Unethical Measures by Commonwealth Bank of Australia Employees

This assessment evaluates the unethical measures used by the employees of Commonwealth Bank of Australia for activating the children’s Dollarmites Youthsaver accounts. It also assesses the breach of social contract and evaluates the managerial branch of stakeholder’s theory to advise how several key stakeholders could react to the case.

Running head: ACCOUNTING AND SOCIETY
Accounting and Society
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Introduction:...............................................................................................................................2
1.(i) Indicating whether CBA staff behaved in the interest of its shareholders by activating the
account using agency theory:.....................................................................................................2
1.(ii) Indicating whether CBA has breached any social contacts by activating the accounts
using legitimacy theory:.............................................................................................................4
2. Evaluating the managerial branch of stakeholder’s theory to advise how several key
stakeholders could react to the case:..........................................................................................6
Conclusion:................................................................................................................................8
References and Bibliography:....................................................................................................9

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Introduction:
The assessment aims in evaluating the unethical measures that was used by the
employees of Commonwealth Bank of Australia for activating the children’s Dollarmites
Youthsaver accounts. The ethical background of the decisions made by employees of
Commonwealth Bank of Australia regarding the activation of the accounts is assessed, while
detecting the moral grounds, which the employees has violated. In addition, the breach of
social contract is also evaluated to understand the un-ethical measures faced by the company
due to the actions of the employees. Lastly, the managerial branch of stakeholders is
evaluated in the assessment, which helped in identifying the individuals, who are affected by
the decisions made by the employees of Commonwealth Bank of Australia.
1.(i) Indicating whether CBA staff behaved in the interest of its shareholders by
activating the account using agency theory:
The decision made by the employee of Commonwealth Bank of Australia directly
reflects wrong behaviour, which they have conducted to ensure their bonuses from the
operations. The employees of Commonwealth Bank of Australia have relevantly used bank’s
discrepancy fund (i.e. loose change) or their own money to activating the children’s
Dollarmites Youthsaver accounts. The children’s Dollarmites Youthsaver accounts were
mainly set up by the parents but were not activated. In addition, the employee used the money
to activate the accounts without the permission of the parents. The action conducted by the
employees of Commonwealth Bank of Australia ensured their bonuses, which helped in
improving the level of returns that could be generated from operations. However, the
activation of the accounts was without the prior consent of the parents, which also indicates a
violation of the privacy and security that was conducted on part of the employees after
activating the account. Bosse and Phillips (2016) stated that the violation of ethical

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consideration on part of the employees directly initiated the law suits by stakeholders of
Commonwealth Bank of Australia.
From the evaluation of the agency theory there needs to be a relation between
principal and agent in a business, which could resolve problems that can exit in agency
theory. In addition, the with the help of agency theory organisation are able to resolve
problems that can exist due to unaligned goals and difference in aversion of risk. From the
evaluation it could be identified that the organisations with the help of the agency measures is
able to resolve the problems existing within the management and stakeholders of the
organisation. Therefore, the agency theory relevantly indicates that management takes
decision on the basis of returns that could be generated for stakeholders of the organisation.
Hence, Agency theory ensures that the management takes relevant actions, which results in
higher return for the shareholders of the organisation. In this context, Pepper and Gore (2015)
stated that agency theory explains the different level of obedience, which needs to be
followed by the organisation, while conducting their operations. On the other hand, Nevo,
Nevo and Pinsonneault (2016) criticises that agency theory is considered to have theoretical
approach, which has less power than the actual explanation.
However, the current case of Commonwealth Bank of Australia violates the measures
that has been taken by the Agency theory in generating returns to the stakeholders. In
addition, the decision made by the employees were not ethical, as it only benefited them and
ensured their bonuses. Therefore, the measures taken by the employees of the bank mainly
violated the foundation of agency theory, as the actions taken by the employees did not help
in supporting the activities of stakeholders of the organisation. Hence, the employees did not
take the actions on behalf of the stakeholders instead the measures were to improve their own
bonuses. The use of discrepancy fund or loose change of the bank for activating the account
directly indicates that the employee acted only for their benefits and not for the benefits of the

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stakeholders, as depicted by the agency theory. Thus, it could be understood that the staff of
the Commonwealth Bank of Australia was aiming to increase their personal gains by
supporting immoral activities and misusing the discrepancy fund or loose change of the
organisation. On the contrary, Pepper and Gore (2015) argued that violation of agency theory
components negatively reflects on share price valuation of the organisation, as investors does
not rely on operations conducted by the management.
1.(ii) Indicating whether CBA has breached any social contacts by activating the
accounts using legitimacy theory:
Legitimacy theory relevant indicates that the business is bound by the social contract
that each firm needs to be follow, while commencing their operations. Furthermore,
legitimacy theory also desires that the actions of the organisation are relatively focused on
various social desires, which helps them fulfil their objectivity and guarantee their continued
existence in the market. Hence, legitimacy theory indicates that the organisation and its
employees conduct fair operations throughout the years of its operation to minimise the
occurrence of any unethical behaviours by the management or the employees of the
organisation. Moreover, the legitimacy theory revolves upon the notion that there is a social
contract between the organisations and Society, which the organisation needs to comply with
while conducting their operations. The theory also indicates that the firm Operates with the
permission of the society and is ultimately accountable to the society rules. Henceforth, the
organisation needs to use ethical measures in using the natural resources and to hire
employees. In this context, Deegan (2014) stated that legitimacy theory lays an ethical outline
for the organisation, which they need to follow for supporting and upholding the societal
regulations.

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In addition, From the valuation of the case study it could be identified that the
employees of Commonwealth Bank of Australia have violated most of the societal laws
recording ethical consideration, while conducting their operations. The case study directly
indicates that the employees have violated and used unethical measures for manipulating the
Loose change of the bank in ensuring that bonus. The actions taken by the employees of
Commonwealth Bank of Australia is considered unethical, as they have activated the
Dollarmites Youthsaver accounts without the consent of the parents. Therefore, the
employees have violated social contract such as maintaining the trust of the clients, using
unethical operations, misutilisation of the company resources and upholding self-interest
rather than societal interest.
Trust Breaking of society:
The employees of Commonwealth Bank nearly broke the trust of the citizens, as the
manipulated the accounts and used unethical measure to obtain bonuses for their effort. This
relevantly indicated that actions of the employees relatively violated the societal contract,
where the management was only conducting operations and violating the personal space of
the individuals.
Using Unethical Practises:
Use of unethical practices in activating the account and obtaining bonuses for the
services by the bank relatively increased cash outflow of the organisation. This directly
violated the ethical Grounds of banks employees. the employees of Commonwealth Bank
have used the unethical practices in their operations and violated the societal contract for
conducting smooth and just operations within the organisation (Nishitani 2016).
Misutilisation off Company resources:

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The employees of Commonwealth Bank of Australia used the discrepancy fund and
their own money for activating the accounts of children's. This directly violated the societal
contract of using the resources of the organisation ethically. The employees used the
resources of the organisation such as discrepancy fund to stimulate and conduct unethical
operations which could increase their chances of getting bonuses from the management.
Upholding of self-interest:
The employees by using manipulative measures in conducting the operations has a
relatively uphold their own self-interest above the society interest. Therefore, the organisation
has violated the contractual rule to support operations that incorporate the values of society
and minimise unethical activities. Hence, the employees of Commonwealth Bank of Australia
have violated the above contractual rules to increase their bonuses during the fiscal year
(Chelli, Durocher and Richard 2014).
2. Evaluating the managerial branch of stakeholder’s theory to advise how several key
stakeholders could react to the case:
The stakeholder theory relatively describes the stakeholders of the organisation on
two different fronts where the first front is from internal stakeholders and the other is external
stakeholders. The internal stakeholders relatively comprise of employees, managers, and
owner, which directly indicates the overall operators of the organisation. Moreover, the
external stakeholders relatively comprise of suppliers, society, government, creditors,
shareholders, and customer. Both the internal stakeholders and the external stakeholders
relatively comprises of the stakeholder theory, where adequate persons can be identified who
can have problems with the overall scandal conducted by employees of Commonwealth Bank
of Australia. In this context, Hörisch, Freeman and Schaltegger (2014) stated that
management uses the stakeholder theory to identify the accurate stakeholders of the

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organisation, who can have an opinion on the operations and on future prospects of the
company. Jones, Wicks and Freeman (2017) further added that organisation relatively
focuses on specific stakeholders such as employees, creditors, and shareholders while making
any kind of decision, as they intend to increase their profits over the period of time.
The manipulation conducted by the employees will directly have an impact on both
internal stakeholders and external stakeholders of the organisation. the reactions of the
several key stakeholders are depicted as follows.
Managers:
The reaction of the managers regarding the scandal conducted by the employees will
be extremely aggressive, where the management will take relevant measures to control the
unethical behaviour of the employees and reduced the cash outflow of the organisation.
Moreover, the management will terminate the employees, suspending any kind of future
possibilities of the event being repeated again by the employees. The manager could also
called the bonuses that motivated employees to conduct unethical operations (Mansell 2015).
Government:
The second reaction would mainly come from the government who is responsible for
the activities of the Australian banks. Commonwealth Bank of Australia is a relatively
governed by public sector management, where the operations conducted by the employees a
relatively evaluated by the government. Moreover, the government will impose most strict
rules within the organisation for the violation of ethical conduct by the employees.
Shareholders:
The major reaction would mainly come from the shareholders of the organisation,
where massive selling process will start for the shares of Commonwealth Bank of Australia,

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as the investors will have low interest due to the scandal conducted by the employees. The
investors will start to relate and rely on the information that is presented by the bank on the
upcoming events of the scandal. The evaluation will directly have an impact on the share
price valuation of the company making the highest and prominent actions that can be taken
by a stakeholder.
Customers:
The reaction of the customers after the shareholders will have the most impact on
your operations of Commonwealth Bank of Australia. The customers seeing the violation of
ethical Grounds by the employees will resort to other companies, where the trust level is a
relatively high. The children account holding customers whose account were activated
without the consent will file a complaint against the company regarding mistrust and
violation of ethical grounds (Andriof et al. 2017).
Conclusion:
From the evaluation of the assessment, the overall manipulations and unethical
measures that was conducted by the employees of Commonwealth Bank of Australia has
been adequately addressed. The evaluation of legitimacy theory, agency theory and
stakeholder theory are relatively conducted to understand the impact of the scandal on
operations of the organisation. The scandal is relatively violated the legitimacy theory and
agency theory objectives, as the organisational employees used an ethical measure to fulfil
their desires. Moreover, the stakeholder theory relatively indicated the number of
stakeholders that may react on unethical measures taken by employees of Commonwealth
Bank of Australia.

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References and Bibliography:
ABC News. (2018). 'Breach of trust': CBA apologises for manipulating children's accounts.
[online] Available at: http://www.abc.net.au/news/2018-05-19/commonwealth-bank-staff-
manipulated-childrens-accounts/9779010 [Accessed 22 Jul. 2018].
Andriof, J., Waddock, S., Husted, B. and Rahman, S.S., 2017. Value maximisation,
stakeholder theory and the corporate objective function. In Unfolding Stakeholder
Thinking (pp. 65-84). Routledge.
Bosse, D.A. and Phillips, R.A., 2016. Agency theory and bounded self-interest. Academy of
Management Review, 41(2), pp.276-297.
Chelli, M., Durocher, S. and Richard, J., 2014. France's new economic regulations: insights
from institutional legitimacy theory. Accounting, Auditing & Accountability Journal, 27(2),
pp.283-316.
Commbank.com.au. (2018). Youthsaver. [online] Available at:
https://www.commbank.com.au/banking/youthsaver.html [Accessed 22 Jul. 2018].
Deegan, C., 2014. An overview of legitimacy theory as applied within the social and
environmental accounting literature. Sustainability accounting and accountability, pp.248-
272.
Ferguson, A. (2018). Dollarmites bites: the scandal behind the Commonwealth Bank's junior
savings program. [online] The Sydney Morning Herald. Available at:
https://www.smh.com.au/business/banking-and-finance/dollarmites-bites-the-scandal-behind-
the-commonwealth-bank-s-junior-savings-program-20180517-p4zfyr.html [Accessed 22 Jul.
2018].

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Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in
sustainability management: Links, similarities, dissimilarities, and a conceptual
framework. Organization & Environment, 27(4), pp.328-346.
Jones, T.M., Wicks, A.C. and Freeman, R.E., 2017. Stakeholder theory: The state of the
art. The Blackwell guide to business ethics, pp.17-37.
Knaus, C. (2018). Commonwealth Bank apologises for staff manipulation of children's
accounts. [online] the Guardian. Available at:
https://www.theguardian.com/australia-news/2018/may/19/commonwealth-bank-apologises-
for-staff-manipulation-of-childrens-accounts [Accessed 22 Jul. 2018].
Mansell, S., 2015. Book review: rejoinder to Veldman’s review of capitalism, corporations
and the social contract: A critique of stakeholder theory (Vol. 22, No. 2, pp. 271-275). Sage
UK: London, England: Sage Publications.
Nevo, S., Nevo, D. and Pinsonneault, A., 2016. A Temporally Situated Self-Agency Theory
of Information Technology Reinvention. Mis Quarterly, 40(1), pp.157-186.
NewsComAu. (2018). Not-so-mighty Dollarmite accounts targeted in Commbank rort.
[online] Available at: https://www.news.com.au/finance/business/banking/commonwealth-
banks-dollarmite-scam-exposed/news-story/21c3e1514981063a6b4fd53276216cd6
[Accessed 22 Jul. 2018].
Nishitani, K., 2016. A Comparative Empirical Analysis of the Determinants of Initiation of
Integrated Reporting Practices in Japanese and UK Listed Companies: The View of
Voluntary Disclosure Theory or Legitimacy Theory? (No. DP2016-07). Research Institute for
Economics & Business Administration, Kobe University.

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Pepper, A. and Gore, J., 2015. Behavioral agency theory: New foundations for theorizing
about executive compensation. Journal of management, 41(4), pp.1045-1068.
Thomsen, S. (2018). CBA staff put loose change or their own money into kid's bank accounts
to make bonuses. [online] Business Insider Australia. Available at:
https://www.businessinsider.com.au/cba-staff-put-loose-change-or-their-own-money-into-
kids-bank-accounts-to-make-bonuses-2018-5 [Accessed 22 Jul. 2018].