Corporate Social Responsibility and Ethics for Managers

This report discusses the unethical practices followed by Commonwealth Bank of Australia (CBA) and how they denied such allegations. It explores CBA's vision, mission, and code of practice, and explains Carroll's four part model of CSR. The report also covers the three components of sustainability and provides recommendations for ethical banking practices.

Ethics for managers
Corporate Social Responsibility
Corporate Social Responsibility

Ethics for Managers 1
Table of Contents
Abstract............................................................................................................................................2
Introduction......................................................................................................................................3
Question 1.......................................................................................................................................3
Question 2.......................................................................................................................................4
Question 3.......................................................................................................................................6
Economic Responsibility:............................................................................................................7
Legal Responsibility:...................................................................................................................7
Ethical Responsibility:.................................................................................................................8
Philanthropic Responsibility:.......................................................................................................9
Question 4.......................................................................................................................................9
Power:........................................................................................................................................11
Legitimacy:................................................................................................................................11
Urgency:.....................................................................................................................................11
Question 5......................................................................................................................................11
Transparency must be maintained:............................................................................................11
The Social Role:.........................................................................................................................12
Assigning Credit:.......................................................................................................................12
Poor Recommendations:............................................................................................................12
Conclusion.....................................................................................................................................12
References......................................................................................................................................14

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Abstract
The report here consist of the ethical issues faced by Commonwealth Bank of Australia that how
the bank is in news recently for its unethical practices and behavior. Their corporate social
responsibility has been redefined by sampling the three attributes of Mitchell et al. in the context
of how the stakeholders have been treated by the bank itself. The values, beliefs, norms and
mission of the bank has been mentioned to showcase what the organization is all about and what
should they focus on. The model of corporate social responsibility by Carroll has been explained
where economic, social, legal and philanthropic responsibility has been explained. The three
components of sustainability in this sector are also explained in detail. Lastly recommendations
has been given for the bank to be ethical in future. The recommendations include the factors that
affects the ethics in the banking sector and also the benefits given by managing the ethics in the
sector

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Introduction
The banking sector in Australia is majorly dominated by the four banks named as
Commonwealth Bank of Australia whose market share is AUD80.34 billion, Westpac Banking
Corporation (AUD31.35 billion), Australia and New Zealand Banking Group (AUD28.74
billion) and National Australia Bank (AUD29.57 billion) (NASDAQ.com, 2017). This report
contains of how the Commonwealth Bank has been caught in following unethical practices
recently. The main objective of the assignment is to discuss the unethical practices followed by
CBA in these years and how knowingly they denied such allegations. Another objective is to
recommend the bank, few changes for making their business more ethical in the coming future
(Commbank.com.au, 2017).
It is very important to investigate ethics in the banking sector. The ethics should be applied in all
kinds of affairs and relations of bank with other persons such as customers, shareholders to
ensure the reliability of the profession. Ethics also enhances and maintains the status, stability,
confidence and consistency in banking sector.
Question 1
One of the major ethical issues that CBA has faced recently is the criminal money-laundering
and the controversy of terrorist finance. It was found out in August 2017, the Australian
Transaction Reports and Analysis Centre has filed allegations of breaches done by CBA under
the act of Anti-Money Laundering and Terrorism Financing Act. The allegations made so had
focused on Commonwealth Bank’s failures in reporting the transactions through their network of
IDMs (intelligent deposit machines). It was confirmed by Australian federal police that the
persons with related links to organize crime and terrorism have made number of transactions
(DW.COM, 2017).This serious conduct by CBA has exposed serious and financial crime to the
Australian community. The culture and accountability of the Commonwealth Bank was in news
and the bank raise voice against this specific allegation about their culture and accountability by
saying that these are all false allegations (Forbes.com, 2017).
There has been complaints from customers and whistleblowers regarding fraud, shoddy financial
advice led to significant customer loss and extreme staff commissions. Commonwealth has
received criticism from customers as well in relation to high charges and excessive fees, interest
charges and shareholder dividends (NewsComAu, 2014). One of the significant issue was that

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CBA knew about their systematic breakdown in their compliance system and opted for not doing
anything about the same and did not disclose such issues to shareholders. To disclose the
material information to market and the significant users is as important as anything in the
business. The disclosures and apologies were made later for such breaches and allegations is of
no good as it does not matter after the wrong doings knowingly (Montague, Larkin, and Burgess,
2016).
Another ethical issue was found out that Commonwealth bank is funding those projects that are
certainly destroying environment, accelerating climatic change and affecting the health of
communities. The company has addressed these unethical behavior practices by apologizing but
for few issues they denied the allegations made so. They have made announcement that if they
are in fault then customers will be remediate and it will be one of their priority. CBA will
announce soon a program for retail customer to refund in situation where bank makes an error
and doesn’t give those customers a right amount of discount.
Question 2
Commonwealth bank’s vision is to outshine at securing their financial wellbeing including
business, people and communities altogether and enhance the same. It was reported that CBA net
profit for the financial year 2014 has increased by 13% from the past year and the cash return on
equity was recorded up to 18.7%. To be consistent with the policy of board, $2.18 per share was
determined as a final dividend and the total dividend for the year brings to $4.01 per share and
this has represent an increase of 10% from the past year.

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For the long term value to customers, shareholders and people, CBA continued to maintain the
focus on customers and the strategic priorities namely people, technology, strength and
productivity. This is done by strong people engagement and improve customer satisfaction
through all businesses. The extension of mobile wallet offering has been seen and being
responded to customers according to their needs so they have launch a new app namely
CommBank app, Cardless Cash and CommBank PayTag. The world class technology in mobile
payment has been introduced to provide access for businesses.
Bank’s mission or strategy is to focus on customer, that to secure the financial wellbeing and
enhance the customer value by providing them an excellent experience. They have divided their
strategy into four categories and that would be People, Technology, Productivity and Strength.
Where people are vibrant and quite customer focused with a high integrity culture which are very
much success centric. They invest in development of people, managing talent and make a place
committed towards safety and diversity. The world-class technology is applied to meet the
customer needs (Neugebauer, Figge, and Hahn, 2016). The application has been launched that
influence real-time capabilities, new ways to make better interaction with customers and value
with the usage of analytic insights. This results in increasing productivity when stability is
provided and use technology at its best is what the bank believes in. Another strategy is the
strength, it was learnt when there was global financial crisis and it makes their organization

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stable to gain the trust of Australians which they can lock their money into. It is in their mission
to make a flexible and strong financial reports or balance sheet with an intention to continue with
the gaining customers and create more opportunities.
The code of practice is wide in range to make sure the level of professional service is provided to
customers. The Code of Banking practice is what they have set out the commitments and
obligations to customers on the principles, disclosures and standard of practice of conduct of
banking services. This code has applied to bank customers and to personal. The Australian E-
commerce Best Practice Model has sets some standards for the protection of consumers where
their information is being protected in e-commerce. The Australian Treasury Operations
Guidelines seek to improve the customer experience in electronic commerce by providing some
guidelines related to fair business practices, better advertising, disclosing business identity, the
terms and conditions of contract and adopting privacy principles (Commbank.com.au, 2017).
Question 3
Carroll’s four part model of CSR comprehends of economic, legal, ethical and philanthropic
expectations that a society has in a time being from organizations (Carroll, 2016). These four
parts have created a solid foundation on which basis company form their policies and code of
conducts. A brief presentation of caroll’s four part model of CSR is as follows:

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Economic Responsibility: Every business forms a part of society and they have an economic
responsibility towards it. The only way to sustain in market and society is to provide with an
incentive to owners and shareholders so to make investment and continue with the operation by
having apt resources in hand (Wood, and Wood, 2017).
CBA’s approach to CSR in the instance of economic responsibility is providing jobs for the
future, urbanization, consumption and production. Bank has adopted many concepts of business
which are in to the direction of financial effectiveness where the attention has been given to
increased revenues, cost-effectiveness, strategies, operations, investments and marketing. This
way bank creates profits by adding value and benefit all the shareholders of the bank. The
economic responsibility affects CBA by excelling in good workforce and their well-being, code
of conduct and culture. Urbanization is helping in macro-economic trends and demographics of
the bank, lastly consumption and production factor is responsible for lending, investing and
procuring (Commbank.com.au, 2017).
Legal Responsibility: The legal responsibility is about setting some ground rules under which the
business is expected to function within those ground rules and operate. The rules here include
laws and regulations, gives an overview of codified ethics of society in which fair business

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practices are recognized by lawmakers at every level including state, federal and local levels.
Businesses are expected to work with the compliance of these laws and regulations and becomes
the condition of operating business.
CBA’s actions on the theory of corporate social responsibility range from criminal law, labor law
and other security regulations. The bank is committed to high standards of corporate governance
and a framework which supports the long-term performance and sustainable advantage, protect
and enhance the interest of shareholder and stakeholders (Suliman, Al-Khatib, and Thomas,
2016). In order to fulfill the expectations of stakeholders and develop the market practice and
make changes in regulations, bank review their corporate governance on regular basis to ensure
the above mentioned objectives will meet. Bank has followed the specified recommendations
which was set out in corporate governance principles in the financial year 2017. The Corporate
Governance Statement has set out the guidelines and arrangements of the corporate governance
currently in August 2017 (Stohl, Etter, Banghart, and Woo, 2017).
Ethical Responsibility: After meeting the basic requirements of CSR, company shifts the focus
on Ethical responsibilities and these are the responsibilities that a company puts up on itself as it
is no obligation to be ethical but a sense of responsibility towards society. These responsibilities
includes environmental friendly, providing fair wages and not doing business with unjust
countries to be very clear (Chan, Watson, and Woodliff, 2014).
Whereas CBA has formed framework and categories to be ethically responsible comprising
number of components which includes Commitments where in professional code of conduct and
expectation of its own people. Conflicts of interest wherein all the actual, perceived and potential
conflicts of interest are being identified, avoided as it can be. Anti-bribery and corruption in
which there is a policy for zero tolerance for bribery and corruption, they carry an Anti-Bribery
and Corruption Policy (Gitman, Joehnk, Smart, and Juchau, 2015). The company board has
adopted Group Securities Trading Policy where people are permitted to deal in certain period
only as they are not in the possession of price-sensitive information which is not published. They
have made a whistle blower policy which is designed to encourage and support those parties who
are involved in such matters with a purpose to support as well as encourage them and protect
them of any victimization (Carroll, Primo, and Richter, 2016).

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Philanthropic Responsibility: The philanthropic responsibility involves in making efforts for the
benefit of society. A live example by the bank is they provide housing needs to the ones who are
in actual need.
As far as sustainability is concerned, it mainly consists of three factors that are environmental,
economic and social. The main four banks of Australia are recognized for the sustainability
performance. Their sustainability practices are:
 Environmental practices: Westpac developed pioneering products and services such as
green bonds to reduce carbon footprints. ANZ and NAB reduces the greenhouse gas
effect and invested in the renewable energy product. Strategies related to environmental
stewardship was develop by commonwealth bank of Australia to measure the
environmental footprint and to facilitate the use of renewable energy.
 Economic practices: WBC provided customers the access to the correct advice to achieve
secure retirement. ANZ gives banking services like online or mobile banking to provide
best access to the consumers. NAB manages the fund efficiently in order to enhance its
customer confidence and offers fair services to them. A disciplined financial control
system was developed by CBA for bringing current value to the customers.
 Social practices: WBC performs various practices like ‘prime of life’, ‘International
women’s day program’ and ‘women of influence awards’ and also provides employment
to many Australian people. ANZ creates the most diverse workforce and conducted
trainings and graduate programs for the disadvantaged people. Investment in local
businesses and industries was done by NAB to create good financial as well as social
returns to the local people. CBA provides finance for educational programs for creating
new technologies and practicing ICAL (indigenous customer assistance line).
Question 4
Mitchell et al. define power which can influence firm to the extent where the party gains the
access by physical means, normative means and material means so as to influence the firm with
it in a direction the organization wants.
Legitimacy has been defined as an assumption in general in which company is bound to operate
in a desirable, proper and socially constructed system of values, beliefs, norms and definitions.

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The third attribute is Urgency which is defined as the degree where stakeholder titles for instant
attention and it not only depends on time but on the relationship with stakeholders also and the
due importance on the claim they call for.
CBA’s key stakeholders group consist of Customers, Employees, Investors community,
Suppliers, Media, Government and regulations, Community and non-government organizations
and lastly Service providers and academics (Madsen, and Rodgers, 2015).

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Power: The stakeholders are varied and prioritize their engagement based on the standards they
have to follow which is AA1000 Accountability Stakeholders Engagement Standard. Investors,
Customers, Employees, Government and Regulations are the stakeholders who directly or
indirectly impact the bank’s legal activities and performance as they hold the powers to influence
the bank as a whole in some significant terms. CBA have not treated their stakeholders ethically
as it was all in the news of accounting scandal where customers were exploited. It charges high
interest rates, excessive fees and high bank charges from their customers which resulted in a
huge customer loss. But the bank took necessary steps to remediate such loss bear by customers
(Tashman, and Raelin, 2013).
Legitimacy: The organization knowingly ignored the wrong happenings going around in the
business and did not follow the set norms, beliefs and values. This was a live example of
unethical practices that they follow in their operations so in this case stakeholders were treated
unethically. It was intentional to hide facts from stakeholders.
Urgency: In this case CBA has treated their stakeholders ethically by announcing remediation.
They announced remediate immediately to those who has suffered from such big scandal
happened. The bank decided to pay a total amount of $80 Million to its customers (Yeates,
2015). Their step of remediation shows the degree of time-sensitivity to react on the critical
situation that arise at that point of time and this action shows the importance of the claim made
by stakeholders.
Question 5
Some of the ethical principles are already included in legislation of banking system of many
countries in written but in few there isn’t such legislation written but it is to be put in practice as
they are not just written laws but to follow them in practice (Buckley, and Stanley, 2016). The
recommendations are to be provided in order to make the bank more ethical in future and can
change their image in the mean-time only by following such measure into their operations. These
recommendations are as follows:
Transparency must be maintained: There are times when banks must provide a relevant
information to their stakeholders internal or external. Even if it is prohibited to share information

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with certain people but it should be depend on the requirement of the situation where sharing
such information become necessary. (Gupta, Briscoe, and Hambrick, 2017).
The Social Role: The social function must be keep in mind while making investments. As it is a
known fact that in any case where there is a financial failure in bank it will affect the whole
society as well and the economic activity. So the social role of bank must be reprioritize and
must be taken in the decision making process (Commbank.com.au, 2017).
Assigning Credit: While giving credit, banks mainly consider profitability and solvency factors
in it, in addition to the same they must consider the activity where the credit is assigned to and
the social value of that activity (Oates, and Dias, 2016).
Poor Recommendations: It is often that clients are advised by employees of bank to take up some
policy or buy financial products or any investment advice to which they are not even suitable. So
it is recommended that not to put any kind of pressures on clients and only suitable and weigh
out the advice.
Other recommendations include not cooperating with the ethical practices and behavior in the
organization, must carry a sense of responsibility for social activity, while making decisions
bank must look for more of ethical solutions rather creating any dilemma and there must be a
fine administration of funds as it is also a property of shareholders.
Conclusion
It is concluded that a proper analysis is done to address the objectives of the study by mentioning
the major ethical issues faced by CBA, its mission, vision and code of conduct and actions taken
by the bank for its corporate social responsibility. The three attributes have been explained in the
context where it was shown how the stakeholders have been treated unethically. The
recommendations have been provided for the same it is suggested to use them in their business
operations to make the bank ethical in future (Saeidi, Sofian, Saeidi, Saeidi, and Saaeidi, 2015).
The internal and external factors that influence banking ethics are:
 Job performance: the employees take unethical steps to meet their targets and enhance
their performance. This breaches the ethical code of conduct of the institution.

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 Competitors: to survive in the market and to deal with the number of competitors,
banking and finance managers need to take unethical decisions which results in breach
of ethics.
Other factors like legislation, rewards and many more also influence banking ethics. There are
many benefits of managing ethics in a bank. Having ethics in banking sector gives surety that
the policies and operations of bank are legal. Establishment of an ethical code of conduct results
in building a strong public image. So on a whole, ethics do provide many benefits to the sector in
every aspect.
This study also has certain limitations like it is wholly based on the secondary data collected
from online sources. It is only related to the ethical aspects of Commonwealth Bank of Australia
and do not contain the whole information about the bank and its practices.

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