Corporate Governance and Ethics - Commonwealth Bank of Australia

This report discusses the ethical issues that the Commonwealth Bank of Australia (CBA) is facing, specifically in terms of governance and culture, which has damaged the bank's image and global acceptance. The report evaluates these issues based on utilitarian and Kantian ethics principles, defines the ethical theories, and argues about their characteristics. The report identifies issues such as a negative workplace environment under the previous CEO, Ian Narev, employees engaging in unethical practices, insufficient accountability frameworks and practices, and inadequate measures to protect customer information. The report concludes with a reflective solution to mitigate these issues effectively.

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Executive summary
Commonwealth Bank of Australia (CBA) is considered to be one of the largest multinational
banks in Australia. It generally provides various range of financial services to the customers like
retail, business and institutional banking. In recent times the organisation is facing a series of
ethical issues that damage the image and global acceptance of the organisation dominantly. The
ethical issues can be found out with special focus on the governance and culture of the bank in
doing ethical business practice in Australia. In this regard, the purpose of this report is to identify
those issues related to Commonwealth Bank of Australia and evaluate the issues on the basis of
both utilitarian and Kantian ethics principles. In fact, for a better understanding, the report
further intends to define the ethical theories and argues about the characteristics. Based on the
entire understanding, a reflective solution will be provided that will help to mitigate the issues
effectively. From the conclusion, it was found that the ethical issues of CBA are rightly
discussed in the light of Kantian ethics and Utilitarianism and the report critically discussed the
ethical issues in the organisation.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Issues in Commonwealth Bank...................................................................................................3
Utilitarianism...............................................................................................................................5
Core concept............................................................................................................................5
Related to the issue..................................................................................................................6
Kantian Deontology.....................................................................................................................7
Core concept............................................................................................................................7
Related to the issue..................................................................................................................8
Reflection on resolving the issue.....................................................................................................9
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11

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Introduction
Commonwealth Bank of Australia (CBA) is considered to be one of the largest
multinational banks in Australia. It generally provides various range of financial services to the
customers like retail, business and institutional banking. Moreover, CBA is also associated with
the practice of superannuation, insurance, investment and broking services. This magnanimity of
Commonwealth bank makes it a financial giant in Australia. Founded in 1911 with its
headquarter in Sydney, the company has more than 1,100 branches across the world with a
number of more than 51,000 employees. This global presence of CBAA lists it in the ‘big four’
financial companies in Australia along with NAB, ANZ and Westpac. However, in recent times
the organisation is facing a series of ethical issues that damage the image and global acceptance
of the organisation dominantly. The ethical issues can be found out with special focus on the
governance and culture of the bank in doing ethical business practice in Australia.
In this regard, the purpose of this report is to identify those issues related to
Commonwealth Bank of Australia and evaluate the issues on the basis of both utilitarian and
Kantian ethics principles. In fact, for a better understanding, the report further intends to define
the ethical theories and argues about the characteristics. Based on the entire understanding, a
reflective solution will be provided that will help to mitigate the issues effectively.
Discussion
Issues in Commonwealth Bank
The workplace environment in CBA was not good under the leadership of the erstwhile
CEO Ian Narev. The report of Maddock (2018) argued that the Commonwealth Bank employees

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were reluctant about the objective and aims of the organisation because their interests were never
been fulfilled. For instance, lack of motivation and malfunctioning practices were there that
pushed the employees to do unethical practices. For instance, people in CBA deliberately used
the Ponzi scheme that were banned in Australia (afr.com, 2017). The organisational management
knew the fact but did not care to investigate the matter. Moreover, the organisational practice
was so negative that the employees easily skipped the radar of the organisation. As far as the
interests of the employees were concerned, the official pension scheme of the employees was
never followed and the retired employees were unable to get their rightful pensions. As a result
of that it facilitated a negative image among the employees to perform well and went for a better
career option. From the research of Letts (2017) it can be stated that it was the charismatic
leadership of Ian Narev that created a illusive working culture and most of the employees
believed that they were doing to right thing because the management never punished them or
restricted to use unethical practices while doing business.
Moreover, the accountability framework and practices within the organisation was not
adequate enough to ensure the safety of the customer’s information. The report of Eyers (2017)
pointed out that even after the money laundering issue occurred in 2014 the CBA management
did not take adequate measures. Insufficient control over the organisational practice was
identified one of the major aspect that raised question about the ethical business practice of
Commonwealth Bank of Australia. The investigation of ASTRAC, the regulatory and controlling
committee of Australia alleged that CBA was the perpetrator of depositing more than legal AUS
10,000 limit in the machines to transfer millions overseas. It subsequently questioned the entire
financial planning of the organisation that was also not free from any kind of unethical
organisational practice. In fact, during the money laundering issue in 2015 the Commonwealth

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Bank management did not find out any suspicion on some specific accounts. It proved the
inability of the organisation to foster an effective organisational practice through setting control
over its financial transactions. The nefarious banking activities of CBA failed to report the
suspicion matters to AUSTRAC and even in 2014 the anti-money laundering team got an alarm
but it took more than two months to review and investigate the matter (Letts, 2017).
Utilitarianism
Core concept
Utilitarianism is identified as an important ethical theory of modern times based on the
normative ethical aspect that traditionally stemming since the late 18th and 19th century
propounded by philosophers and economists Jeremy Bentham and J. S. Mill. As per this theory,
it can be argued that the action is right if it tends to promote happiness (Novoa, 2018). On the
contrary it will be wrong if people get affected by it. Therefore, it can be stated that the theory of
Utilitarianism tried to deal with the practice of delivering more happiness and benevolence for
the people. One of the popular statement about Utilitarianism was that it provided maximum
benefit for maximum number of people (Mill, 2016). Therefore, the core concepts of
Utilitarianism are pleasure or happiness are of true intrinsic value, right actions will lead to
happiness and everyone’s happiness counts equally. However, from the research of Faulhaber et
al. (2019) it cab e derived that Utilitarianism includes not only the actions but also law, policies,
character traits and moral codes are also incorporated into the practice of Utilitarianism.
Based on this understanding, there are two distinct part of Utilitarianism in the form of
Act Utilitarianism and Rule Utilitarianism. The purpose of the act Utilitarianism is to act on the
basis of particular actions. On the other hand, the rule Utilitarianism deals with the general rules

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of morality and ethics. Therefore, it is important for a person to perform on the basis of his or her
values and principles. For instance, the key concept of pleasure or happiness has intrinsic value
means every actions has a value and the outcome is depended on the motive of that person (Nolt,
2016). On the other hand, it is also important for individual actions to follow the righteous path
in order to promote happiness for all. Furthermore, equal happiness connotes the practice of
doing tasks without harming others. As a result of that it will be easier for a person to bring more
efficacy into his or her actions.
Related to the issue
Relying on the principles of Utilitarianism, it can be stated that the money laundering
issue was clearly violated the principles of Utilitarianism. As per the first principle, it can be
argued that the happiness is considered to be one of the major purpose of the Utilitarian
principle. It can be stated that the negligence of the Commonwealth Bank management violated
the moral code of doing business ethically. The business operations of the organisation has to
create a better business framework so that it will deliver sustainable business performance. As a
result of that the intrinsic value of the organisation had been ethically damaged as the
organisation failed to control its business operation ethically.
Moreover, the Utilitarian principles also advocated that the wrong action delivers
unhappiness. It means the wrong doing will create huge problem for the individuals to get the
expected result that he or she is willing to achieve. Therefore, the action of negligence and
inability of Commonwealth Bank to measure the vitality of the money laundering is also
damaged the image of the organisation highly. In fact, the customers were also sceptical about
the organisational performance and activity. As a matter of fact, the Australian government also
started investigating into this matter and alleged that commonwealth bank was definitely

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breached the code of conduct and the role of the management was also subject to further
investigation.
From the point of view of equal happiness it can be stated that Commonwealth Bank only
put emphasis on its business profitability. Therefore, giving the leverage to the employees to
increase the sales by their own terms and deliberately support the unethical professional practice.
As a result that the customers were the most vulnerable group that facing severe financial loss.
From that point of view, it can be stated that the principle of Utilitarianism stated that everyone’s
happiness counts equally but it was not prevalent in course of the business practice of
Commonwealth bank where it only valued its own profit and overlooked the interests of the
workers.
Kantian Deontology
Core concept
As far as the Kantian Deontology is concerned, it can be stated that the theory of
deontology puts robust emphasis on the moral obligations to act in accordance with a set of
principles and rules regardless of its outcome. In other words, Turrens (2018) articulated that the
role of a person was to set some moral principles and followed it strictly without bothering about
the result. While comparing with the characteristics of Utilitarianism, Deontology narrates a
different principle which is more rigid and orthodox as well. Based on this principles it can be
stated that the role of Utilitarianism is to ensure happiness among all whereas the Kantian ethics
advocated that the no matter what the outcome will be it is essential for a person to follow the
path of morality (Paquette, Sommerfeldt & Kent, 2015). It will lead the person to have a great

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moral and ethical integration. In this regard, one of the major aspect of deontological theory can
be found in the theory of Kant.
Based on the Kantian principles it can be stated that human will is considered to be the
foundation of morality. In other words, the foundation of morality bestows in the will of the
human being and they are the absolute one to decide moral path (Carr, 2016). This moral will of
man is referred as the best thing in the world without having any qualification. As a matter of
fact, it is important for the organisation to deal with the practice of dealing with the moral duty
or law that consists of a set of maxims based on the category of nature. Henceforth, duty of a
person is identified as the most important part that guides a person to reach the path of
excellence (Orlitzky, 2017). In fact, the chosen path can be right or wrong for the person but it
has to be followed by the ethical norms and principles that will facilitate a better prospect to
develop inner-self.
Related to the issue
The Kantian ethics primarily followed the principles of action rather than the
consequences. It means the deontological form of Kantian ethics argued that the moral path led
to the rightful way but the ethical standpoint cannot be define by its good or bad consequences.
Based on this understanding, it can be stated that the leadership in Commonwealth bank is also
vested on the effective and moral leadership of Ian Narev. In other words, the leadership style of
Ian Narev had to focus on the moral way of practicing leadership. However, for making high
profitability in business, he tried to use unethical practices that brought the country on the verge
of an unethical business practice. It can be stated that the role of the leader is not only to deal
with the moral principalities but making a solid base of sustainable business orientation should
also be the important aspect for the organisation. From that point of view, the leadership style of

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Ian Narev also did not focus on the employee interests. As a result of that the pension scheme of
the employees did not function properly. It was a deliberate effort of Ian Narev to put thrust on
the result rather than the way he chose to achieve it. As a result of that the leadership of Ian
Narev violated the fundamental basic of Kantian ethics that is relied on the ethical action rather
than the result.
Reflection on resolving the issue
Based on this understanding, it can be stated that there are some key measures that will
procure a better and ethical practice for the organisation. In my opinion, the first approach has to
be dealt with the development of ethical leadership practice. It is associated with both the
Utilitarian and Kantian moral principles. For instance, the Utilitarian principle will guide the
leader to implement a measure that will render benefit for all the employees. On the other hand,
the Kantian ethics will help the leader to focus on his actions rather than outcome so that he will
understand the importance of his actions and willing to bring more efficacy and transparency into
the workplace culture.
I presume that the second opinion is closely linked with the Kantian ethics because the
second strategy will be creating a proactive nature of the organisation to eradicated the ethically
risk factors. In my opinion, the organisation has to acknowledge the difference between ethically
right or wrong business practises. Based on that it can decide the wright path of making an
ethically sound business orientation. It will help the organisation to ensure the future
sustainability of the organisation and maximisation of customer due to develop a good brand
image.

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Conclusion
The above discussion is trying to elucidate the ethical issues incurred in Commonwealth
Bank of Australia since 2015. One of the major issue was the money laundering that the
organisation was deliberately overlooked because of extracting high profitability. Besides this, it
can also be stated that the role and quality of leadership that the former CEO of Commonwealth
Bank, Ian Narev had followed was also biased and self-centred. As a result of that both the
image of the organisation and the interests of the employees damaged extensively. Based on this
understanding, the report intends to explain the issues from utilitarian and Kantian form of
ethical practices. Moreover, a reflective suggestion is also discussed that highlights the process
to resolve the issues effectively. Therefore, the report is highly relevant and critically reflect the
ethical issues in Commonwealth Bank in Australia.

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