Ethical Issues in Business: Banking and Financial Services Industry

This article discusses the ethical issues faced by the banking and financial services industry in Australia. Lack of transparency, emotional manipulation, and breaching professional standards are some of the issues discussed. The article also relates these issues to ethical theories and their impact on the industry's reputation and customer loyalty.

Running head: ETHICAL ISSUES IN BUSINESS
ETHICAL ISSUES IN BUSINESS
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1. Introduction
The different ethical considerations help in maintaining the proper functioning of the
business while operating as per the objectives of undertaking a fair entity. The ethical
standpoints of the business contribute to the sustenance of the same while operating in the
different offshore markets. Establishment of the Banking Royal Commission in the year 2018
was undertaken in order to investigate of the different misconduct in the banking, superannuation
and financial services industry (Wishartand Wardrop 2018). The reports that were shared by the
Royal Commission clearly portrayed that there are different ethical issues that are faced by the
banking and financial service providing industry. The ethical issues have affected the proper
functioning of the organizations as per the objectives of the business. The discussion brief
emphasizes on the identification of the different ethical issues that are faced by the banking and
the financial; service providing industry and thereby relate the same with different literature and
theories that are perceived by the researchers earlier. It will be helping in identifying the ethical
standpoints of the organizations while operating as per the objectives of the business.
2. Enumeration of the three issues
The different issues that are faced by the banking and the financial service providing
industry are:
 Lack of transparency in the business processes and resistance to investigation- There
are instances where the banking organizations have taken steps to maximize their profit
margins through lack of transparency in the operations. The banking sectors in Australia

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should have operated as per the IFRS (International Financial Reporting Standards),
which emphasize on fair reporting systems of the organizational position. However, in
many cases, the organizations resist over the investigation that are undertaken by
different agencies in order to maintain their secrecy of operations
(MoosaandSilvapulle2012). For an instance,in 2016 the Commonwealth Bank of
Australia lost almost 20 million customer accounts due to a security breach. However, the
bank authority did not inform its customers about the breach in their customer details.
Moreover, during the investigation the CEO Ian Narev deliberately expressed that there
was no loss of customer information in order to stop further investigation (Hutchens,
2018).
 Manipulating customers emotionally by exploiting their vulnerabilities- Making use
of the emotional attachment of the customers in order to maintain the profitability of the
banking institution is again a legal and ethical constrain that is characterized by lack of
transparency in the processes of the business. Adherence to the ASIC (Australian
Security and Investment Commission) standards would have helped in enhancing the
banking operations by avoiding manipulation of the customers. Exploitation of the
vulnerable elements that might affect the thinking capabilities and pressurize the same in
order to undertake dealings with the financial organization is an ethical discord where the
organization resorts to deceptive elements in order to retain the trust and loyalty of the
customers. Misleading the customers for investing into different schemes through the
promises of financial benefits also affects the morality of the organization to undertake
fair trade with the customers (Subramanian 2013). According to the report of Reuters the
National Australia Bank Ltd is alleged to manipulate the customers in such a great

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manner. In fact, the employees are forced to do such thing because of the prevalence of
huge bonus and incentives that encourage the bankers to meet the targets by any means.
Fraudulent activities are also an intrinsic part to extract more profit for the company
(Barrett and Duran 2018).
 Breaching a professional standard or a benchmark, which is widely accepted-
Breaching of the professional standards by the organizations affects ethical undertaking
approach of the business. The key idea of breaching a widely accepted conducted is
based on the enhanced chances of profitability of the business (Wehinger 2013).
However, organizations face a dilemma of maximizing the profit through compromising
the brand name of the same or vice versa. The breaching of a professional standard in
order to exploit the customers can be taken as one of the most important ethical issues
that are faced by the banking and financial service providing sector. Therefore, the Royal
Commission has taken steps to investigate on the activities that are undertaken by the
banks and the financial service providers in order to prevent such unethical activities in
the banking sector. As per the report of Royal Commission, the Commonwealth Bank of
Australia charged clients fees even after their death. The investigation specifically looked
into a case where the CBA financial planning arm was charged fees for a client from
2003 to 2015 despite she passed away in 2004 (Danckert 2018).
3. Discussion of the ethical theory and the manner in which the situation is unethical
Normative ethics studies the morality of the actions or deeds that are performed by the
people or organizations.Rossi and Sleat (2014) stated that the consideration of the
Normativeethicshelps in judging the different actions as per the moral bindings. The different

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moral interventions and conventions helps in judging the actions that are undertaken by an
individual or a group. In this connection the unethical practices that are undertaken in the
different banking and financial sectors has affected the interests of the customers and the chief
investors. The bribery and fraudulent activities has affected the loyalty and trust of the customers
towards the banking and financial industry (Starnawska 2015). Therefore, the application of the
Normativeethics in the practices that are undertaken by the banking and the financial service
providing organizations would bring about positive changes in the functioning of the systems.
Crane andMatten (2016) noted that the Normative ethics purely coincided with the outcome of
the different activities that are undertaken by the individuals or groups of people. in this
connection, the different ethical misconducts that are undertaken by the banking and financial
service providing industry has led to a breach in the professionalism which has affected the
brand name and the loyalty of the customers. The different issues that are faced by the banking
industry in the recent years are correlated to the compromised normative ethical bindings, which
have affected the goodwill of the businesses as an outcome. Matthews (2016) stated that the
growth in the fraudulent activities in the banks has affected the trust of the people who feel
reluctant to invest on the activities of the banks for getting a fair return on their investments. On
the other hand, Rossi and Sleat (2014) stated that deception and bribery affected the functioning
of the banks which is uncovered by the application of the normative ethical standards which
focus on the outcomes that are unraveled by the unethical activities.
Conclusion
Therefore, it can be concluded that the proper functioning of the systems of the business
undertakings and its decision making attributes are mainly based on the ethical considerations.

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The ethical considerations influence the proper functioning of the business systemswhile
upholding the brand name and loyalty among the customers of the same. Different ethical issues
are faced by the banking and financial service providing organizations, which are being
investigated by theRoyal Commission. The application of the ethical theory has helped in
underpinning the different aspects of the unethical nature of the activities that are undertaken by
the banking sector and the manner in which they affected the loyalty and trust of the customers
in the industry.

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References
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Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
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Danckert, S., 2018. CBA charged client fees for 10 years after death. [online] The Sydney
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charged-client-fees-for-10-years-after-death-20180419-p4zag1.html [Accessed 24 Sep. 2018].
Hutchens, G., 2018. Commonwealth Bank: information watchdog 'dropped the ball' over huge
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