Report on Financial Advice, Governance, and Ethics in Banking

This report examines the issue of financial advice within the context of corporate governance, ethics, and stakeholder impact, drawing on the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. It analyzes the culture, governance, and remuneration aspects of financial advice, assessing the effects on stakeholders using Carroll and Buchholtz's framework. The report investigates the financial institutions' ASX Principles and Recommendations before the Royal Commission and assesses the diversity and inclusion of the boards. An overall ethical analysis is provided, incorporating Normative Theories of Ethics and sustainability approaches. The report highlights misconduct, poor advice, and ethical breaches, offering a comprehensive overview of the challenges and implications within the financial sector. The report emphasizes the importance of ethical conduct and responsible governance in the banking industry, focusing on the impact of financial advice on stakeholders, including investors, and the need for robust regulatory frameworks and ethical standards.

Corporate governance, ethics and corporate social responsibility
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Contents
Corporate governance, ethics and corporate social responsibility...................................................1
Introduction......................................................................................................................................3
Discussion on the report..................................................................................................................3
Conclusion.....................................................................................................................................10
References......................................................................................................................................10
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Introduction
The banking industry is considered to be one of the most sensitive industry in the world hence
this seen that company must work according to the code of conduct that is framed for its
operations. The government of the country has made various banking code and ethics through
which they are able to regulate the code of the company. The term business ethics is defined as
the process through which the operations of the banking are identified. The Australian companies
along with the business have to identify various regulations which include large, small and
medium-sized banks in the country. if the companies that are working in the country does not
follow the banking code of conduct or are not able to identify the ethical codes of the company
then they are liable under the banking code of conduct as these are defined by the government of
the country. here this is seen that the banking industry is the industry where the maximum
amount of trust lies between the customers of the bank and other partners of the bank. Hence
every bank in industry needs to sign a document for the commitment towards the banking code
of conduct. Through the banking code of conduct this becomes the responsibility of the bank to
provide the best in class and standard behaviour towards the deposits of the customers and
should outreach the demand of the customers. This is considered that the code of conduct of the
banking sector is approved by the Australian Securities and investment commission. Where the
industry code is defined under the approval powers.
In the current paper includes the royal commission into the misconduct in the banking,
superannuation and the financial service industry which was popularly known as the banking
royal commission. The commission was established in the year 2017 by the government of the
country so that they are able to inquire into and report on the misconduct of the banking sector.
This research would provide the implication through which they are able to maximise the
performance and the operations of the banks that were working in the country.
Discussion on the report
The banking regulation and royal commission that are made by the government of the country
helps in identification of the misconduct that the banks in the country perform, also the
superannuation and the financial service-related misconduct are identified by the company. Here
through this it is seen that there are various companies that have broken the law due to which the
license of the companies in the banking and the financial sector terminated (Beck and Paton,
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2018). The commission helps in identifying the issues through which they are able to identify the
issues, causes and the responses and recommendations. The report identified various financial
and code of conduct related issues which are specified as below:
Financial advice
This is seen that there are various companies and individuals in the country that have sought
financial advice from various companies. Hence this is seen that financial advice in the industry
has grown at the significant rate. Through the report and the research that the commission did it
was identified that there were 25,386 financial advisers in the country. Hence this is seen that
there were three different issues that have emerged with the connection to the financial advice
that are given by the financial service users. This is seen that clients in the industry have been
given poor advice through which the investors of the company have shredded their value and the
worth. This is also seen that the financial advisors of the company have been provided with
fragmented and ineffective discipline (Casson, 2019).
This was seen that the regulatory framework was governed so as to regulate the financial
advisors and to provide them with the code according to which they should work for the
betterment of the company. As per the corporation act of the company, this is specified that the
licensed entity has the obligation where they ensure that its authorised representatives are the
person who will comply with the laws of the service in the country.
The financial advice industry is filled with various ups and downs. Where this has been seen that
the persons that are engaged in the industry of the financial advisors are not following the ethical
standards that are defined by the government of the country. the financial advisors are sometimes
performing their obligation in a biased manner due to which they are breaking the interest of the
investors and consumers from the company (Hamer, 2016). These unethical and unbiased
practices are taken by the financial advisors as they are receiving less compensation for the work
that they perform and due to this they are not able to maximise their earning. Hence, to achieve
profits at a higher rate the financial advisors of the company perform these uncodified and
unethical obligations. This impact the confidence of the customers that are considering to invest
as per the advice of the financial advisors (Davis, 2019).
There were some early scandals that took place in the financial advice industry through which
they began to provide bad financial assistance to the users. there was various accounting fraud
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that were identified in the report among which the first one was the storm financials which was
considered to be the profitable company before seeking the financial advice. Due to the different
advice and the financial assistance the investors in the company were told to took the loans
against the equity in their own homes so that they are able to obtain the loan and to invest the
amount in the share. due to this, it was seen that many clients of the company were in negative
equity positions due to which they sustained huge loss. Due to which the advice seeker lost all
the shares, homes and the life savings that they have (Hanrahan, 2019). Hence, for this reason,
the ASIC estimated the loss that were suffered by the investors of the company. Therefore, as an
act of by the ASIC the company was put into the voluntary administration and liquidation where
liquidators for the company were subsequently appointed.
Effects on the stakeholders of the financial misconduct by the financial advisors
In the of Carrol and Buchholt’z, the stakeholders are defined as the individual or the group of the
person that has various kinds of the stake in the particular organisation. this is seen that the
stakeholder of the company gets affected through the actions or the policies or the market
sentiments of the company. Also, this may happen that the stakeholder of the company may
affect and influence the practice of the company. hence there is two-way interaction with the
stakeholders. Hence this is seen that the stakeholders of they may be defined as any person that
has the effect on the investment or the faith in the company due to various decision that are taken
by the company. as the business in the current world is increasing hence this is seen that there are
various forms of stakeholders that are affected by the decision that is taken by the company
(Hargovan, 2018). the stakeholders of the company may have direct or legitimate interest in the
operations of the company. the most important and the popular stakeholders of the company
include the shareholders, employees and the customers of the company.
The primary stakeholders of the company include the shareholders and the investors of the
company, customers of the company, employees, local communities and the supplier of the raw
material of the company. while on the other hand, the secondary stockholders of the company
include the government, civic institutions, social pressure groups or the media or the academic
commentators. These also includes the competitors of the company (Hargovan, 2019).
The term stake in the stakeholders is described as the interest or the share which is in
undertaking by the stakeholder for the company. this can also be defined as the method where
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this can be seen that if the group with the common interest of investment in the company so as to
maximise the wealth. Here the interest of the person to maximise the wealth is considered to be
the stake.
As the royal commission has been identified by the government of the country so that they are
able to find the issues that have been developed in the companies due to the misconduct in the
financial advice that is presented by the financial advisors. As the negative or the wrong advice
has been provided in the various cases in the country due to which the investors in the company
are losing their interest to invest in the company (Hayne, 2018). as this is seen in the famous case
of storm financials, where the company miss leaded the investors and provided the wrong
financial advice to the investor sue to which the investor of the company lost all of their wealth
and money. It was considered that the investors those who have accepted the advice and made
investment as per the advice of the storm financials became bankrupt in few years. Hence due to
the financial misconduct of advisors of the company the stakeholders or the investors of the firm
face various issues (Hooper, et. al., 2018). This does not affect the single stakeholder but affects
the market as a whole. It can be considered that if the stakeholders of the company provide have
been provided with the financial assistance then it would help the company to get best amount of
funds and interest from the stakeholder for the better performance of the company (Wishart and
Wardrop, 2018). Also, this helps in increasing the production of the company so that market
demand can be captured. As due to the misconduct that the financial advisors perform the
interest of the stakeholder’s losses for the investment that is to be made in the company and
hence the volume of the investment in the stock market decreases. The company for the purpose
of fulfilling the objective of giving the stakeholders the best and transparent option must use
various approaches. Some of these include the strategic, multifiduciary and the synthesis
approach to the assessment. This is seen that it is the major identification that the stakeholders of
the company must maintain so that they are able to maximise the interest of the stakeholders of
the company (Kaufman, et. al., 2019).
The strategic approach that is built by the company includes the strategy that is made for the
betterment of the stakeholder where they are able to get the profits for the stakeholders. Here the
manager of the company considers the attributes of the stakeholders of the company as this is
seen that the stakeholders of the company may resist or may retaliate against the company for the
wrong decision that are taken by the company. on the other hand, the company multifiduciary
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approach identifies the stakeholders of the company more than just an individual or the group of
the person. here the company provides access to the information that is related to the company.
here the management of the company aligns the stakeholders just in line with the stockholders of
the company. here the company considers both the stockholders and the stakeholders of the
company equally important so that they are able to perform the obligation in the best and the
desired manner (Legg and Speirs, 2019).
Hence this can be seen that as the financial advisors make various misconduct in giving
assistance to the stakeholders of the company. Hence sometimes the wrong advice that is given
by the financial advisors make the investors lose their money. Due to this the stakeholders of the
company faces the problem. Hence the role of the company is to provide assistance to the
shareholders in making the right and justified decision regarding the issue. The management of
the stakeholders nowadays has become most important criteria for the companies and the
companies must not face the issue where they get impacted through the decision of the
stakeholders (Mathews, 2019). This can be considered that the primary objective of the company
is to provide the stakeholders of the company the best and transparent information about the
performance of the company. this would help the company to maximise the investment in the
company.
Analysis of the financial institutions investigated in the ASX principles and recommendations
The corporate governance is one of the most important terms that the company must follow so
that they function as per the rules, relationships, systems and the process as defined by the
management of the company. through this the companies in the country are able to control the
functioning of the employees and the managers of the company. here the polices and the
framework are defined by the company so that smooth and effective functioning of the company
in an effective manner can be done. as a part of corporate governance, the investor's confidence
can be built and entities that are listed on the ASX can complete their obligations for the
investors of the company (McIlroy, 2017). there were various principles that are defined for this
purpose so that a powerful and efficient corporate governance programme can be framed by the
company. some of the principles and the recommendations that are related to the company
include the following:
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 Lay solid foundation for the management and oversight: this is considered to be the
principle through which the management of the company is considered to be controlled.
Here true and fair information related to the company must be provided by the company.
 Structure of the board to add value: this is important for the company to follow the fact
where this is seen that the board of the company must be of appropriate so that the
commitment towards the shareholders are fulfilled.
 Act in the ethically and responsible manner: the entity that is listed with the company
must act in an ethical manner
 Safeguarding the integrity of the corporate reporting: this is important for the company to
safeguard the integrity and accountability of the reporting entity.
 Make timely and balanced disclosure: the company that are listed in the stock exchange
must provide a timely disclosure about the functioning to the ASX.
 Respect the rights of stockholders: this is important for the company that they should
respect the rights of the security holders of the company.
 Recognise the risk and manage them: it is the duty of the managers of the company to
recognises the risk and manage them in the best possible manner.
 Remunerate the fair and responsibility: this is important for the company to manage the
fairness and the responsibility of the companies that are working in the industry.
While making the investigation and before the royal commission the companies that are listed in
the stock exchange provided that the corporate governance is one of the major issues in the
financial institutions and the employees of the company are not fulfilling the guidelines as per
the required benchmark. The companies are not following all the guidelines and the principles
that are defined in the corporate governance guidelines (McIlroy, 2018). It is considered to be the
matter of the fact that the principles that are made by the government of the company are rigid
and complex to follow hence these are not followed by the companies working under this
segment. it was considered that there was inadequate oversight and challenges that were related
to the CBA board, this was also seen that it was not clear about who was accountable to the risk
and how these were considered to be held accountable for this instance. The issue, incidents and
the risks that were related to the companies ere not identified in a quick manner, also the
compliance of the corporate governance was not given enough attention as defined by the
companies before the royal commission investigation (Merrington, et. al., 2015).
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The royal commission investigation includes a broad area of board. The board was considered to
be diverse in making the analysis about the corporate governance issues int eh companies. This
was done in the manner that through this the trust in the companies would start to build again. It
is considered that the board and the senior manager of the company needs to take immediate
actions for the same so that they are able to maximise the corporate governance practice in the
company. the board on the priority identified various areas where they decided to make the
analysis. These areas include review of the organisation and the management that are operating
and are listed with the ASIC (Mills, et. al., 2018). To take the ownership of the non-financial
risks., measuring and monitoring the culture and customers outcomes. Using the consequence
and the management so as to enforce accountability. Also, to empower the employees so that
they focus on good customers outcomes. The board investigated around 10323 submissions
(Purser, et. al., 2019).
Ethical analysis
The information and the investigation that has been done by the royal commission is one of the
most important investigations that was required for the purpose of identifying the misconduct
that are faced by the companies working in the banking and various other financial industry
(Price, 2019). It considered being through this report the specific individual was not focused or
was given the criminal prosecution for this purpose. instead around 24 recommendation were
made so that the responsible people change their- mindset and bring confidence and trust in the
industry back. Here this was considered that there were many problems that were related to the
ASIC due to which they were facing various problems for the same. through this report it can be
considered that the companies and the financial institutions that are working in this country
should perform their obligation according to the rules and regulations (O'Brien, 2019).
The companies for the purpose of being sustainable in the company must identify the corporate
governance strategies and should also describe the method through which they provide the best
financial advice. This should be done in the best manner so that the stakeholder’s confidence in
the companies and the financial market come back.
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Conclusion
The above analysis concludes in the manner that royal commission report has made a significant
change in the governance of the company and this is seen that through this they are able to
minimise the misconduct that occurs in the company. the companies are now following the
corporate governance policy as prescribed by the ASIC. The overall implication of the
investigation that has been made by royal commission is positive as through the interest of the
stakeholders in the financial market has generated once again.
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