Managing Ethical Scandals in Commonwealth Bank of Australia: A Public Relations Perspective

This article discusses the ethical scandals faced by Commonwealth Bank of Australia, its impact on the bank's image, stakeholders' analysis, existence barriers, and the role of PR in crisis management. It also provides recommendations to enhance its CSR.

Running Head: Public Relations theory practice
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Public relations theory practice
8/11/2018

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Introduction
Commonwealth Bank of Australia (CBA) is an Australian multi-national bank with
companies across Asia, New Zealand, the United Kingdom and the United States. It offers a
range of economic services comprising business, institutional, and retail backing, broking
services, reserves management, investment, assurance, and superannuation. It is the largest
bank in the Southern Hemisphere. This bank is one of the “enormous four” which is listed on
the Australian Stock Exchange in 1991. They have selected a new CEO who presently has a
huge accountability on his shoulders (Howell, 2015).
In 2018, discoveries from the Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Business have demonstrated a negative philosophy
within the bank, among claims of misrepresentation, deception, and tax evasion, among
various other crimes. Its vision is to exceed expectations and enhancing the well-being of
individual, business, and communities. To accomplish the organization argues that it has to
win the trust of the people it serves. The bank reinforces the trust of the client to ensure
success. CBA’s values incorporate collaboration, integrity, excellence, responsibility, and
service (Otchere and Chan, 2003). This value guarantees that clients have to be taken care
efficiently and competently so that outcomes in their satisfaction match with the
organization’s services. It advances the policies of environmental stewardship in computing
environmental footprint and enabling the use of renewable energy. It also develops a
disciplined monetary control system and committed governance for getting the current value
to clients.
In the following, an effort has been made to describe ethical standards through public
relations theory, identify the barriers to the organization, and recommendation to enhance its
CSR.
Analysis of the ethical scandals
Commonwealth Bank of Australia has faced many ethical standards that have influenced its
reputation and bank works continuously to legitimize its reputation. Some of the main
scandals faced by CBA are –
 Bank official charged allegedly over the bribery scandal.
 Bank staff concerned in alleged $76m fraud.

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 A vast majority of financial Planners betrayed client’s interest.
Accusation over bribery scandal-
In bribery, scandal two Commonwealth Bank administrators, Keith Hunter (Previous director
of Technology Service Management) & Jon Waldron (GM of bank’s IT engineering
answered to Keith Hunter) were accused over a bribery scandal with a U.S based Technology
Company in 2013 with two counts of bribery. The co-conspirator Waldron was accused with
seven counts of receiving unethical payment associated to a lucrative agreement, which was
given by CBA to the Californian, centred IT firm Service Mesh. They helped them to secure
major IT tender to deliver products & services without putting it to general. Waldron &
Hunter expected a payment of almost $2.2 million in 2014 from an NGO, which was fixed by
Service Mesh. The bank identified in response to the scandal that they do not accept any
offense or illegal action by any of the banks' employee and will take genuine action. They
announced “Anti-bribery and corruption strategy and programme” in light of these scandals
(McIlroy, 2018).
Bank staff implicated over alleged fraud-
Bank staffs were apparently collusion in a $ 76 million Ponzi scheme and got undisclosed
commissions for their part in the suspected deception, which was overlooked by the bank's
administration for nearly five years-until forces were alarmed. Mr Zaia and Mr Jordanou are
alleged of using fake documents to acquire millions of dollars for some proper advances that
certainly not got off the ground. Assets were supposedly guided from client’s accounts
without their approval. Documents acquired by the Fairfax Media disclose the range of the
bank’s contribution and its disturbing integrity failings (Buckby, Gallery, and Ma, 2015).
Deceived client’s interest-
The head of financial advice for Anthony Regan, concedes he lost count and mislead the
corporate regulator, ASIC which compels to introduces public relations practices and
programmes. The company has suffered financial loss and failure to provide on-going
services (Sujan and Abeysekera, 2007).
Stakeholders’ analysis
One of our commitment series of forums are devoted to progressing our stakeholder
engagement, which includes-

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 Customers- Their engagement mechanism is related to: -
 On-going appraisals of satisfaction, complaints related to products, service,
and feedback
 Multi-channel commitment, comprising face-to-face customer involvement
 Sovereign and proprietary customer reviews
 Customer workspaces
 Communal group reviews
 Customer backer
 Call centres and grievances networks
 Social broadcasting
 Commitment with customer agents and organizations
 Conventions with relationship supervisors
 Conferences with advisers
 External quarrel resolution
Employees
Investors
Suppliers
Media
Government
and
Regulators
Community
Organization
Customers
CBA

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 Employees- They are influenced by the negative publicity adjoining the scandal such
as: -
 On-going appraisals of employee engagement and feedback beliefs, policy and
significances
 CEO and Group Administrative in-boxes
 Ad hoc reviews
 Social and digital platform
 Team conferences and training
 Employee actions and Town Halls
 Group widespread appraisal should be conducted (Martin, Evans, Rice, Lodhia
and Gibbons, 2016).
 Investors- They are accountable for raising debt backing for the bank from the
national and international debt market
 On-going negotiations regarding performance related matters
 Monetary and non-monetary reporting
 Seminars
 Conferences
 Assessments
 AGM
 Suppliers- They support in enhancing commitment to provide products and services
for our organization, people, community, and the economy to upgrade value and
manage supply chain
 On-going debates associated to standards, commercials, and issues
 Supplier conferences, seminars, and workshops
 Risk valuations
 Modernisation programs
 Supplier protocol and Renewability Questionnaire
 Supplier reviews
 Media- They make an important announcement to brief community about subject
matters

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 On-going matters associated with topics of concentration
 Meetings, conferences, and emails
 Updates and media releases
 Digital platform
 Government and Regulators- They make innovation in Financial services and banking
reform should be regulated
 On-going considerations associated with the monetary services production,
advocacy, and reform
 Summits
 Proposals
 Inquiries and commissions
 Financial establishment associations
 Community Organization- Their engagement mechanism is associated with education
diversity, charity partnerships, customer assistance, disaster belief, and sustainability
(Chan, Watson and Woodliff, 2014).
 Contribution on a variety of external recommended panels
 Industry associations
 On-going conferences with partners
 Phone calls and emails
 Sponsorship of events, forums, and summits
Impact on the image
The Commonwealth Bank has perceived its six months profits drop after it was enforced to
set aside $375m as arrangement against possible fines for charged money laundering and
subsidizing of violence. It has reported that its ultimate set of results under outbound CEO
Ian Narev, that its half-year money profit fell 1.9 % to $ 4.735bn. Statutory benefit for the six
months has dropped to a vast extent and market volatility remains at a risk given continuous
global uncertainty. The scandals in the bank have inflicted competitive image and reputation,
which has been spoiled by significant misconduct in its financial planning (Moradi-Motlagh
and Babacan, 2015). They have consented to $25 million to settle legitimate activity against it
by ASIC over bank charge swap rates. It has visible it to billions of dollars in potential
penalties and lost monetary statements of 20 million account holders. It has engaged in the
unconscionable behaviour, which could not monitor communication and trading of personnel.

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They have to pay penalties to financial customer and ASIC. It comes in the wake of critical
revelations uncovered by the banking royal commission.
Meanwhile, an investor legal claim against CBA alleges that the bank did not consent to its
continuous exposure commitments to inform shareholders about the Austrac examination.
After the money laundering case, there is a possible lack of resourcing and compliance
functions at the bank. It has prompted to years in prison for launderers, an A$4bn fall in CBA
market estimation and the government's declaration of a public inquiry into unfortunate
behaviour. They have lost people trust and confidence they play in the brand as a social
image is associated with the customer perception. Customer sentimental attachment and
recognition is attached to the brand when it is breached satisfaction decreases. They are
accused of penetrating Counter-terrorism financing and Anti-Money Laundering Act over
mutual cash deposits. CBA admitted utilizing unscrupulous practices that conned individuals
out of life insurance payments, and Mr Narev apologized publicly after found to have given
clients poor money-related advice (Cummings and Durrani, 2016).
Analysis of existence barriers
The bank is an established business, and it becomes tough to adopt an innovation, as it will be
tedious to bring variations in the organization. It was currently understood that the greatest
hindrance to the bank is –
 Regulator- The regulatory hindrances should be detached so that the financial sector
can be intended to provide greater retirement items to fulfil the requirements of the
women. The barriers should be detached which the stops the cost-adequacy in
planning the income stream product since it can cause risk (Hamman, 2016).
 Misconduct- The bank is losing their clients because of the misconduct of the staffs
associated with the financial issues. In recent years, it was distinguished that the
personnel working in the bank were not executing their responsibilities according to
the compliance. They were engaged in a forgery of facts and documents, which
prompt to the huge financial damage. This unethical conduct of the personnel caused
an extreme harm to the reputation of the bank. Numerous clients discontinued their
accounts with the bank and opened in some other banks.
 Ineffective control- Due to ineffective control framework within the organization, the
personnel were successful in making unreasonable financial advice to the customers

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associated with the investment and bank accounts. Personnel were involved in making
forged signatures and manipulating the customers to make wrong choices. At the
point when the allegations were proved right, after a critical investigation, the
personnel were suspended and dismissed from work. An effective control framework
is must to keep in mind the activities performed by the workers. Proper records of all
the transactions should be sustained so that they can be confirmed as and when
required.
 Hierarchical Structure-The bank follows a hierarchical arrangement in the
organization where only the top management is permitted to participate in decision-
making and policymaking. They have an inflexible working procedure and are not
willing to conform to the dynamic variation that takes place in the business
atmosphere. It is still centred in the following the inflexible structure in the work
procedure and because of this the opponents are performing and CBA is missing
behind (Wagland and Taylor, 2015).
 Technological Changes- The bank is not able to adapt up to the technological
variations, clients are frequently complaining about the improper online
administrations. Customers are documenting complaints with respect to this matter on
social media, which is abolishing the association of goodwill in the market. Clients
are switching their businesses and accounts with different banks that are providing
better services.
Role of PR in Crisis management-
Public relations remain to be an integral part in managing the crisis and reconstructing the
reputations of the banks. Banks are currently connected on all sides to react to the public trust
entanglement while accusations of poor business practices proceed. It combines the public
distrust with flows of lawsuits from offended parties at all levels of the loan securities market.
PR experts know how to change public perception with the right words and marketing
campaign (Liu, 2015). They also know that supporting their customers with the right
strategies can mitigate many issues that accompany with a public crisis. Disaster management
is most likely best-known roles among other parts of PR (Sheehan and Quinn-Allan, 2015).
PR specialist will assess the situation and offer advice on what the banks should do to solve
the problem. To provide the right supervision, PR experts need to assess the background, the
type of the current disaster, and the immediate context, so that they can suggest a systematic

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guide on dealing with the incident (Drennan, McConnell and Stark, 2014). They should know
which viewers they should address first when making an open declaration, which terms they
should avoid, and their response matters. They react to what happening in the media and offer
continually updated advice on the best way to deal with the circumstance. They should
support statements and materials on behalf of the client, while at the same time schedule
interviews and meetings with the media to guarantee that it comes off in the most ideal light.
They should offer insights on maintaining the brand loyalty of their shareholders, investors,
and customers (Liu, Cutcher, and Grant, 2017).
After the initial crises have conceded, PR has to begin strategies to reconcile the damage that
was finished during the calamity. For example, they may create a proposal that attracts more
attention to the positive part of the brand's identity. They should set up important interviews
and press releases to help take most of the public attention away from the event that happened
and help the bank in returning to as usual (Ciro, 2016).
Press release to the shareholders
Commonwealth bank delivers a press release after scandal in which they announce an annual
report on 9 August 2017 by CEO Ian Narev and CFO Rob Jesudason. Commonwealth bank
performance this year has again donated to the monetary prosperity of our investors, our
people, clients, and the Australian economy. This is the consequence of our reliable focus on
innovation, client loyalty, and economic strength (Brown and Karpavičius, 2017).
This announcement provides:
 A summary of the improvements made to financial reporting; and
 An updated financial full-year profit was announced.
Financial report improvements-
Minor improvements have been made to the distribution of the customer balances and related
revenue and expenses between business sections. The group has changed its accounting plan
in connection to long-term incentives delivered to specific employees in the Global Asset
Management business, to support the accounting treatment with characterized commitment
plans under employee benefits. Minor improvements have been also made to the revelation of
Fund under Administration (FUA) balances (Reinig and Tilt, 2008).

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Financial full-year profit-
Following enhancement to approach in the recent period, there was a variation to the
arrangement of credit disclosures by credit grade for advances, which neither were due, nor
debilitated (Schlagwein, Thorogood and Willcocks, 2014).
They talked about the strong point of CBA’s monetary performance has reinforced the
Board’s aim of steady dividends for investors. CBA dividends are remunerated to in excess
of investors and through their super funds. They have focussed on enhancing and securing the
financial comfort of individuals, industries, and the communities, and the arrangement of
assurance items to our clients. They support clients through technology and convey great
customer experience through channels (Willcocks and Reynolds, 2015).
Recommendation
 CBA should strengthen governance, management of non-budgetary risk, and
misunderstanding.
 They should achieve better clients and risk outcomes
 They should more responsible, customer-centred, and transparent culture.
 Taking a proactive approach to deal with situations and improve execution.
 Supporting the inducements of banks with communal benefits is greatly assisted by
increasing the responsibilities of directors to take into consideration societal and
ecological elements (Williams, 2016).
 Describing disclosure necessities and protecting these in business governance
framework would help to coherences values, rise comparability and increase
clearness, while reducing facts irregularity and the incidence of ethical exposures.
 If an activity has a supposed hazard of causing damage to humanity or the situation,
the liability of proof should fall on the potential investors of the activity.
 The administration should more aggressively satisfy its responsibility as the protector
of public attention.
 A renewed focus on listening to clients and enhanced framework and methods are
implemented for reporting and settling client grievances (Steen, McGrath and Wong,
2016).

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Conclusion
Commonwealth Bank of Australia offers financial and banking services. It offers them to
small business, retail, corporate, and institutional customers. A robust banking area is
condemning to a strong economy. Many have contended that bank was shielded from the
poorest effects of the Global Monetary Crises. Their reputation has accepted a major hit over
financial advice scandals and an enormous money laundering case. ASIC has started
legitimate action over apparent market control. These are claims that could eventually cost
the bank billions of dollars in penalties. The alleged ruptures of money laundering and
terrorism financing enactment were the most recent in a progression of scandals that had
extremely damaged brand CBA.
To be strong bank build upon the support of their investors, the trust of their clients, and an
active working relationship with regulators and government. The Big 4 Australian banks
were the largest companies on the Australian Securities Exchange. There has been an active
debate about whether the Australian banks should pledge a Royal Commission into banking
business practices. They are constructed in a foundation of trust and they have to win that
trust through being vulnerable and answerable at all times. Therefore, it is important to
advocate widespread adoption of CSR without considering the consequences.
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