Corporate Governance and Social Responsibilities of National Australia Bank

This report discusses the corporate governance and social responsibilities of National Australia Bank (NAB) based on ASX 2010 Principles and Recommendations. It analyzes the conduct of NAB, stakeholder theory, corporate governance theories, agency theory, stewardship theory, corporate social responsibility, and ethical theories.

Running head: CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES
Corporate Governance And Social Responsibilities

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 1
Contents
Introduction................................................................................................................................2
National Australia Bank Conduct..............................................................................................2
Stakeholder Theory....................................................................................................................3
Corporate Governance Theories................................................................................................3
Agency Theory.......................................................................................................................4
Stewardship Theory...............................................................................................................4
Corporate Social Responsibility (CSR).....................................................................................5
Ethical Theories.........................................................................................................................5
Deontology Theory................................................................................................................5
Utilitarianism Theory.............................................................................................................6
Justice Theory........................................................................................................................6
Corporate Governance Discussion based on ASX 2010 Principles and Recommendation.......7
Recommendations......................................................................................................................8
Conclusion..................................................................................................................................8
References..................................................................................................................................9

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 2
Introduction
In this report, the corporate governance and social responsibilities of the National Australia
Bank (NAB) will be discussed. The National Australia Bank (NAB) is among the top
financial institutions of Australia. NAB is also the listed company of the Australia Stock
Exchange (ASX). Recently in the report of the Banking Royal Commission the conduct of
the bank has been in question (ABC News, 2018). Banking Royal Commission is a body that
conducts inquiry, set up by the Crown on the recommendation of the government. The
importance of stakeholders for a company will be elaborated in this report. The Corporate
governance of the NAB will be analysed from the corporate governance theories, theories of
the Corporate Social Responsibility and theories of Creating Shared Value. The discussion on
the Corporate Governance of the National Australia Bank is based on ASX 2010 Principles
and recommendations. The Directors conduct will be analysed by the ethical theories as well
as the theories of justice and economic distribution.
National Australia Bank Conduct
The Banking Royal Commission had submitted his report in that various conducts of the
employees of the National Bank of Australia had been coming into the Banking Royal
Commission misconduct. The Staff of the NAB had been found to be in the bribery in the
banking Royal Commission inquiry. They are found to be charging unnecessary fees from the
clients for the services they had not provided. They had also found charging fees from the
clients who are already died (Hurchens, 2018). The NAB was criticized for hiding the
information from the Australian Securities and Investments Commission (ASIC) for the scale
of fees for no service. The major misconduct was between from the year 2009 to 2015 where
the staff of the bank had been found to be in the inappropriate planning. Many of the financial
advisors of the company had breached their duties and their license had been terminated by
the ASIC (Bartholomeusz, 2018). The commission has been given to the gym trainers and the
non-financial experts in the introducer program for referring the clients to the National
Australia Bank (NAB). Major breached like forged documents for settling down the loans. It
was also revealed in an article of the newspaper that there is volatile and a toxic culture in the
bank. It can be concluded from the report that there been an issue in the corporate governance
and in the ethics of the directors of the National Australia Bank (Hurchens, 2018). However it
is not proved that the bank has conducted these things but due to the series of scandals that

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 3
had been comingthere is poor corporate governance and the ethical culture in the organisation
(Bartholomeusz, 2018).
Stakeholder Theory
The Stakeholder theory is being recognised as the well-known theory of the corporate
governance. As the name suggests the Stakeholder Theory is about the stakeholders of the
company. The Stakeholders states that the shareholders are just one of the stakeholders of the
company. The stakeholder theory is a bigger term as it includes customers, investors,
government, people, employees and the others. The stakeholders should be a first priority for
the company as the success of the company depends on its stakeholders. The company is
required to take care of the interests of the stakeholders to run in a long way. Therefore it is
required that companies must consider the priorities of the stakeholder in making plan and
policies. It becomes necessary that the companies not only took the interest of the shareholder
to be in the priority but also the interest of the stakeholders should also require to be
considered. The National Australian Bank has not taken the interest of the stakeholder in the
priority as the clients had been cheated by the bank employees. They had charged
unnecessary fees from the clients for no services. The Company had cheated their clients and
has done unethical practices and they had made forged documents for settling down the
loans. The director of the companies has the duty towards their customers who are the part of
the stakeholder theory but they had failed to give priority and its results they had faced a lot
of criticism in the country for their Misconduct. The company has faced a legal, social,
economic and the political implication due to the non-implication of the Stakeholder Theory.
Thus from these types of breaches it can be said that the bank has failed to apply this theory
in their organisation. This theory main motive is to suggest that the companies not only
consider or work in the shareholders but they are also required to work for the interest of the
Stakeholders. It can be said from the conduct of the NAB and its impact that the stakeholders
are the main part of the organisation (Heath, 2018).
Corporate Governance Theories
The theories of corporate governance will guide the companies to how to make a good
governance environment in the company.

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 4
Agency Theory
This theory states the relationship between the shareholders and the executives or managers
and the shareholders. The Agents are the executives or the managers of the company and they
work for the principal. In this Theory, the principal is the shareholders who hire agents so
their interest can be fulfilled. So According to this theory, the directors, managers and the
executives of the company must work in the interest of the shareholders. This theory states
the relationship between the principal and the agents and they must work in Cooperation so
that that the company interest must be fulfilled. However, sometimes it does not goes like this
and they do not see the interest of the Shareholders but see their own interest. In the report of
Banking Royal Commission, it was revealed that the staff of the National Australia Bank has
been found to take the bribery and the series of these scandals was out in that report. The staff
of the company has not followed this theory and this results tha it affects the company
reputation. If the staff of the bank has followed this theory than might this implication would
have not been possible. The staff of the NAB for the opportunistic behaviour has forgot the
interest of the shareholder. They had failed to meet basic motive of this theory to separate
ownership and the control but according to th report of the Banking Royal Commission it has
not been followed (Finacial Management, 2018).
Stewardship Theory
The Stewardship theory is related to the protecting of steward and increasing the wealth of
the Shareholders. It can be only possible by the good performance of the company. Stewards
are the executives and the managers of the organisation and they must work for the
shareholders. This theory is very different from the agency theory as in this theory
individualism has not been practised and the goal of the organisation and that of stewards.
The better results can be acquired for the company and there is a responsibility of the
company to satisfy the needs of the stewards and the autonomous actions of the executives of
the executives of the company. The National Australia Bank has failed to comply with these
theories as is required by the companies to operate in the manner as the management of the
company has failed to work in the interest of the company. The management has the work for
increasing the wealth of the organisation but due to the misconduct of the management, the
company has paid millions of money as compensation to the clients. The company has
suspended many of his employees who had been found to be in the suspension of the
employees. Hence, it is proved that this NAB and his staff have failed to comply with the

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 5
Stewardship Theory. This theory is also been suggested for unifying the roles of the CEO and
the (ChairmanCarroll and Buchholtz, 2012).
There is required for the NAB to apply both these theories in the organisation for the better
performance and these types of acts cannot be repeated. The Corporate Governance theories
has its own impact on the organisation and if failed like NAB than it can lead to severe
results. The organisation had been required to adopt the changes that can happen in the
organisation
Corporate Social Responsibility (CSR)
The Corporate social responsibility has the movement aimed at encouraging the companies to
get more aware of the impact of their business on the rest of society, including their own
stakeholders and the environment. The Corporate Social Responsibility is the business
approach contributes to sustainable development by delivering the social, economic and the
environmental benefits of all the stakeholders. The National Bank of Australia has failed in
Corporate Social Responsibility. The Company has focussed to fraud practices like charging
fees for no services. These acts of the NAB staff has created an anti-social impact and failed
to take care of their stakeholder but they only cheated their stakeholders. The Company has
nowhere followed this theory and that has a major impact on the society. To achieve the four
aspects of this theory is difficult but the NAB has failed to comply with any of the aspects.
Thus, the National Australia Bank can be said to have failed to apply this theory on every
aspect(Grindle, 2017).
Ethical Theories
The theories of ethics are the guidelines to the companie to follow the ethical culture in the
company. The NAB must take guidance of Ethical that how to implement the theories of
guidance that is required to implement in this guidance that how the implementation of these
theories can help the organisation. These theories guide the companies to take decisions
(Akhigbe and Zolnourian, 2018). These theories are-
Deontology Theory
This theory suggests that while taking the decision it is necessary that they must take care of
their duties and the obligation when the ethics are in play. This means that the person will
follow his or her obligations to another individual or the society because upholding one’s

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 6
duty had been considered ethically correct. It is said that the deontologist will always retain
the promises as a friend. The companies who stick to the deontologist theory produce very
consistent results because these decisions are based on the individual’s set duties.
However,those companies who failed to apply thetheorythey are required to understand that
this theory implication is in the interest of the company. The National Bank of Australia is
required to take guidance from this theory of deontologist.The staffs of the company have not
followed this theory while making decisions. As the Staff has not showed their duties and
obligations while making the decision that has affects the companies in many ways
(McCahery, Sautner, and Starks, 2016).
Utilitarianism Theory
This theory is based on the one able to predict the consequences of a certain action.
Utilitarianism is divided into two parts, act utilitarianism and rule utilitarianism. Act
Utilitarianism is an act of a person performed that benefits the many people not regarded as
the personal feelings or the societal constraints such as the laws. Whereas, the Rule
Utilitarianism takes the law into the account in consideration with the fairness. It benefits the
most of the people it is considered through fairness and through the available just means. It
gives justice and includes the beneficiaries at the same time. The National Australia Bank has
failed to apply these theories tothe culture of their organisation. Therefore, in the reports it
had been stated that the culture of the NAB is a toxic and unethical culture in the bank. The
work of the NAB is not at all justified according to this theory. The work is not done with
fairness and in accordance with the law (Filip, Saheba, Wick and Amir Radfar, M.D.2016).
Justice Theory
This theory of John Rawls is based on the surrounding justice. These theories help the
individuals to cope up with the ethical dilemmas. Rawls had viewed that every individual has
an equal right that is the most extensive basic liberty that is companionable with the related
liberties for others. Rawls has also provided the freedom that one can engage in the activities
till the time he or she will not infringe the rights of others. The NAB staff had infringed this
theory as their staff had infringed the rights of their customers. The Justice Theory also states
that the difference in the socio-economic culture should be set aside so that everyone can take
the advantage and the positions and the offices should be open to all. The National Australia
Bank has failed to apply these theories tothe culture of their organisation. Therefore, in the
reports it had been stated that the culture of the NAB is a toxic and unethical culture in the

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 7
bank. The bank has cheated with millions of amounts that is the infringed of this theory
(Filip, Saheba, Wick and Amir Radfar, M.D.2016).
Corporate Governance Discussion based on ASX 2010 Principles and
Recommendation
The Corporate governance principles and Recommendations are that every ASX listed bank
has to follow these principles and Recommendations. These principles and recommendation
are therefore for the good governance of the company (Arora and Sharma, 2016). The
National Australia Bank has also in their annual statement has stated that they had approved
all the recommendation of the ASX Corporate governance (NAB, 2018). These principles lay
that the company must lay down a solid foundation for the management of the company. The
other recommendations like that the organisation must structure that can add the value and
the acts should been ethical and responsible (Macey and O'Hara, 2016). It is important for the
organisation while reporting that it can safeguard the corporate integrity. The company must
time to time make disclosure so that it can help the shareholders and the investors can take
the information from the website of the company. The principles recommend that the
organisation must respect the rights of the security holders. The bank must implement the
programs for the benefits of the security holders (Grindle, 2017). The principles say that the
risk has been recognised and it had been managed to recognise that risks. The suggestion
made by the ASX that the organisation must make the committee for the remuneration
distribution, so the remuneration and can be done fairly and responsibly. These suggestion
and the principles that has been recommended by the ASX the bank has to Comply and in
failure to do so than there been a huge penalty. The ASX principles are so that the
corporation can conduct good governance in their organisation. The NAB has also stated that
the company must have followed all these principles and all the steps have been taken for the
good governance in the organisation (NAB, 2018). The NAB governance cannot be proved
the good governance after the revelation in the report of Banking Royal Commission that the
bank conduct had been found doubtful. The series of scandals of the bank staff had been
came out. The unethical and toxic culture of the organisation proved that bank has failed to
apply the principles of the ASX in their organisation. The NAB has breached all the
principles and the recommendation of the ASX (ASX Policy Charter, 2018).

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 8
Recommendations
It has been analysed that the NAB has failed to provide good governance in their organisation
and therefore the companies are recommended that for the good governance firstly they have
to follow the ASX principles and Recommendation. If these principles were taken seriously
by the NAB than there may be the unethical culture had not been emerged in the
organisation. The companies must start the training programs in the organisation in that the
ethics should been guided (Arlen and Kahan, 2017). The NAB also must ensure that the
directors and shareholders work in the cooperation so that the shareholders should been
informed with every decision of the management. It is required that the organisation must
work like the family as there been a familiar environment been created in the organisation.
The company must ensure that every employee has been monitored by the top management
on the timely basis. The NAB directors must do work more than their skills and expertise as
they can push back their hands by giving the excuse that work was is not of their expertise
(Royal Commission, 2018). These recommendations if the bank has taken into account before
as it was informed about the acts of their staff that have charged fees from the client for no
services can be prevented if was timely monitored by the bank (Martínez-Campillo, 2016).
Conclusion
It can be analysed that the corporate governance is an important part of the organisation. It
can say from the report of the Banking Royal Commission that the National Bank of
Australia has failed to provide the good governance in their organisation. The NAB has also
failed to comply with the principles and the recommendations of the ASX. The theories of the
corporate governance that if had implemented in their organisation than the conduct of the
bank might be something else. The Stakeholder theory also proved to be useful for any
organisation as from that theory it can be analysed that the stakeholders should be taken into
a priority for any organisation. The stakeholders are a wide term that includes customers,
people, employees, government and many more. The company is run due to their
stakeholders and the NAB has only failed to fulfil the requirements of the stakeholder. The
NAB has also cheated their stakeholders. The ethical culture in the NAB was worst and they
have not applied the theories of utilitarianism and the deontology in the decision-making and
for the fairness and the justice. The Companies governance can be proved by these acts and
therefore the company had been provided with recommendations that may help the company
to provide good governance in their organisation.

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITIES 9
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http://www.abc.net.au/news/story-streams/banking-royal-commission/ [Accessed 1st October
2018]
Akhigbe, T. and Zolnourian, A. (2018) Ethical dilemma of error disclosure in wrong-site
craniotomy: a systematic review. International Journal of Medical Reviews, 4(1), pp.17-21.
Arlen, J. and Kahan, M.(2017) Corporate Governance Regulation through
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Arora, A. and Sharma, C. (2016)Corporate governance and firm performance in developing
countries: evidence from India. Corporate governance, 16(2), pp.420-436.
ASX Policy Charter(2018) Key to Disclosures Corporate Governance Council Principles and
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appendix.pdf[Accessed 1st October 2018]
Bartholomeusz, S. (2018) The scandals are starting to bite. [Online]Available from:
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Filip, I., Saheba, N., Wick, B. and Amir Radfar, M.D. (2016) Morality and ethical theories in
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Hurchens, G, (2018) Banking royal commission: all you need to know – so far. [Online]
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hearings-open-on-litany-of-misconduct[Accessed 1st October 2018]
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https://www.nab.com.au/about-us/corporate-governance
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2018]

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