Holmesglen Institute: Corporate Governance and Ethics Report on CBA

This report provides a critical analysis of corporate governance and ethical issues at the Commonwealth Bank of Australia (CBA). It examines the relationship between corporate governance and performance, highlighting ethical breaches such as the financial planning scandal. The report identifies unethical behaviors of financial planners, incentive structures, and the higher management's actions to conceal misconduct. It applies Utilitarian and Kantian ethical theories to evaluate these issues. The Utilitarian perspective assesses actions based on the greatest happiness principle, analyzing how CBA's policies and actions impacted stakeholders. The Kantian perspective, on the other hand, evaluates actions based on moral duties and principles, examining whether the actions align with universal ethical standards. The report concludes by summarizing the key findings and implications of the ethical failures within CBA.

Running Head: CORPORATE GOVERNMENT AND ETHICS
Corporate government and ethics
Student’s Name
University Name
Author’s Note

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Table of Contents
1. Introduction..............................................................................................................................3
2. Background of the organisation...............................................................................................3
3. Identification of issues..............................................................................................................3
4. Theoretical analysis..................................................................................................................5
4.1 Utilitarian theory and analysis of ethical issues in CBA..................................................5
4.2 Kantian theory and analysis of the CBA case...................................................................8
5. Conclusion..............................................................................................................................10
6. Reference List.........................................................................................................................12

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1. Introduction
This report explores the relationship between corporate governance and corporate performance
critical analysis of governance and ethics issues at the Commonwealth Bank of Australia. The
corporate governance principles happened highlights and with emphasis on various issues
encountered by the organisation, the researcher has attempted to exhibit how failure has taken
place. The Utilitarian and Kantian perspective have been applied in order to explore the ethical
issues of the Commonwealth Bank of Australia.
2. Background of the organisation
The Commonwealth Bank of Australia provides financial services including retail business,
funds management former broking services, Finance Company activities, General Insurance,
institutional banking, superannuation and so on. In the year 2018, the royal Commission into
misconduct in the banking indicated negative culture inside the bank and brought allegations of
fraud, deception as well as money laundering against it. The following report explores some
deliberate activities on the part of the bank and evaluates the outcome of such actions in the light
of the utilitarian and Kantian theories of ethics. Facing high competition from the Rivals, the
Commonwealth Bank, which is considered as one of the big four banks of the Pacific region
decided to undertake a leg up policy of internal liberalizing the actions of financial planners so
that they can generate plans for maximum monetary benefit of the bank (Oates & Dias, 2016).
3. Identification of issues
In context to the Commonwealth Bank of Australia, an explicit case of financial planning
scandal has been observed. In this context 3 electrical behaviour examples can be identified
which are interlinked.

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Firstly the individual Rogue financial planners of the bank who acted in unethical manner by
placing the elderly retiree’s savings into the investment categories of high risk which is contrary
to the Banking instructions. Furthermore ethical issues in this context involves attempt to conceal
this fact by falsification of documents.
Secondly, unethical behaviour has been exhibited by the Commonwealth Bank when they
provide incentive to the financial planners in the form of permission, overseas sales and bonuses
for being the top performers meeting their sales targets (Brown, 2017). By means of this strategy
sales based culture was posted by the Commonwealth Bank among their financial planners. in
fact, the financial planners of the bank were also threatened to be dismissed if they did not meet
their target.
Thirdly, the higher management of the Commonwealth Bank exhibited behaviour meant to
conceal the misconduct of the financial planner. The CBA, in the first place, became aware about
the transgression of Don Nguyen, one of the financial planners of the bank and put him for one
month suspension in August 2008. After the first month suspension, the absconded was
promoted to the position of the senior financial planner. In this context, the role played by Jeff
Morris who was the whistle blower from the Royal Commission working with the
Commonwealth Bank is very critical. It was identified that the Commonwealth Bank
management was the warned that Don Nguyen who was an imposter, might not be eligible for
occupying the position of senior financial planner (Cull & Bowyer, 2017). Nevertheless, the
compliance team of Commonwealth Bank, headed by Jeff Morris was strictly asked to back off
by the senior level management of the Commonwealth Bank of Australia (Barker & Youngdahl,
2015).

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In conclusion it can be stated that the second ethical issue is the most critical and is the major
driver behind Exhibition of individual unethical behavioural issues of the individual financial
planners which was accountable for the follow through experienced by the Commonwealth Bank
which then attempted to minimise the damage on its reputation by covering of the issues.
4. Theoretical analysis
4.1 Utilitarian theory and analysis of ethical issues in CBA
The three critical ethical breaches identified for the Commonwealth Bank of Australia will be
explored under the utilitarian theory of Business Ethics. This theory States that in case of any
business outcome of activity, the biggest Emphasis should be upon what is wrong and what is
right. Based on that, one policy or action is to be selected over another as ethical. As such, it can
be stated that interest and demands an individual or an agency to take into account the interest of
the others. In this context, Stuart Mill define that utilitarianism measures the quantity of pleasure
for the amount of happiness that is derived out of an action (Hague, 2016). This implies that the
outcome of an action is quantified and scored according to the metric of happiness.
Utilitarianism can be linked with the greatest happiness principle which promotes that an action
should have the capacity of achieving happiness for maximum people or it should bring least
negative impact, among all the available choices.
Application of utilitarianism in case of Business Ethics takes two forms, namely, act
utilitarianism as well as rule utilitarianism. the act utilitarianism can be applied directly to the
ethical breeches conducted by the Commonwealth Bank of Australia in order to suggest any
alternative action that could have been undertaken in that situation for ensuring maximum
happiness all happiness for the largest possible community. In this context, it can be argued that

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the individual actions undertaken by the financial planners by placing the savings of the retirees
into high risk investment products is definitely a breach of utilitarian ethics. In this case, the
largest community affected by the action of the individual financial planners where the
community of the retirees. Their savings implies to there lifelong monetary asset which was put
into risk because of personal interest by the financial planners. Hence, neither the action insured
maximum happiness for the biggest community, nor it benefited a large group out of its impacts.
In the next stage the rule utilitarianism can be applied to evaluate the banking rule or policy that
allowed the action to take place. In this case, the unethical action that will be explored here is is
the policy of the Commonwealth Bank to place incentives as the parameter for the performance
of financial planners (Mill, 2016). The placement of incentives implies that the financial planners
will definitely try to adopt any means possible in order to fulfil their sales targets. The higher
management of the Commonwealth Bank was absolutely aware of this and in spite of that they
promote a culture where the financial planners where threatened to be dismissed if they were not
able to exceed or meet their sales target. It should be remembered that financial services
Institutions are serving a broader community. Again, once when it has been identified that the
financial planners have undertaken unfair means and risked the loss of consumers' assets, it is
evident that under pressure of the banking policy of the Commonwealth Bank of Australia, they
might again undertake any similar action that might have big negative impacts towards a larger
section of the community. According to the virtues of utilitarianism, when the bank was
imposing this decision with full knowledge and certainty about the consequences of the actions,
it can be considered to be a breach of utilitarian ethics
This is a case of breach of rule utilitarianism also. In context to this, it can be argued that the
principle of utility is determination of the validity of rules and conducts. In this context, rules

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cannot be validated by their innate values. This implies that even if the rule for conduct implied
towards the situation is wrong from the point perspective and it is able to bring happiness
towards the biggest community at the expense of a small miss doing or and happiness of a
negligible group of people, it is ethical according to the utilitarian ethical theory. In this context
it can be argued that if the government of any Nation determined to demolish certain terrorist
groups for the peace and wellbeing of the entire National community, it will be considered to be
a ethical from the perspective of the government which has undertaken this decision (Fryer,
2016). Nevertheless, the Commonwealth Bank of Australia was well aware that fulfilling the
sales target will benefit the banking corporation only, which is small group of business, led by
personal interest only. However, the largest ocean of the commutative to avail the banking
services from the Commonwealth Bank of Australia comma might come under threat because of
search aggressive commercial decision of the organisation. It is evident that is the bank
flourishes financially; the internal and external stakeholders will be benefited to great extent.
However, they comprise of only a small section of the society. Hence, the decision undertaken
by the bank to force the financial planners to fulfil the sales targets would have been ethical if it
would have served the interest of a bigger community.
Lastly, the act utilitarianism is also to be applied on the collective decisions of placing Don
Nguyen in the position of senior financial planner. Revisiting the case, it can be highlighted that
he was the first one to be caught for translation of financial planning and also had to undergo
imprisonment (Baron, 2018). Again, deserves mention that the Complaints committee of the
Commonwealth Bank of Australia did the ethical work by making the higher management
cautious about the reputation and threats of placing that person in the position of senior financial
planner. However, the bank forcefully directed his ascension.

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4.2 Kantian theory and analysis of the CBA case
German philosopher Immanuel Kant proposes a view opposite to utilitarianism. According to
Kant, unlike Mill, there are certain types of actions like murder, lying or theft which are totally
prohibited. Even in cases where such actions can bring about happiness of a larger community,
sacrificing the happiness of a negligible group of people the action is still invalid. For evidence,
slavery in Greece was supported by utilitarian view of ethics because it accounted to the
happiness of a larger group of people, rather than the entire population of Greece by sacrificing
the happiness of few of the slaves. However, in that case if not murder, torture, operation and
other atrocities were done to the slaves who is strictly against the view of Immanuel Kant and the
Kantian ethics. Kantian ethics is based upon two major questions that any actor should ask
himself or herself before conducting the action. The first question is whether he or she is able to
make a rational will that everybody should act like he is going to do at that moment or not. If his
answer is yes, he should progress with it and if it is no he should refrain from the action without
a second thought (Bowie, 2017). The second question that is to be asked in this contest is that if
the action that is going to be undertaken, fulfil the goals of human beings in general, compared to
simply using them for the fulfilment of personal goals?
If the first context is true in relation to this question, then the actor should progress with his task
and on any other instance he should refrain from doing the task. The Kantian theory of ethics can
also be considered as a deontological moral theory which respects the consequences like
rightness or wrongness of the actions, rather than the consequences but on whether they fulfil the
purpose of ethics or not.
In context to Kantian ethics the two categories of imperatives also needs to be mentioned. First
imperative is the hypothetical imperative which commands with relevant Desire. For evidence

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should have great characters, in order to earn respect. In this case, if one individual do not want
to earn respect, he or she need not have a good character.
The Other category of imperative is categorical imperative which provides for unconditional
command. For evidence one should not cheat their taxes, and even if they went off their own
interest, they should not do so because it is their duty towards the nation. In case of Business
Ethics, Immanuel Kant advocated the category imperative to be followed because ethical duties,
according to him or actions that need to be followed in anyway without any case of relevance
(Bowie, 2017).
In analysing the ethical breaches of the Commonwealth Bank of Australia, in context to the
kantian ethics highlighted that the the financial planners would definitely not be able to think that
it is justified for all others to do the same as they did. This is because, if all financial planners
practiced in the same way as they did, the bank would have lost majority of clients, not
mentioning the financial loss that will be incurred by a considerable section of banking
consumers. Secondly the question that needs to be raised is that weather their action is fulfilling
the general purpose of human beings or not. In this case, the retirees had invested their lifelong
income with the hope of getting considerable return at their old age. Hence, if the financial
planners had intended to fulfil the general goal of human beings, they should have invested the
money in the least risk investment category. This is because they should have given importance
to the fact that the consumers should get maximum return against their money. Even if we
analyse the first instance of ethical breach by the Commonwealth Bank, the act of investing the
money of the retirees in high risk profile is equivalent to theft and lying, which are strictly
prohibited by the Kantian ethical theory.

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Incase of the second ethical breach, where incentives were provided to financial planners in the
form of monetary bonus as well as overseas sales strips for the top performing planners meeting
their targets, it can be argued that comma the managers of Commonwealth Bank would
definitely not suppose that the higher management of all bank can act in this way. This is
because, providing incentive to the highest grossing financial planners would motivate them to
fulfil their financial goals by undertaking any means possible, fair or unfair. On top of that, it can
also be argued that the managers were not catering to two common human good in this case
(Baron, 2018). By providing financial incentive to the financial planners, the higher management
was actually alluring them to take more steps like Don Nguyen. Although this action does not
come under the major prohibited actions of the contain theory like murder, theft or lying, it also
does not fulfil the basic principles of this query.
In the third case, the unethical action that will be evaluated under this theory is the action of
appointing Don Nguyen the position of senior financial planner even after he was suspended for
a month for misconduct in financial planning. It is evident that in context to answering the first
question raised by the Kantian theory, the higher management, who undertook this decision,
would not be able to say yes because if this kind of action was generalized, it would be
promoting a wrong organisational culture which would ultimately affect the bank in the long
term. Secondly, it is unclear that whether this appointment is serving any common human good
or not since there is no active outcome of disappointment until the senior financial planner
undertakes any action after his appointment.
5. Conclusion
In conclusion it can be stated that from the perspective of both utilitarian as well as the theory of
Immanuel Kant, it can be reasoned that the actions or rather the culture promoted by the

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Commonwealth Bank of Australia was irrational, unjustified as well as unethical. Considering
from the perspective of the utilitarian theory it can be commented that the actions of the bank did
not fulfil interests of the greater community. Again, considering from the perspective of the
Kantian theory it can be argued that the banking actions have reached the basic guidelines for
ethical actions provided by the theory.

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6. Reference List
Barker, S., & Youngdahl, J. (2015). From ethical fringe to investment mainstream: Governance
law and climate change risk management. Governance Directions, 67(9), 525.
Baron, M. W. (2018). Kantian ethics almost without apology. Cornell University Press.
Bowie, N. E. (2017). Business ethics: A Kantian perspective. Cambridge University Press.
Brown, C. M. (2017). Legal Ethics. Encyclopedia of Global Bioethics, 1-9.
Cull, M., & Bowyer, D. (2017). Ethics in Financial Planning: Myth, Fact or Rhetoric
Paradox?. e-Journal of Social & Behavioural Research in Business, 8(2), 56-69.
Fryer, M. (2016). A role for ethics theory in speculative business ethics teaching. Journal of
business ethics, 138(1), 79-90.
Hague, C. (2016). Planning practice in the West Bank: should planners speak up?. Planning
Theory & Practice, 17(1), 161-165.
Kagan, S. (2018). Normative ethics. Routledge.
Mill, J. S. (2016). Utilitarianism. In Seven masterpieces of philosophy (pp. 337-383). Routledge.
Oates, G., & Dias, R. (2016). Including ethics in banking and finance programs: teaching “we
shouldn’t win at any cost”. Education+ Training, 58(1), 94-111.