Commonwealth Bank of Australia's Ethical Breach and its CSR Impact

This essay delves into the ethical breach at the Commonwealth Bank of Australia, focusing on the fraudulent manipulation of children's accounts by retail branch staff for personal gain. It examines the incident reported by ABC News and confirmed by Fairfax media, highlighting the bank's apology for the breach of trust. The essay discusses the importance of ethics in business success, analyzes the organization's actions in relation to corporate social responsibility (CSR) theories, and emphasizes the negative impact of such breaches on customer trust and the bank's reputation. It further explores the bank's CSR policies, business ethics, and the positive effects of ethical practices on stakeholder relations, employee retention, investor confidence, and overall business sustainability.

Running head: ETHICAL ISSUES
ETHICAL ISSUES
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1ETHICAL ISSUES
This essay discusses the ethical breach of the very famous Commonwealth Bank of
Australia. In the famous newspaper of the country named ABC news, this information has
been published in 19th May, 2018 (Abc.net.au 2018). The investigation has found out this
unethical behaviour was executed by the retail branch staffs of the Commonwealth Bank in
order to serve their own interest. Fairfax media report has been referred in order to confirm
the news where the Commonwealth Bank of Australia has apologised for their action of
breach of trust to their customers. This essay discusses the incident and the findings in the
investigation, discuss the importance of ethics in the effective and success of business in
this global context and analyse the organisations actions in opposition of the corporate social
responsibility theories.
The Commonwealth Bank of Australia is one of the most important and trusted
corporation of the country but this incident has just overturned the ideology and bond
between the organisation and their customers. According to the report, the Commonwealth
Bank’s chief executive officer Matt Comyn has responded to the accusation of fraudulent
manipulation of thousands of children's accounts by the own staff of the bank. The report has
also revealed that these staffs conducted this unethical function only to earn bonuses and
meet their targets. These employees have used the fund of the bank as well as their own
money illegitimately to activate the Youthsaver accounts. The unethical issue has taken place
by utilising the regulations of the bank and use them in serving their own interest. In order to
get more incentives these staffs used the bank’s policy of opening and keeping small deposits
in the bank.
The Commonwealth Bank of Australia has the policy for the little kids to open bank
account under the program of Youthsaver where these kids will be saving their money. Thus
the bank encourages them to learn to save money early in their lives. It is no doubt a very
appealing strategy in accordance to the company’s CSR policies but the ethical breach is a

2ETHICAL ISSUES
huge blow to the positive side of this program of the bank. The report has revealed the fact
that the chairman has agreed with the accusation and referred to the same issue that took
place in the year of 2013 which compelled the bank to bring some minor changes to this
policy so that no employee take advantage of this product and use them to serve their own
interest. However, this same thing has happened again and recent investigation has found out,
this malfunctioning has been taking place for last five years. Now the corporation has decided
to take Zero Tolerance Policy of these unprincipled employees as this has now related with
the fame of the organisation as well as the safety of their customers. Despite the fact that this
ethical breach has not affected the customers financially but for the Commonwealth Bank of
Australia it is a huge loss for they will not get trust of the customers (Dugan and Taylor
2016). This will directly affect the business of the bank and the number of new customers
will sharply decrease. However, the CSR policies of the corporation transparently discusses
their duties associated with the social development. This is the reason why the decision of
taking punitive measure to the accused employees is highly supportable.
From the discussion of the CSR policies of the Commonwealth Bank of Australia, it
can be found out that the bank has a high quality CSR outlook for example it does a great
number of good deeds. It starts from the advancement of gender equity in the organisation’s
employment policies, promote ethical as well as clear business practices, support
environment friendly investments and foster financial literacy in kids of the country
(Commbank.com.au 2018). The element of trust in the financial sector in Australia has been
restored as well as maintained by the corporation. The bank views the customers as their
friends which reveals their aim of business is not to make profit at any cost but making
friends. Therefore, this issue of fraudulent manipulation of the children’s account has not
been supported by the authorities of the Commonwealth Bank. In addition to this, the

3ETHICAL ISSUES
business ethics of the bank is not to serve themselves only, but to serve the society which are
closely connected with the perfect ethical business plan of the Commonwealth Bank.
Business ethics refers to the application of the ethical values in the business
environment. From the psychological point of view ethics refers to the choice of right and
wrong and doing only the right things (Freeman 2016). In the business, ethics ensure that the
profits are made through the right channels only. This business ethics guide the companies to
respond to the demands of the employees along with the stakeholders though whom the
companies get necessary resources (Jain, Leka and Zwetsloot 2018). Ethics also mandate that
their products are produced in accordance to the ethical guides of the industries.
In addition to this, the companies also follow ethical regulations in their services to
the customers. Their customers are the chief stakeholders of the companies without whom
their business cannot flourish. Hence they are respected in all possible manner and thus gain
competitive advantage (Jondle, Ardichvili and Mitchell 2014). The companies also have
responsibilities towards gaining a sustainable environment which helps them to continue their
growth without haring any part of the nature. There are some reasons why the business ethics
are very important for the companies to follow.
First, the business ethics of the companies are primarily contributing factor of the decisions
making process of the organisations therefore, they allow their stakeholders to involve in the
decision making process so that any of their interests do not get harmed or neglected
(Mahapatra and Panda 2016).
Secondly, business ethics enablers the companies to value the rights as well as opinions of the
employees. Thus the employees stay longer with their corporations and feel attached to the
organisations even if there is a bad time for the business (McMurrian and Matulich 2016).
These employees always feel motivated though the fact that are the part of the firm which

4ETHICAL ISSUES
does not have any type of negative or defamatory functioning which ultimately gets reflected
in their production.
Thirdly, the ethical business promotes for investor friendly atmosphere where the investors
feel secured to invest their funds. By the means of following each and every regulation, the
ethical companies can create a complete host of loyal customers who have a blind trust on the
product as well as the services of the combines (Velamuri, Harvey and Venkataraman 2017).
This gradually get spread in the market which lead to have more investors for the company.
Fourthly, the business following ethical outlook do not send more costs as they do not face
much employee turnover in their workplaces (Pearson 2017). Therefore, the companies can
take measures to increase their productivity. The funds are spent in the method of training
and arranging workshops which directly enhance the quality of the production
Fifthly one of the most important factor for successfully doing business is gaining reputation.
Ethical functioning helps the firms to gain fame among their stakeholders as well as retaining
them for many a year (Walumbwa, Hartnell and Misati 2017). This also help in gaining
competitive advantage as the popularity of the brand overshadow the performance of the
other rival firms.
Sixthly, the ethical business incurs no monetary fines or any type of penalties as they always
follow the regulations laid by the government or the communities. This however reduces the
risk of falling by losing potential customers, suppliers, employees and even the company
itself.
Seventhly, when a company follows all the rules and regulations of the governments, the
employees, suppliers and other stakeholders feel attracted to the work environment of the
organisations. This encourage team work among the employees in one hand and promote
effective partnership among the companies and their stakeholders (Craft 2018).

5ETHICAL ISSUES
Eighthly, the increase in the customers leads to increase in the demand. Thus more goods and
services are sold and more bookings are increasing. The unethical actions can seem to give
the business temporary boost but effectively harm the long term goals. Therefore, the ethical
actions are the only key to attain sustainability as well as success in the business.
Ninthly, Ethics followed in the business can allow healthy competition among the rival
companies. As many companies indulge in competition in a same market face issues but the
companies characterized with the ethical behaviour can never engage in the malpractices
rather they allow the customer choose their preferred objects.
Finally, ethical practices by the companies helps to uplift the communities which gets
reflected their good will which regulate their profit much higher than their competition
companies.
Therefore, it can be concluded that what the employees of the Commonwealth Bank
have done to serve their own interests, can never be supported by the customers as well as the
other stakeholders and may lead to harm the reputation of the firm. However, the CSR
policies of this bank reveal that they minutely follow the business ethics. The effect of
business ethics has been discussed to demonstrate the positive effect that the firm can get
over their competitors.

6ETHICAL ISSUES
References:
Abc.net.au (2018). 'Breach of trust': CBA apologises for manipulating children's accounts.
[online] ABC News. Available at: http://www.abc.net.au/news/2018-05-19/commonwealth-
bank-staff-manipulated-childrens-accounts/9779010 [Accessed 26 May 2018].
Commbank.com.au (2018). [online] Commbank.com.au. Available at:
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/
corporate-responsibility/2017/2017-corporate-responsibility-report.pdf [Accessed 26 May
2018].
Craft, J.L., 2018. Common thread: The impact of mission on ethical business culture. A case
study. Journal of Business Ethics, 149(1), pp.127-145.
Dugan, M.T. and Taylor, G., 2016. Ethical Issues Related to Earnings Management: An
Instructional Case. Journal of the International Academy for Case Studies, 22(3), p.84.
Freeman, R.E., 2016. Ethical leadership and creating value for stakeholders. In Business
ethics: New challenges for business schools and corporate leaders (pp. 94-109). Routledge.
Jain, A., Leka, S. and Zwetsloot, G.I., 2018. Responsible and Ethical Business Practices and
Their Synergies with Health, Safety and Well-Being. In Managing Health, Safety and Well-
Being (pp. 99-138). Springer, Dordrecht.
Jondle, D., Ardichvili, A. and Mitchell, J., 2014. Modeling ethical business culture:
Development of the ethical business culture survey and its use to validate the CEBC model of
ethical business culture. Journal of Business Ethics, 119(1), pp.29-43.

7ETHICAL ISSUES
Mahapatra, M. and Panda, S., 2016. Ethical Business for Sustainable Development: A New
Paradigm of Corporate Social Power in Global Governance. Journal of Institute of Public
Enterprise, 39.
McMurrian, R.C. and Matulich, E., 2016. Building customer value and profitability with
business ethics. Journal of Business & Economics Research (Online), 14(3), p.83.
Pearson, R., 2017. Business ethics as communication ethics: Public relations practice and the
idea of dialogue. In Public relations theory (pp. 111-131). Routledge.
Velamuri, S.R., Harvey, W.S. and Venkataraman, S., 2017. Being an Ethical Business in a
Corrupt Environment.
Walumbwa, F.O., Hartnell, C.A. and Misati, E., 2017. Does ethical leadership enhance group
learning behavior? Examining the mediating influence of group ethical conduct, justice
climate, and peer justice. Journal of Business Research, 72, pp.14-23.