Ethical Analysis of AMP in Banking Royal Commission: Governance & CSR

This report delves into the alleged misconduct by AMP Insurance Limited Company, as investigated by the Banking Royal Commission. The central ethical question revolves around AMP's continued deduction of premiums from superannuation accounts of deceased individuals and charging fees for unoffered services. The analysis employs ethical theories, corporate governance principles, social responsibility frameworks, and the ASX 2010 recommendations to assess AMP's actions. The report highlights AMP's failure to act in the best interests of its customers, prioritizing profit maximization over ethical conduct and stakeholder well-being. It further examines stakeholder theory, emphasizing the importance of balancing shareholder wealth with the fair treatment of all stakeholders, including customers and employees. The report concludes that AMP's actions contravene corporate governance principles, CSR, CSV, and CSP, advocating for a shift towards ethical practices and shared values within the organization.

Corporate Governance 1
Corporate Governance & social responsibility
by Student Name
Course & Course Code
Professor
University
City & State
Date

Corporate Governance 2
Table of Contents
Executive Summary.................................................................................................................3
Introduction..............................................................................................................................4
Background and Ethical Question..........................................................................................4
Corporate Governance, CSR, CSV and Corporate Social Performance Analysis............6
Stakeholder Analysis................................................................................................................7
Corporate Governance Discussion based on ASX 2010 Principles and recommendations
....................................................................................................................................................9
Ethical analysis.......................................................................................................................11
Conclusion and Recommendations.......................................................................................14
Conclusion............................................................................................................................14
Recommendations................................................................................................................15
References List.......................................................................................................................16
Executive Summary

Corporate Governance 3
The objective of the royal commissions is to conduct inquiries into the misconduct and
perceived unethical practices in the Australian Superannuation, financial services, and
banking industry. In 2018, the Royal commission opened an investigation to investigate
alleged malpractices at the AMP financial service company. The study sought to examine the
perceived misconduct by the AMP Insurance Limited Company. The main issue was to
establish whether or not AMP was ethically right to continue making such deductions as well
as charging death customers for unoffered services. The study was based on ethical theories,
corporate governance and social responsibility practices, and the ASX 2010 principle and
recommendations. The study found out that AMP did not act to the best interest of its
customers. The company took advantage of the confusion to maximising its profit without
considering the impact of its action on its customers and its own reputation in the market.
Lastly, AMP should lead with an example by developing good corporate governance and
morally acceptable practices.
Introduction
The study seeks to investigate the perceived misconduct by the AMP Insurance Limited
Company. The Banking Royal Commission opened an inquiry to investigate alleged

Corporate Governance 4
complaints from customers that the company had continued to deduct premiums from
superannuation accounts even after being informed about the death of the account holders.
The main issue is to establish whether or not AMP was ethically right to continue making
such deductions as well as charging death customers for unoffered services. The study is
based on ethical theories, corporate governance and social responsibility practices, and the
ASX 2010 principle and recommendations.
Background and Ethical Question
The Banking Royal Commission was founded by the Australian government in 2017 contrary
to the Royal Commission Act 1992. The objective of the commissions is to conduct inquiries
into the misconduct and perceived unethical practices in the Australian Superannuation,
financial services, and banking industry. To date, the commissions have completed numerous
inquiries while other financial institutions are still under investigation. One of the companies
being investigated by the Royal Commission for misconduct is the AMP Insurance Limited
Company (Chalmers, 2018).
Early 2018, the Royal commission opened an inquiry to investigate alleged misconducts at
the AMP financial service company. There were complaints from customers that the
company had continued to deduct premiums from superannuation accounts even after being
informed about the death of the account holders. Based on this allegations, the commission
summoned Paul Sainsbury, AMP's Customer, and wealth executive, to respond. In his words,
Sainsbury admitted to the claims adding that the Company intended to repay the deductions
at the maturity of the death benefits. However, Sainsbury could not explain why the company
had continued to make deductions when there was no life to insure. Likewise, AMP had
failed to take corrective measures when two years after the first concern from internal
personnel and customers was raised (Chalmers, 2018).

Corporate Governance 5
On his admission, Sainsbury agreed that the refunds to customers did not include the profits
that would have been realised if the premiums, after the death of customers, had not been
deducted from superannuation accounts. Existing statistics showed a case where deductions
had been made for a decade after the death of customers. Further investigation established
that premiums were either refunded incorrectly or not refunded. AMP had recorded cases of
4,645 death customers who owned an accumulative $ 1.3 million in lost earnings and
unrefunded premiums. Besides the deduction of premiums, Sainsbury also admitted that there
were other fees that AMP was deducting from the superannuation accounts after the death of
owners (Chalmers, 2018).
Although the investigation into the matter is still ongoing, several ethical issues have arisen.
First, why did AMP continued to deduct premiums from the superannuation accounts even
after being notified about the death of the account owners? Second, why did the company opt
to charge for unoffered services? Third, why would AMP steal from its customers? And
fourth, are there ethical theories and principles that support the perceived misconduct by
AMP?
Corporate Governance, CSR, CSV and Corporate Social Performance Analysis
The concepts of Corporate Governance, Corporate Social Responsibility (CSR), Creating
Shared Value (CSV), and Corporate Social Performance (CSP). Corporate governance can be
described as the rules, practices, and processes that govern the operations of a Corporate. The

Corporate Governance 6
concept offers a balance between a company's goals and objectives and the needs of its
stakeholders (Fernando, 2010, p. 113).
Just like corporate governance, CSR also elaborates the roles of corporates in societal well-
being. CSR states that businesses should be responsible for the environmental and social
impact in the society arising from their operations. The concepts seek to ensure that
corporates do not make a profit at the expenses of the plights of a community. CSR should be
practiced on customers as well by safeguarding their interest. Good CSR provides a win-win
situation for the company and customers. While companies use CSR to improve their brand
and corporate image, customers should be satisfied with the activities of the company
(Shailer, 2004, p. 17).
Lastly, both CSV and CSP refer to improving a company's competitive advantage in the
industry by promoting societal needs. Corporate strategies should support the growth of a
company while benefiting its stakeholders as well. As a superset of the other concepts, CSP
holds that the performance of a company is influenced by its relationship with its
stakeholders (Crowther & Seifi, 2015, p. 89).
Although the objectives of the abovementioned concepts ten to overlap, they have a common
message. The only way in which businesses can do well is through doing good to their
stakeholders and the society (Keay, 2011, p. 217).
AMP was supposed to safeguard the interest of its superannuation customers. First, the
insurance company would have stopped the deduction of premiums from the customers'
accounts after being informed about their death. Second, the company should not charge
death customers fees for non-provided services. Third, upon realising the mistake and
identifying over four thousand cases of unrefunded funds, the company failed to take a
corrective measure. Fourth, Paul Sainsbury stated that the premium payments made after the

Corporate Governance 7
death of customers would be made less the profit that would have been realised if the
deduction had taken place (Bonnafous-Boucher & Rendtorff, 2016, p. 76).
AMP did not act to the best interest of its customers. The company used the confusion to
maximising its profit without considering the impact of its action of its customers and its
reputation in the market. Instead of doing well by doing good, AMP did well by doing bad
which is against the concepts of corporate governance. CSR, CSV and CSP (Afza, 2014, p.
214). Likewise, AMP did not care about its reputation as far as it made a profit by extorting
lifetime investments from its customers. Good corporate governance required that AMP
would have released the entire superannuation funds to the beneficiaries upon the death of
customers without further deductions (Collier & Roberts, 2001, p. 67).
Stakeholder Analysis
Stakeholder theories assume that there several stakeholders, besides shareholders, with a
stake in a corporation. Stakeholders who are affected by the success or failure of a company
include customers, financiers, communities, employees, suppliers, trade associations and
trade unions. Besides maximising the wealth of the shareholders, managers should also
ensure that other stakeholders also receive fair treatment such as fair returns from the
company (Hilb, 2016, p. 99). According to the stakeholder theories, corporations should
observe corporate social responsibility even when it means a reduction of long-term
profitability. Therefore, it the duty of the corporate executive to ensure compliance with the
international business laws and ethical standards. Likewise, the board is responsible in
protecting the interest of other stakeholders and also ensure that the business practice is in
line with the sustainability of the surrounding community (Kose, 2011, p. 121).
The application of stakeholder theories has a direct impact on business strategy and
objectives. Corporates must ask themselves why they are doing business. Some corporates

Corporate Governance 8
are more interested in using any means to maximise their profit without taking the interest of
stakeholders into account. This is the case of AMP Company. The management was more
interested in maximising the shareholders' wealth. One way of increasing the company's
investment portfolio was to continue deducting premiums from customers even after their
death. To make matters worse, AMP decided that it was not going to share the revenue
realised from investing the premium deductions with the customers. This way, the company
would increase dividends payable to its customers by stealing from its customers (Kahane et
al., 2013, p. 154).
The employees and customers raised complaints about the company's misconduct. According
to the stakeholder theories, a business stands to benefits a lot when there are goodwill and
cooperation from its stakeholders. AMP failed to protect the interest of the employees and
customers who were forced to present their grievances to the Banking Royal Commission
(Wasieleski & Weber, 2017, p. 79).
If AMP Company had applied the stakeholder theory, the current issue before the royal
commission would not have arisen in the first place. Second, AMP would have used the
theory to iron put the arising differences with its stakeholders. Therefore, the company should
carefully reconsider its business strategy and reorganise its way of doing business. AMP
lacks shared values with its stakeholders. The first step is to develop a shared sense of
belonging that brings its stakeholders together. Through shared values, AMP would follow
ethical standards to generate more income (for the shareholders) while safeguarding the rights
of other stakeholders.
Although profit-making is a key goal for a business corporation, creating economic value that
seeks to improve the wellbeing of different stakeholders should be a priority for AMP.
Stakeholder theory does not state that the business should forgo its profitability duty.

Corporate Governance 9
However, in making a profit, AMP should take the interest of its customers into account
(Wells, 2013, p. 213).
Corporate Governance Discussion based on ASX 2010 Principles and recommendations
ASX 2010 Principles and recommendations provide ASX listed companies with good
corporate governance practices that govern their daily operations. The expected ethical
conducts of the companies can be found under the Principle 3 named Act ethically and
responsibly.
The principle outlines that:
First, listed companies should treat their reputation as a valuable asset which should be
protected at all cost. It would difficult to restore a reputation once it has been damaged.
Stakeholders expect listed companies to act responsibly and ethically. Failure to act ethically
and responsibly is likely to destroy an entities value in the long run (Australian Security
Exchange, 2018, p. 24).
Second, acting responsibly and ethically does not end with complying with the legal
requirements. Entities should act with integrity, honesty, and a manner that align with
expectations of its stakeholders. In other words, ASX listed companies should portray good
corporate citizenship by;
a) Respecting employees' rights,
b) Creating a non-discriminatory and safe work environment;
c) Dealing fairly and honestly with stakeholders especially with customers and suppliers;
d) Protect the environment;

Corporate Governance 10
e) And, deal with partners who portray ethics and responsibility in their business
activities.
Third, the board of a listed company is exacted to lead by an example by developing a culture
that promotes responsible and ethical behaviours. Good corporate practice relies on the
personal integrity of the management and board members (Australian Security Exchange,
2018, p. 24).
The following issues can be extracted from the inquiry facing AMP Insurance Company
based on the ASX 2010 Principles and recommendations;
First, AMP failed to act responsibly and ethically by deducting the premium from the
superannuation account even after the death of customers. The management was unable to
observe honesty and integrity as expected by its customers and employees.
Second, the admission by Paul Sainsbury stated that the refunds to customers would not
include the profits realised if the premiums are invested. Likewise, investigations showed that
refunds were either done incorrectly or were not done at all. Therefore, AMP failed to act
with integrity, honesty, and a manner that align with expectations of its stakeholders as
stipulated under the ASX 2010 Principles and recommendations (Schachter, 2004, p. 144).
Third, the management of AMP failed to treat its customers fairly as required by the ASX
2010 Principles and recommendations. The company was more interested in enhancing the
wealth of its shareholders than protecting the interest of its employees.
Fourth, the board of AMP failed to lead by an example by developing a culture that promotes
responsible and ethical behaviours. The board was unable to ensure that the management
acted ethically and responsibly by treating superannuation accounts as required by the law
and accounting principles (Freeman, et al., 2017, p. 123).

Corporate Governance 11
Last, the company destroyed its integrity and reputation, and it would take it a long period to
rebuild it.
Ethical analysis
The issue facing AMP can also be analysed using a moral aspect. In corporate governance,
besides promoting the welfare of shareholders, a company is also expected to protect the
rights of its other stakeholders such as employees, customers, suppliers, financiers,
government and the community.
First, corporates should treat all its stakeholders with equity and fairness. Companies should
strive to safeguard the legal, social, environmental and contractual rights of its stakeholders.
Failure to do so would result in ethical issues (Allhoff & Vaidya, 2005, p. 177).
Second, ethical behaviour and integrity should govern the operations of any corporation.
Integrity is a fundamental factor in the success of any organisation. Board members,
management and employees are required to act with integrity while executing their daily
activities. Therefore, companies should develop codes of conducts that guide their operations.
Third, corporates are required to promote transparency to the best of interest of their
stakeholders. Although transparency is a responsibility of the management and the board, it
offers accountability to organisational stakeholders.
Fourth, ethics is important is the operations of any organisation because it helps in
differentiating between the right and wrong behaviours. The management should observe
ethical practices through accountability to the stakeholders. A business is considered to be
ethical when it balances between corporate objectives and social obligations. Being ethically
right help businesses to enhance their reputation among its stakeholders. Some practices that
are considered to impact ethical values of an organisation negatively include coercion, insider

Corporate Governance 12
trading, conflicts of interest, Disclosure of wrong and false financial position and using
illegal means to gain profit (Ransome &, 2013, p. 114).
The following issues can be extracted from the inquiry facing AMP Insurance Company
based on the ethical analysis.
First, AMP failed to treat its customers equitably and fairly. The Company could safeguard
the legal and contractual rights of its stakeholders. AMP continued to make a premium
dedication from dead customers against the pre-contractual agreement between the two
parties. Second, while other customers were refunded, over four thousand customers were not
refunded at all. This shows unfair and unequal treatment of customers. Such behaviour
resulted in unethical issues.
Second, the Board members, management and employees at AMP failed to act with integrity
while executing their daily activities. Although the company has developed a code of
conducts that guide its operations. If the code of conducts had been observed, the
management and the board would not have failed to identify such misconduct in the daily
activities of a company for two years. Instead, it can be assumed that the management chose
to ignore the unfair treatment of its superannuation customers (Plessis, 2010, p. 56).
Third, the insurance company failed to promote transparency to the best of interest of its
customers. The management and the board had been unable to perform a most important
responsibility: Ensure that transparency is observed in the operations.
Fourth, the management failed to observe ethical practices through accountability to the
customers. Ethically, the company was supposed to balance balances between its corporate
objectives and obligations/ responsibilities to its customers. However, the management of
AMP ignored its responsibility to its customers and chose to use illegal means to gain profit.

Corporate Governance 13
Using the ethical aspect, AMP was wrong to continue deducting premiums even after the
death of its customers. The company went ahead to use the money for the organisation
benefits without the consent of the next of kin/ beneficiaries (Cohen, 2013, p. 153).
Conclusion and Recommendations
Conclusion
Since the year 2016, the customers have been complaining that the AMP Insurance Company
had continued to deduct premiums from superannuation accounts even after being informed
about the death of the account holders. Two years down the line, the company has not taken a
corrective measure to rectify the issue. With the increasing concern to customers and

Corporate Governance 14
employees, the Banking Royal Commission has been forced to intervene by opening an
inquiry on the alleged misconduct by AMP. Although the investigation is still ongoing, Paul
Sainsbury, the AMP's Customer, and wealth executive member have already admitted to the
allegations.
The study focused on the ethical aspect of the alleged misconduct at AMP based on the
Corporate Governance, CSR, CSV, CSP, Stakeholder theory analysis, the ASX 2010
Principles and recommendations, and the ethical analysis. The findings can be summarised as
shown below;
a) Corporate Governance, CSR, CSV, and CSP: AMP did not act to the best interest of
its customers. The company used the confusion to maximising its profit without
considering the impact of its action on its customers and its reputation in the market.
Good corporate governance required that AMP would have released the entire
superannuation funds to the beneficiaries upon the death of customers without further
deductions.
b) Stakeholder theory analysis: AMP failed to protect the interest of the employees who
were forced to present their grievances to the Banking Royal Commission. In making
a profit, AMP should take the interest of its customers into account
c) The ASX 2010 Principles and recommendations: The management and board of AMP
failed to act responsibly and ethically as required by the ASX 2010 principles and
recommendations.
d) The ethical analysis: AMP acted unethically by continuing to deduct premiums even
after the death of its customers. The company went ahead to use the money for the
organisation benefits without the consent of the next of kin/ beneficiaries.

Corporate Governance 15
Recommendations
a) Based on the findings, the board and management of AMP Insurance Company
should take the following recommendations into account;
b) The company should admit to the wrongdoing and accept any recommendation made
by the banking royal commission. Acknowledging the wrongdoing and accepting the
recommendation of the commission will be the first step to rebuilding its already
destroyed reputation.
c) The company should stop further deductions from the accounts of the dead
superannuation customers.
d) The company should share the profits generated from investing the premium
dedications with the beneficiaries of the superannuation funds.
e) The company should develop a useful code of conducts that will promote honesty,
transparency, and integrity.
f) The board of AMP should lead with an example by developing good corporate
governance and morally acceptable practices.
References List
Afza, T., 2014. Theoretical Perspective of Corporate Governance: A Review. European
Journal of Scientific Research, 119(2), pp. 255-264.
Allhoff, F. & Vaidya, A., 2005. Business Ethics: Ethical theory, distributive justice, and
corporate social responsibility. London: SAGE Publications.
Australian Security Exchange, 2018. Corporate Governance Principles and
Recommendations with 2010 Amendments, Sydney: ASX Corporate Governance Council.

Corporate Governance 16
Bonnafous-Boucher, M. & Rendtorff, J. D., 2016. Stakeholder Theory: A Model for Strategic
Management. Illustrated ed. New York: Springer.
Chalmers, S., 2018. Banking royal commission: AMP continues to charge dead customers life
insurance premiums. [Online]
Available at: http://www.abc.net.au/news/2018-09-17/amp-charges-dead-customers-for-life-
insurance/10255978
[Accessed 18 Sep 2018].
Cohen, S., 2013. Ethics, Values and Civil Society. New York: Emerald Group Publishing.
Collier, J. & Roberts , J., 2001. Introduction: An Ethic for Corporate Governance?. Business
Ethics Quarterly, 11(1), pp. pp. 67-71 .
Crowther, D. & Seifi , S., 2015. Corporate Governance and International Business. 1 ed.
London,UK: Bookboon.com.
Fernando, A., 2010. Business Ethics And Corporate Governance. New Delhi: Pearson
Education India.
Francis, R. D., 2000. Ethics and Corporate Governance: An Australian Handbook. Sydney:
University of New South Wales Press.
Freeman, R. E., Kujala, J. & Sachs, S., 2017. Stakeholder Engagement: Clinical Research
Cases. London: Springer.
Fryer, M., 2014. Ethics Theory and Business Practice. London: SAGE Publications.
Hilb, M., 2016. New Corporate Governance: Successful Board Management Tools. London:
Springer.

Corporate Governance 17
Kahane, D., Lopston, K., Herriman, J. & Hardy, M., 2013. Stakeholder and citizen roles in
public deliberation. Journal of Public Deliberation, pp. 9(2): 1-35.
Keay, A. R., 2011. The Corporate Objective. Sydney: Edward Elgar Publishing.
Klettner, A., 2016. Corporate Governance Regulation: The changing roles and
responsibilities of boards of directors. New York: Taylor & Francis.
Kose, J., 2011. International Corporate Governance. New York: Emerald Group Publishing.
Phillips, R. A., 2011. Stakeholder Theory. illustrated ed. New York: Edward Elgar
Publishing.
Plessis, J. J. d., 2010. Principles of Contemporary Corporate Governance. Washington:
Cambridge University Press.
Ransome, W. & C. S., 2013. Ethics and Socially Responsible Investment: A Philosophical
Approach. Sydney: Ashgate Publishing, Ltd.
Schachter, E. P., 2004. Identity configurations: A new perspective on identity formation in
contemporary society. Journal of Personality, pp. 72(1), 167-200. doi:10.1111/j.0022-
3506.2004.00260.x.
Shailer, G. E. P., 2004. Introduction to Corporate Governance in Australia. Sydney: Pearson
Education Australia.
Wasieleski, D. M. & Weber, J., 2017. Stakeholder Management. Illustrated ed. New York:
Emerald Group Publishing.
Wells, G., 2013. Sustainable Business: Theory and Practice of Business Under Sustainability
Principles. Sydney: Edward Elgar Publishing.

Corporate Governance 18