Unethical Measures by Commonwealth Bank of Australia Employees

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