Corporate Governance and Social Responsibility

This report analyses the corporate governance and social responsibility of AMP, a listed bank of ASX, in light of the Banking Royal Commission report. It discusses agency theory, stewardship theory, stakeholder theory, and corporate social responsibility. It also examines the ASX 2010 principles and recommendations and suggests implementing ethical culture using deontology and utilitarianism theories.

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY
Corporate Governance & Social Responsibility

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY 1
Contents
Introduction................................................................................................................................2
Background................................................................................................................................2
Corporate Governance...............................................................................................................3
Agency Theory.......................................................................................................................3
Stewardship Theory...............................................................................................................3
Stakeholder Theory....................................................................................................................4
Corporate Social Responsibility.................................................................................................5
Corporate Governance Discussion based on ASX 2010 Principles and recommendation........5
Ethics..........................................................................................................................................6
Justice and Economic Distribution.........................................................................................6
Deontology & Utilitarianism..................................................................................................7
Recommendations......................................................................................................................8
Conclusion..................................................................................................................................8
References................................................................................................................................10

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY 2
Introduction
This report will be the study of the corporate governance of the AMP. AMP is also the listed
bank of the ASX. Thus, the AMP has to lay the principles and recommendation laid down by
the ASX. The AMP in recent times got a lot of media attention due to their conduct that had
been found to be in question in the report of the Banking Royal Commission. Banking Royal
commission is a body that conducts an inquiry of the banks. It is set up by the crown on the
recommendation of the government (Royal Commission, 2018). The AMP conduct will be
analysed in the view of corporate governance and the corporate social responsibility. The
Banking Royal Commission conduct into the banking and superannuation has found the
conduct of AMP that has raised many ethical issues. These issues may be solved by
implementing the ethical culture in the organisation. The ethics guide the companies in taking
decisions responsibly and with certain obligations. Thus, the AMP had been recommended
that various duties that had been breached by the employees of the AMP can be solved by
implementing various policies in the company.
Background
The Banking Royal Commission has conducted an enquiry in that various banks misconduct
had been came into the question. In the report of Banking Royal Commission various
scandals of the AMP was revealed (McGowan and Davidson, 2018). AMP is one of the
biggest financial institutions of the Australia (AMP, 2018). The AMP financial advisors had
been found to be in charging fees but the services has not been provided by the bank. The
AMP in many circumstances has misled the ASIC by stating that fee for no service had been
a process error and it was not a deliberate action (Hurchens, 2018). AMP was found to be
deducting the service fees from the client’s accounts. The Banking Royal Commission got the
various evidences that had showed that around 20 times the AMP had misled the corporate
regulators. In a report, it was stated that the AMP would have to pay a bill of around $1
billion (David, 2018). The reports also stated that the AMP could be liable for the ASIC
penalty. The AMP has done many more scandals and has also not monitored the accounts of
the customers who has chosen to invest in the cash. The AMP has found to be in the major
problem as the legal implication can also takes place for these acts. The AMP can be liable
for the criminal penalties (Chung, 2018).

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY 3
Corporate Governance
The corporate governance is the rules and regulation that guide the employees of the
companies for the better efficiency and for the ethical culture. It provides the transparency in
the culture and helps the shareholders to get the accurate information about the operations,
finance, and the other departments of the company (Williams, Bingham and Shimeld, 2015).
There are some theories that will guide the views on the corporate governance of the
company:-
Agency Theory
This theory of corporate governance will focus on the relationship of the agents and the
shareholders. According to this theory, the directors, managers, officers and the executives
are the agents of the company. In the view of this theory, the financial advisors of the AMP
are the agents of the companies. This theory states that the shareholders are the principal of
the company. In this view of the AMP shareholders are the principal. So in accordance with
this theory the agents work in the interest of the principal means the directors, managers,
executives must work in the interest of the shareholders. The employees of the AMP should
have to work according in the interest of the shareholders but the company has failed to apply
this theory. The employees of the AMP had been done certain breaches that been charging
fees for no services and deducting amount from the clients account as the service charge.
Therefore, the bank had paid many millions to their clients that have affected the
shareholders of the company in the vast manner. This theory states the relationship between
the shareholders and the management of the company. The AMP has not shown this
cooperation between their management and the employees. Thus in the end it is the duty of
every agent to work in the interest of the shareholders. The shareholders are the owners of the
company who hire agents to work for their interest (Bosse and Phillips, 2016).
Stewardship Theory
This theory of corporate governance is about the protection of the stewards and increasing the
wealth of the shareholders. The stewards are the employees such as executives and the
managers of the companies. The stewards have the responsibility of the company and they
must perform in the interest of the shareholders. This theory is not an agency theory as
because in this theory individualism is not been followed. The AMP advisors and the
directors are the stewards in accordance with this theory. The financial advisors must work so
that the companies interest will be fulfilled and the interest of the shareholders. The

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companies must also take care of their stewards. The AMP has the duty towards their
management to protect them and to take care of their employees. In the view of this theory,
the AMP has the duty towards their employees. The AMP has failed to apply this theory in
their organisation and due to that in the inquiry of the Banking Royal Commission, various
bad conducts had been found of AMP. Neither the stewards had worked in the interest of the
company and neither the company. If the company has provided proper governance in the
company than may be this situation has not been rise. These theories of agency and
stewardship have focussed on the type of governance, if both these theories put together than
it will give the better governance in the company (Madison, Kellermanns and Ranft, 2016).
Stakeholder Theory
According to the theory of Stakeholder, it states that the stakeholders are the variant of the
concept of the stockholder. There are two types of the stakeholders in the company, firstly the
primary stakeholders who have the direct stake in the company. Secondly, the stakeholders
who has a public or has an special interest stake in the organisation that is more indirect. The
stakeholder is a wider term that includes stockholders, general public, employees, customers,
competitors, government, media and many more. The companies have the duty in accordance
with this theory that they must take care of their stakeholders. Stakeholders should been the
first choice for the company. The Companies goals are like to fulfil the requirements of the
stakeholders. The AMP has also the duty to fulfil the demands of the stakeholders but the
AMP was totally failed to fulfil the requirements of the stakeholders. The company has
charged fees for the services they had not provided to the customers. Thus, the clients are the
stakeholders of the company and the AMP has the duty towards them to provide services for
the fees but the unnecessary fees been charged from them and not has provided any services.
The company has faced a lot of criticism for their acts and for cheating their stakeholders.
The bank has totally failed to apply this theory in the culture of their organisation. This
theory motive was to consider the problems of the stakeholders of the company, as they
should be put in priority. Sometimes company only focusses on the interest of the
shareholders, they forgot the interest of the stakeholders, and the same had happened with the
AMP. This theory states that the Stakeholders are as important for the company as the
shareholders for the company (Pigé, 2017).

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Corporate Social Responsibility
The Corporate Social Responsibility has the basic movement that has an aim is to encourage
and aware the companies about the impact of the business they are engaged in on the rest of
the society that includes their own stakeholders and the environment. The Corporate Social
responsibility is worked on the business approach that contributes to the maximum
development by providing the economic, social and the environment benefits of all the
stakeholders . The AMP after their scandals been revealed in the Banking Royal Commission
than it becomes necessary them to understand the value of Corporate Social Responsibility.
The AMP stakeholders have been affected due to the company have less focusses on their
corporate social responsibility. The company is run due to their stakeholders and if the
stakeholders will not been focussed then it can affect the company in legal, social, political
and the economic implications. Therefore, the company cannot run from its Social
responsibility or it can create a major effect on the companies like AMP who are the one of
the biggest financial institutions of the Australia (Bhattacharya and Sen, 2010).
Creating Shared Value
Creating shared value is the link between the competitive advantage and the Corporate Social
Responsibility. It has redefined the role of the capitalism and the role of company in the
society that has been written by Porter that there is deep link between the business strategies
and also the corporate social responsibility. In the year 2012, Karmer and the Porter with the
help of the global non-for profit advisory firm FSG founded the shared Value initiative. The
AMP has failed to apply this theory in the organisation as they had not linked the competitive
advantage and the corporate social responsibility (Gibbert, Leibold and Probst, 2002).
Corporate Governance Discussion based on ASX 2010 Principles and
recommendation
The ASX in the year 2010 had made some Amendments in the principles and
recommendations that are required to follow by the companies who are listed in the ASX.
The companies listed in the ASX every year in their annual statement showed that they had
compliance with the principles of the ASX. The companies who failed to comply with these
principles can be liable for the penalties. These principles and recommendation suggest that
the companies must lay the solid foundation for the companies that the delegation of work by

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the senior and junior executives can be done properly. The companies must structure the
board properly so the duties and responsibilities can be discharged properly (AMP, 2018).
The companies must promote ethical and the responsible decision-making. There must been
an important for the company to safeguard the integrity in the financial reporting and for that
it is required for the companies to establish an audit committee. The company is required to
establish the timely and the balanced disclosure of all the important material that is in relation
to the company. The company must respect the rights of the shareholders and must facilitate
the effective exercise of these rights. The ASX also recommend that the companies be
required to establish a sound system to manage and control the risk for the both internal and
external risks. The last principle suggests that the companies must establish that the level of
remuneration is sufficient and reasonable. The AMP has also listed in the corporate
governance statement that they have followed with the principles and the recommendation of
the companies. The AMP has showed that they had maintained good governance in their
company but in reality, the company has failed to comply with the following governance
policies. It can be proved from the evidences that has revealed in the report of the Banking
Royal Commission (Safari, 2017).
Ethics
The ethics always play an important role in the organisation that has an important part of the
organisation. The ethics are the guidance to the company’s management to work with
obligations and responsibly. The companies are required to implement ethical culture for that
they can implement some of the theories of ethics. The AMP must also take guidance from
these theories to improve the ethical culture in the company. These theories are explained
below:
Justice and Economic Distribution
Justice and economic distribution can be seen from the two approaches. The two approaches
of libertarian and Rawls view on the economic distribution and the Justice.
The Libertarian that has identifies the justice with an idea of liberty. He has also argues that
an individual freedom that is the basis for determining that what is correct and wrong. The
justice can consist in permitting each person to live as he/she pleases and it is free from all
the interferences of the others. His approach was clear that till you have not interfered in
anyone liberty than no one can disturb your liberty. Thus, the Amp has interfered the liberty

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY 7
of the clients and the millions of money had been charged from the clients for the services
they had not provided (Martin, 2015).
The Rawls view is all surrounded by the Justice. These theories help the individuals to deal
with the ethical dilemmas. The John Rawls had said in this that every individual has some
extensive basic liberties that every individual has equal rights and is companionable with the
related liberties for the others. The libertarian and Rawls had the same view that until the
time individual does not infringe the rights of others until the time he or she can engage in the
activities (Martin, Coolsaet, Corbera, Dawson, Fraser, Lehmann and Rodriguez, 2016).
Thus the AMP has not implemented the Libertarian and the Rawls view in the organisation
therefore it is recommended that the Amp must apply this theory to improve their culture.
Deontology & Utilitarianism
These two theories of ethics will guide the AMP that can help companies to implement
ethical culture in the organisation. This theory guides the companies to take decisions. It
suggests that while taking any decision it is necessary for the company that it must take care
of the duties and the obligations when the ethics are in play. In the view of this theory that
upholding one duty is ethically correct that means when a person follow his or her obligations
to the another individual. This theory says that the deontologist will always retain promises as
a friend. This theory says that whoever follows a theory that produces consistent results
because the decisions are based on the duties that has been set by the individuals. Therefore,
the company are required to apply this theory in their culture to get good results. The AMP
has also failed to apply this theory as this theory deals with the decision based on the
obligation and duties that was not followed by the management of the company. The
company has failed in every aspect of the theories guidance (Akhigbe and Zolnourian, 2018).
The Utilitarianism is based on the ability to predict the consequences of a certain action. This
Theory is based on the two parts the first is act utilitarianism and the second is rule
utilitarianism. Act Utilitarianism is regarded as the benefits for the many people and not for
the self-motive or the societal constraints such as the laws. The AMP has not followed this
theory and worked for the self-motive and not for the motive of their large number of clients.
Whereas the Rule Utilitarianism takes the law into the account considered with the fairness.
This is viewed as the fairness of being that benefits the number of people in the organisation.
This theory gives the justice through the fairness. From the point of AMP this is not been
applied in the organisation as the fairness on the part of the organisation had not been seen

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anywhere. Thus, it can be said that the AMP had been failed to apply these theories in their
organisation. This theory can give the learning for the company the importance of the social
responsibilities. The AMP must implement these theories for the better ethics and to
understand the responsibility towards the society (Kahane, Everett, Earp, Farias and
Savulescu, 2015).
Recommendations
The AMP conduct in the Banking Royal Commission has proved that the AMP has failed to
apply the good governance and failed to obey the responsibilities towards the society.
Therefore, it is required to recommend company so that the company’s governance and the
ethical culture of the company can be improved. The companies can implement the ASX
principles and Recommendation as not just in the statement of the company but also in the
practical basis. The company can implement the corporate governance theories in the for the
better governance such as Agency, stewardship and the Stakeholder theories. These theories
as stated above can help the companies to improve their ethical culture in the company. The
AMP can also implement some training programs for the management of the company. It
helps the employees to know their duties towards the shareholders and also towards their
stakeholders. The directors must guide that they have to work more than their area of
expertise as the directors not been just limited to their expertise. The directors have the duty
to manage and to monitor the activities of the employees. The cooperation between the
management and the company must be good for the better results for the company. Thus, the
environment of the organisation must be familiar so that the organisation needs been fulfilled
(Tricker and Tricker, 2015).
The AMP is also recommended that the company to improve the duties and responsibilities
towards the society by implementing the ethical theories in the company. The libertarian and
Rawls view on the justice and economic distribution can help the companies to improve their
ethical culture. The management must be guide with the duties and responsibilities towards
the society.
Conclusion
It can be concluded from the report of Banking Royal Commission that various laws had
been breached by the AMP. The company has not followed the good governance in the

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company. The Company has raised many ethical issues that can be solved by the ethical and
governance implications. It can be analysed that the AMP employees has deliberately
conducted the misconduct like charging fees for no services. The AMP has not fulfilled its
responsibilities towards their stakeholders. The Stakeholders are an important part of the
organisation that has been proved from the stakeholder theory and the effect on the AMP for
non-compliance of the theory. The corporate governance of the AMP is required some
serious changes and good policies to be implicated to regain the trust of the stakeholders. The
AMP has also found to misled and hide the facts from the ASIC and for that the AMP was
highly criticised.

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