Role of Royal Commission's Report in Promoting Ethical Practices in Banking Sector

Running head: CORPORATE GOVERNANCE AND ETHICS
Corporate governance and ethics
Name
Institution

CORPORATE GOVERNANCE AND ETHICS 2
Executive Summary
This paper examines the role of the Royal Commission's report in promoting
ethical practices, accountability and integrity in the industry. The paper specifically
focuses on the tasks of theoretical perspective in shaping ethical business behaviours
by financial institutions. The paper comprises of five main parts. The first part is this
introduction. This second part helps the reader to understand the theoretical perspective
of the topic by exploring the theory of justice. The third part examines the application of
the theory of justice in business. The fourth part aligns Rawls' theory of justice with what
the Royal Commissioner is saying in the report. The fifth part offers a recommendation
of the players in the Australian banking sector on the best ways to observe ethical
behaviours. The findings state that the entities operating in the Australian financial
service sector engage in misconduct practices to maximise their profits at the expense
of customers. Although such practices are unethical and unacceptable, there are no
laws to hold perpetrators accountable. The report by Royal Commissioner recommends
enacted of ethical laws to combat unethical business behaviours in the industry. Lastly,
banks should incorporate CSR to promote business ethics and ethical practices.

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Introduction
Misconduct reports in the Australian banking sector seem endless. The degree of
misconducts in the industry range from manipulation of interest rates, foreign exchange
to unethical practices in the commodities and mortgage markets. Reports from
regulatory bodies in the industry such as the Australian Securities and Investment
Commission (ASIC) and the Royal Banking Commission (RBC) suggest an ethical crisis
exist in the financial sector. Stakeholders in the industry have frequently complained
about the lack of commitment and effort by the Royal Commission to hold bank
executives and managers accountable for their misconduct activities. Such an issue
raises the question about the current arrangements in place to ensure integrity in the
banking sector at a business and personal level. For example, should bank executive,
managers or employees be held accountable for engaging in unethical behaviours that
benefit banks?
Royal Commission of Australia was established in 2017 after numerous claims of
unethical lending and investment practices, customer abuse, and poor governance
adopted by banks. The objective of the commission was to investigate the allegations
and make recommendations about the best practices in the banking sector. The
commissioner Kenneth Hayne submitted the final report on the commission's findings to
the Treasury. The report had four main observations. First, the level of conflict of
interests is high because bank personnel pursue personal goals over social benefits.
Conflict of interest is influenced by lack of formal ethical remuneration structure in the
industry. Second, the industry lacked a separation of duties between selling financial
products and providing financial advice. Third, the industry lacks transparency about the

CORPORATE GOVERNANCE AND ETHICS 4
products offered by banks. Such information did not help the client to make the right
choices. And fourth, regulators in the industry could not hold parties that broke banking
regulations accountable for their actions. Generally, the commission recommended that
laws should be changed to restore ethical practices and trust in the banking sector
(Royal Commission, 2019).
This paper examines the role of the Royal Commission's report in promoting
ethical practices, accountability and integrity in the industry. The paper focuses on the
roles of theoretical perspective in shaping ethical business behaviours by financial
institutions. The paper comprises of five main parts. The first part is this introduction.
This second part helps the reader to understand the theoretical perspective of the topic
by exploring the theory of justice. The third part examines the application of the theory of
justice in business. The fourth part aligns Rawls' theory of justice with what the Royal
Commissioner is saying in the report. The fifth part offers a recommendation of the
players in the Australian banking sector on the best ways to observe ethical behaviours.