BUSN104 Money Matters: Commonwealth Bank and Royal Commission Report

This report provides an in-depth analysis of the Commonwealth Bank of Australia (CBA) and its involvement in the Royal Commission. It identifies inappropriate behaviors, such as employee misconduct in manipulating customer documentation, money laundering, and ignoring reporting responsibilities. The report examines CBA's practices through a socially responsible framework, revealing violations of ethical considerations and the negative impact on shareholder wealth since 2018, as evidenced by share market data. It discusses the importance of sustainability and socially responsible outcomes for the organization and assesses changes in CBA's behavior since the Royal Commission's findings, determining whether these changes are likely to be permanent. The report concludes by evaluating the effectiveness of CBA's actions in minimizing future unethical activities and ensuring ethical compliance.

Running head: BUSN104 MONEY MATTERS
BUSN104 Money Matters
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Table of Contents
Introduction:....................................................................................................................................2
Identifying the areas, the nature of the alleged inappropriate behaviour of the company:..............2
Describing the practise of the chosen company from socially responsible framework:.................3
Using share market data, while explaining the effect on the shareholders wealth by the
malpractice since the beginning of 2018:........................................................................................4
Explaining whether sustainability and socially responsible outcomes should matter to the
organisation:....................................................................................................................................5
Indicating any changes to the company’s behaviour since the findings of the Royal Commission,
while justifying whether it is believed to be permanent or not:......................................................6
Conclusion:......................................................................................................................................7
References and Bibliography:..........................................................................................................8

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Introduction:
The overall assessment mainly aims in evaluating the performance of the organization,
where the relevant information regarding the Royal Commission Report is analyzed. The
adequate identification of the areas that were alleged inappropriate behavior for the organization
are adequately depicted with relevant information. Moreover, the actions that was taken by the
company is mainly evaluated on the basis of the socially responsible framework. Furthermore,
the relevant information regarding the shareholders wealth is detected from the beginning of
2018 after the declaration of wrong information. Indicating the changes that has been witnessed
in the company after the declaration of the Royal Commission Report in February of 2019.
Identifying the areas, the nature of the alleged inappropriate behaviour of the company:
There were many financial institutional and banks in Australia whose behaviours was
considered inappropriate by the Royal Commission, while the actions of Commonwealth Bank
of Australia stood differently from its peers. The employees of the organisation conducted the
most inappropriate actions within the organisation for manipulating the major documentations of
the customers. The misconduct of Commonwealth Bank of Australia did not stand at the
manipulations to the documentations of the customers, where the employees were responsible for
money laundering drug syndicates, turning blind eye towards terrorism funding, ignoring
statutory reporting responsibilities for more than three years on more than 750,000 accounts,
while conducting impropriety in foreign exchange trading. The manipulation of the company
was relevantly increasing in nature, which was violating the social and legislative norms laid
down in Australia (Davis 2019).

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The report of Royal Commission directly indicated that several wrong actions were taken
by the employee of CBA while counting operations during the past financial years. The major
unethical activities that were conducted by employees was the manipulations that was conducted
with the customers. The employees were economical with the truth that was told to the customers
regarding the mortgages and other services. The employees of the company were responsible for
selling wrong mortgage products to the customers, as it helped them to increase the level of
commission from the sales (Commbank.com.au 2019). The trailing commissions that the paid by
CBA to the employee of the company was motivating their workers to manipulate the relevant
information of the customers for generating high level of income. In addition, the employee for
generating high level of rewards from the mortgaged encouraged the customers to get lager home
loans and for longer durations that was not required by the customers. The employees mainly
ignored the traditional lending process for advising the best possible mortgage options to the
customers. In addition, the employees also used fraudulent activities in manipulating the data and
documents of the customers to provide them higher loan, which hindered increased the payments
and increased the concern of default. The high amount of loan issued by the company also has
higher interest payments, which was beyond the scope of the customers paygrade to support the
financial obligations. Hence, the company started to face problems with the high rate of defaults
that were conducted due to the non-fulfilment of relevant payments (Smh.com.au 2019).
Describing the practise of the chosen company from socially responsible framework:
From the perspective of the socially responsible framework the overall precise that was
followed by the Commonwealth Bank of Australia was not adequate, as high level of
manipulations were conducted by the employees. These manipulations relevantly violated the

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soul responsibility framework that needed to be followed by the employee of financial
institutions. The company failed to follow the ethical considerations that is required for
providing the adequate information to the customers of the company. The Commonwealth Bank
was responsible for providing wrong information to the customers of the organisation, which was
unethical from the perspective of the socially responsible framework (Afr.com 2018). The
socially responsible framework mainly indicated that companies should not manipulate data of
the customers and project wrong information to increase their personal benefits. The
commonwealth bank employees were also responsible for increase in loan amount of the
customs to suit their benefits, while the custom faced problems during loan repayments. This
increased the possibility of defaults from the loan receivers, as they were not able to pay relevant
premium on the loan. The employees did not even detect the income proof of the individuals
before initiating the loan. Hence, the responsible lending process is a part of the framework
which was violated by the company (Abc.net.au 2018).
Using share market data, while explaining the effect on the shareholders wealth by the
malpractice since the beginning of 2018:

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Figure 1: Share price movement of Commonwealth bank since 2018
(Source: Au.finance.yahoo.com 2019)
The above figure provides information about the share price movement of
Commonwealth banks from 2018. The share price trend of the company has mainly seen to
weaken from 2018, which has negatively impacted the shareholders wealth. From 10th January
2018 the overall share price of the organisation started to decline from 82.66 and fell to the levels
of 65.27 in 25 October 2018. This decline in the share price was due to the presence Royal
commission report, which was being prepared for each financial institutions and banks in
Australia. The certain comments and allegations that was forwarded by the Royal commission
regarding the operations of Commonwealth bank mainly declined the share price of the company
to lower levels (Euromoney.com 2019). The discourse of the malpractices that was conducted by
Commonwealth bank led to the decline in its share price and returned the overall shareholders
wealth. The company was also forced to pay fines to the customers, whom the employees forced
to manipulate the data. The high fines paid by the company also reduced the revenue and
negatively affected the income of the company, which weakened the shareholders wealth in the
process.
Explaining whether sustainability and socially responsible outcomes should matter to the
organisation:
Both sustainability and socially responsible outcomes should matter to the
Commonwealth Bank of Australia, as it minimises the occurrence of future unethical activities,
which might occur by employees. In addition, the presence of both sustainability and socially
responsible outcome is needed by the Commonwealth Bk, as it helps in improving the

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organisation capability of the organisation. Sustainability in the operations can only be achieved
by the management when ethical measures are taken into consideration, while reducing the any
manipulations, which was highlighted in the Royal Commission report. The ignorance of wrong
options would reduce the risky loans of the company, which help in achieving higher
sustainability and reduction in loan default rates. Coleman (2016) stated that with the help for
adequate CSR activity and monitoring process the unethical measure that is conducted by
companies can be minimised.
The business of Commonwealth Bank is directly linked with social responsibility
outcomes, as the company need to operate within the society to generate high level of income.
Hence, the operations of the company need to comply with the social responsibility conditions,
where no manipulations or unethical activities needs to be conducted, which might hamper the
relationship of the bank with the society. Thus, both sustainability and socially responsible
outcomes should matter to Commonwealth Bank of Australia (Merrington et al. 2015).
Indicating any changes to the company’s behaviour since the findings of the Royal
Commission, while justifying whether it is believed to be permanent or not:
After the disclosure of Royal Commission Report during 4th February, 2019 the overall
operations of the company has been changed. The Commonwealth Bank of Australia has become
more intolerable for unethical practices conducted by the employee. The management has
initiated an intolerable action, where any employee that are found manipulating the company’s
policies for their benefits would directly lead to terminations. The action that was taken by the
management to ensure the reduction of future unethical actions by employees. The effective
monitoring process has been initiated by the Commonwealth Bank, which helps in detecting the

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and analysing all the relevant loan process that has been initiated by the bank. This monitoring
process and cross referencing was relevantly not present previously, which led to the
manipulation. Hence, the current monitoring process is still intact for Commonwealth bank, as
relevant scrutiny is being conducted to detect the accurate level of operation that has been
followed for employee while providing loan to new customers. The other process of the business
such as hedge funds and advisory division is also being monitored for analysing any kind of
discrepancy in the operations (Durie 2019).
Conclusion:
The overall assessment mainly evaluated the unethical actions that was made by the
Commonwealth Bank of Australia over the period of time. The Royal Commission Report has
mainly been analyzed for detecting the manipulations that was conducted by Commonwealth
Bank and the relevant actions that was taken by the management for minimizing the occurrence
of future manipulations. Hence, from the relevant evaluation, it is detected that there were major
manipulations that was conducted by the employee of a Commonwealth bank. Hence, after the
disclosure of the royal commission report the management of the bank relevantly made adequate
decisions to minimize the future unethical activities within their vicinity.

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References and Bibliography:
Abc.net.au. 2018. CBA bosses kept making mistakes, but refused to learn from them. [online]
Available at: https://www.abc.net.au/news/2018-11-24/banking-royal-commission-
commonwealth-bank-bosses-not-learning/10549754 [Accessed 18 May 2019].
Afr.com. 2018. Banking royal commission: 10 minutes that shamed the Commonwealth Bank
board. [online] Available at: https://www.afr.com/business/banking-and-finance/banking-royal-
commission-10-minutes-that-shamed-the-commonwealth-bank-board-20181121-h185mp
[Accessed 18 May 2019].
Au.finance.yahoo.com. 2019. Yahoo is now a part of Oath. [online] Available at:
https://au.finance.yahoo.com/quote/CBA.AX?p=CBA.AX [Accessed 18 May 2019].
Coleman, W. ed., 2016. Only in Australia: The history, politics, and economics of Australian
exceptionalism. Oxford University Press.
Commbank.com.au. 2019. CBA comments on Royal Commission Final Report. [online]
Available at: https://www.commbank.com.au/guidance/newsroom/cba-royal-commission-final-
report-statement-201902.html [Accessed 18 May 2019].
Davis, K., 2019. The Hayne Royal Commission and financial sector misbehaviour: Lasting
change or temporary fix?. The Economic and Labour Relations Review, p.1035304619847928.
Durie, A., 2019. The dawn of the finance panel?. Governance Directions, 71(4), p.206.

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Euromoney.com. 2019. Australia: CBA switchback shows weakness of Royal Commission.
[online] Available at: https://www.euromoney.com/article/b1djly31gm51s9/australia-cba-
switchback-shows-weakness-of-royal-commission [Accessed 18 May 2019].
Jones, E., 2016. Australian trade liberalisation policy: the Industries Assistance Commission and
the Productivity Commission. The Economic and Labour Relations Review, 27(2), pp.181-198.
Merrington, S., Lauchs, M., Bell, P. and Keast, R., 2015. An exploratory study of noble cause
corruption: The Wood Royal Commission New South Wales, Australia 1994-1997. International
Journal of Management and Administrative Sciences, 2(4), pp.18-29.
O’Brien, J., 2019. “Because They Could”: trust, integrity, and purpose in the regulation of
corporate governance in the aftermath of the Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry. Law and Financial Markets Review, pp.1-16.
Smh.com.au. 2019. ASIC goes nuclear on CBA ahead of royal commission report. [online] The
Sydney Morning Herald. Available at:
https://www.smh.com.au/business/banking-and-finance/asic-goes-nuclear-on-cba-ahead-of-
royal-commission-report-20190204-p50vj7.html [Accessed 18 May 2019].