of the banking and
financial advisers are the Commonwealth Bank of Australia (CBA), National Australia Bank
(NAB), Australia and New Zealand Banking Group (ANZ), Westpac and others. Some of the
chief instances of the issues in the financial advice are stated as follows.
The entity Storm Financial was engaged in the provision of the loans against the equity of the
customers for the homes. It was noticed during the investigations that there was a breach of
the ethical and professional standards as the entity engaged in the provision of inappropriate
advices. The late 2008s witnessed negative equity positions and sustaining of losses of
numerous investors, evidencing the facts further (Royal Commission, 2019b, p. 128). In yet
another instance, the Commonwealth Financial Planning was accused of provision of
unsuitable advices to the customers encouraging them to invest into highly risky products that
were though profit generating but not suitable for the investors (Royal Commission, 2019c, p.
129). One of the major issues that surfaced in the inquiries was of the manner of
remuneration of the financial advisers. The significant source of the revenue for the financial
advisers is that of combination of various commissions such as the upfront and trail
commissions. Thus, it was discovered that in an attempt to replicate the revenues flowing