MAA250-Ethics and Financial Services

Unit Learning Outcome

1.Apply ethical principles and decisionmaking models in arriving at a responsible and ethical judgement in routine and complex finance decisions.

2.Understand, prioritise and communicate the responsibilities of finance professionals in relation to stakeholder interests.

3.Integrate and communicate knowledge of ethics and professionalism in financial services from corporate and individual perspectives in national and international settings

4.Explain and interpret the career path and role of finance professionals and the importance of networking.

Graduate Learning Outcome

1.Discipline specific knowledge and capabilities assessed when students apply course content to a series of events affecting the Commonwealth bank of Australia.

2. Communication Using written and interpersonal communication to inform, motivate and effect change by drafting professional communications that • recommends a course of action which reflects course content and case study information; and  applies course and case content to individual decisionmaking, with justification

3.Critical Thinking Evaluating information using critical and analytical thinking and judgement. Reflected in assessment of case study information and personal application.

4.Self Management Working and learning independently, and taking responsibility for personal actions. Students are required to demonstrate selfmanagement skills when completing the employability component of this task.

Description / Requirements

Reading of all course content and wider research is required for this assessment. Note: Students must correctly use the Harvard style of referencing.

This assignment is broken into four Parts:

A. Preparation – students must complete the Ethical Lens Inventory (ELI). Whilst no marks will be attached to completing the ELI students will not be able to submit their assignment until their ELI has been completed

B. Case Study - Analysis – drawing on relevant theories of ethical decision-making students must present an analysis of five key stakeholder groups for the Commonwealth Bank of Australia (CBA).

C. Case Study – Recommendation - make a recommendation that will achieve the goal of repairing the CBA’s reputation, and restoring trust in the bank

D. Personal Reflection – drawing on the results of your ELI and a Motivation at Work career assessment students must reflect on how they would respond to an offer of a graduate position with the Commonwealth Bank.

PART A – Ethical Lens Inventory

Completing the Ethical Lens Inventory (ELI, or “Ethics Game”) is a hurdle requirement for submitting Assignment

2. You will not be able to submit Parts B, C, and D until you have completed the ELI and uploaded your completed ELI Lens report.

Requirments

From the unit site on CloudDeakin (Assessment Resources, Assignment 2) download and read:

•Introduction to the Four Ethical Lens Inventory

• Overview of the Four Ethical Lens Inventory

• Understanding the Four Ethical Lens Inventory

• ELI Ethics Game Access Instructions and Registration 2. Complete the Ethics Game (ELI) and extract your ELI profile. 3. Submit your completed ELI report by uploading to the Dropbox on CloudDeakin.

PART B – Commonwealth Bank Stakeholder Analysis (8 marks)

Introduction

A strong banking sector is critical to a strong economy. Many have argued that Australia was shielded from the worst effects of the Global Financial Crisis due to the strength of its banks. To be

strong banks depend on the support of their shareholders, the trust of their customers, and an effective working relationship with government and regulators. In terms of market capitalization, on 1 October 2017, the “Big 4” Australian banks were the largest companies on the Australian Securities Exchange, with the Macquarie Group Limited the 10th largest. Australia’s ten largest companies are included in the table below:

However, banks have long been controversial in Australian society.

There has been a lively debate about whether the Australian government should initiate a Royal

Commission into banking industry practices “Coalition MPs may cross floor to vote for banking royal commission” (David Lipson, ABC, 30 Oct 2017) In August 2016 the Prime Minster announced that the heads of Australia’s big four banks must appear before the House of Representatives economics committee every year, saying the banks “operate under a social licence…they are built on a foundation of trust and they have to earn that trust through being open and accountable at all times.” (The Conversation,4 August 2016) In May 2017 in his annual budget speech the Federal Treasurer announced that the government would apply an annual levy (a “bank tax”) that will only affect large banks in Australia. Despite protests from the banks the public has not raised significant objections to the tax.

In September 2017 all four of Australia’s largest banks announced they will stop charging a fee for customers of other banks to access their ATMs (automatic telling machines). Some have speculated that this move was, in part, motivated by a need to renew the banking industry’s “social licence”.

Commonwealth Bank of Australia Limited (CBA Bank) Of all the Big 4 banks the Commonwealth Bank has perhaps been the most controversial in recent years.

Financial Planning

In July 2014, under the heading Commonwealth Bank CEO Ian Narev apologises to customers, news.com.au reported “for a decade, CommBank has been embroiled in a scandal involving forged signatures and dodgy financial planning. They’re finally saying sorry” (Wenlei Ma, Victoria Craw & Wires, news.com.au, 3 July 2014).

CommInsure

In March 2016, Ruth Fogarty from the ABC reported “CommInsure, one of Australia's biggest life insurers with about 4 million policy holders, has been caught out using unscrupulous practices buried in the conditions of the fine print of its contracts to deny, delay or avoid paying claims” (Ruth Fogarty, ABC, 8 March 2016)

AUSTRAC

“The Commonwealth Bank is facing another scandal as the Australian Transactions Reports and Analysis Centre (AUSTRAC) launches civil proceedings accusing the bank of being complicit in money laundering. This exposes a deeply worrying prospect, that the Australian public are vulnerable to crime and terrorism directly funded through the Australian banking system. AUSTRAC alleges CBA breached the Anti-Money Laundering and Counter-Terrorism Financing Act (2006) 53,700 times since 2012, where transactions were not reported by the bank, or reported too late. The bank faces a potential penalty of A$18 million per breach, which could amount to billions of dollars (Thomas Clarke, The Conversation, 5 August, 2017).

CEO Resignation and senior executive remuneration

In August, 2017 the Commonwealth Bank announced that its Chief Executive Officer, Ian Narev, would be leaving the bank. Mr Narev’s remuneration was reduced by more than 50%, “partly as a result of the money laundering scandal”. Additionally, the bank’s Board of Directors “decided to eliminate the short-term bonuses of all senior executives for the 2017 financial year” (Michael Janda, ABC, 14 August, 2017)

Class Action

“On 9 October 2017, Australia’s leading class action law firm, Maurice Blackburn Lawyers…filed a shareholder class action on behalf of aggrieved Commonwealth Bank of Australia (ASX:CBA) investors. The class action was filed on behalf of investors who suffered losses due to the share price fall following the institution of legal proceedings by AUSTRAC against CBA” (Andrew Watson, Ronald Koo, Maurice Blackburn, 9 October, 2017). 

Requirements

Consider the position of five key stakeholder groups of the Commonwealth Bank:

a) Directors and management

b) Shareholders

c) Customers

1. For each group identify their primary “stake” in the CBA. For example:

• what do they contribute to the bank?

• what do they expect from the bank in return?

d) Employees

2. For THREE of the stakeholder groups, discuss their behaviour in the context of established ethical models, such as:

• The hierarchy of ethical decision-making

• Stakeholder theory

• Normative theory

• Descriptive theory

• Kohlberg’s six stages of ethical reasoning