Interest Groups And Ethical Theories Essay

Question:

Discuss about the Interest Groups and Ethical Theories.

Answer:

Introduction:

The report is prepared to critically evaluate the financial management practices and policies of Common wealth bank of Australia with respect to social outcomes and social responsibility of their outcomes. Any ethical principles breached by common wealth bank have also been identified in the report. Moreover, ethical violations with reference to ethical theories have also been discussed in the report. Common wealth bank of Australia is the multi national bank of Australia that has diversified its business in other countries such as United Kingdom, Asia and Asia. Organization is a leading provider of integrated financial services such as fund management, retail, premium and institutional banking (commbank.com.au 2018). Bank has delivered strong financial performance in the recent years and has enhanced the financial well being its stakeholders.

The sustainable policy and practices of Common wealth bank of Australia through enhanced financed disclosure of carbon emission and framework of new wealth management having responsible investment. Organization has also employed embedded approach having responsible lending. The framework of new wealth management of responsible investment has been established by organization to integrate social, environmental and governance factors across the processes of investment. Such integration is consistent with the pursuit of outcome of sustainable long-term investment for clients and customers. Investment decision-making by organization under this framework embed the considerations of economic, social and governance factors and enabling employees to asses and understand the risk and opportunities associated with the economic, social and governance factors and also generating active ownership practices (Gitman et al. 2015). Efforts are also taken by Common wealth bank to provide transparency in managing the considerations of environmental factors and the progress is disclosed in the integration of framework. Divisions of wealth management also incorporated in the new framework that is made up of four businesses such as colonial first state, global assets management of colonial first state, commlnsure and wealth management advice (Yin 2017). Furthermore, the approach of responsible lending is embedded into the business lending by development of risk tool of economic, social and governance factors risk assessment and the same is regarded as integral to the process of lending decision. Lending portfolio of group has exposure to a number of renewable energy projects in the solar, wind, biogas power sectors and landfill gas. Bank has also become signatory of the equator principles III and the lending approach has received guidance from published nine ESG lending commitments (Klettner et al. 2014). Therefore, it is demonstrated from the discussion that common wealth bank aligns its practices of financial management with the efforts of corporate social responsibility.

Social responsibility and sustainability outcome really matter for CBA:

The environmental impacts of operations are actively considered by bank and are committed towards making positive contribution and operating sustainably. Significant long-term driver of both financial and non-financial risks faced by organization are the climatic change. Core business strategy is to address the risks and the relationship is potentially impacted by change in climatic conditions. For assessing the relationship with suppliers and customers, a framework have been implemented by bank that considers the issues of environmental, social and governance factors. Strategy of sustainable property helps organization in reducing our own direct impact of operations by monitoring the use of energy and reducing emission of green house gas (Dalal and Sadler 2014).

The approach of corporate social responsibility programs of bank is to support the communities, assist the customers, people engagement and minimize the impact of their activities on environment. Bank plays a crucial role in enabling social and economic development, driving innovation, creating opportunities and supporting jobs (Vinnari et al. 2017). In order to make positive contribution to society, efforts are taken by organization to use resources and unique capabilities. Moreover, bank also established a Customer Advocate Community Council that comprised of community, social policy, issues advocacy and welfare. For securing the financial well being of customers, organization responds by collaborating with leading academics, community organizations, social service agencies and regulators. One of the greatest challenges posed to the organization is the change in climatic conditions as this particular factor is considered long-term driver of both financial and non-financial risk (Lucas et al. 2016). In addition to this, a number of training modules helps in supporting understanding of employees of considerations of economic, social and governance factors and thereby enhancing the investment, lending and procurement outcome in decision making process. From the analysis of above discussed facts, it can be inferred that outcomes of sustainability and social responsible really matter to CBA.

Identification of ethical principles breached by CBA:

Common wealth bank of Australia was accused breaching rules of anti money laundering. It was announced by the regulators that bank would face an ethics probe after they were accused of the fact that they did not take enough efforts for prevention of money laundering. CBA was financially sound and well capitalized bank but the issues surrounding the breaching has raised number of concerns. Bank breached the compliance of money laundering and this questions the accountability, governance and culture of organization. Regulators accused bank for its failure to prevent automatic deposit machines from being used by 53000 times by terrorist groups and criminal gangs for money laundering (Brown and Lawrence 2017). Bank was further alleged of the criminal deposits of more than 10000 Australian dollar limit in machines for transferring overseas. In addition to allegations of money laundering, a series of scandal was also faced by bank over insurance payouts and poor financial planning advice. In recent years, Common wealth bank was among several other financial institutions that have faced allegations of offering poor financial services to its customers and their failure to honour insurance claims. The risks associated with the money laundering were not adequately assessed by the bank, they failed to report the suspicious matters, and for money laundering risk, it did not monitor the customers as well. Businesses are at the risk of being misused for criminal purposes if they fail to have sound control and systems in place (Abbott et al. 2017).

Discussion of ethical violations with reference to ethical theories:

The ethical violations by Common wealth bank of Australia can be explained using several ethical theories. Considering the ethical utilitarian theory, that is based on ability of individual to predict the action consequences. As per this theory, the choice yielding greatest benefit is considered ethically correct. It can be seen that bank has conducted ethical violations by breaching the compliance of money laundering that had the consequence of falling price of shares. Common wealth bank was sued of allegedly breaching counter terrorism financial laws and money laundering that has resulted by fall in share price by more than 5% (abc.net.au 2015). The choice of bank to breach anti money laundering has resulted considerable loss to shareholders and has damaged the reputation of organization. Such breaching lead to detrimental impact on overall performance of organization and is not considered ethical. Therefore, it can be said that bank has violated utilitarianism ethical theory.

Considering ethical theories that are based on rights, rights that society has established have been given the highest priority and they are protected (Villa 2015). Since, larger population endorses them, such rights are considered to be valid and ethically correct. Looking at the banking institutions, the established rights of customers is to inform their properly and protect the money deposited in the bank. The court case of money laundering has bank in facing potential class action over the big drop in price of shares. Violation of compliance and involvement in money laundering activities has resulted in significant loss to shareholders (Brand 2016). Therefore, it is indicative of the fact that common wealth bank has violated the ethics based on rights of people in society. Disclosure obligation was also breached by bank that depicted that right to inform to its customer was also violated.

Conclusion:

From the above discussion of the financial management policies of Commonwealth bank, it can be inferred that bank practices their financial decision in line with outcome that are social and sustainable responsible. Moreover, CBA has also incorporated its social responsible practices into their operational, activities depicting that issues of sustainability and social aspects are of particular importance to organization. The established framework of organization incorporates many social and sustainable factors for developing relationship with stakeholders. Discussion of ethical violations has been discussed in relation to ethical theories and it can be deduced from the analysis that bank have breached utilitarianism ethical theories and ethical theories based on rights.

References list:

Abbott, M., Banks, J., Belanger, Y., Brown, D., Christensen, D., Hancock, L., Harrigan, K., Johnson, M., Lund, A., Markham, F. and McGrath, D., 2017. Just Gambling? Ethical Challenges Pertaining to Gambling Provision, Policy and Research.

ABC News. 2017. CBA accused of money laundering, terrorism financing breaches. [online] Available at: [Accessed 6 Apr. 2018].

Brand, V., 2016. Still Insufficient or Irrelevant: Australia's Foreign Bribery Corporate Whistleblowing Regulation. UNSWLJ, 39, p.1072.

Brown, A.J. and Lawrence, S.A., 2017. STRENGTH OF ORGANISATIONAL WHISTLEBLOWING PROCESSES–ANALYSIS FROM AUSTRALIA.

Commbank.com.au. 2018. Commonwealth Bank implements sustainability policies and practices . [online] Available at: [Accessed 6 Apr. 2018].

Dalal-Clayton, B. and Sadler, B., 2014. Sustainability appraisal: A sourcebook and reference guide to international experience. Routledge.

Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.

Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability: Empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics, 122(1), pp.145-165.

Lucas, K., Van Wee, B. and Maat, K., 2016. A method to evaluate equitable accessibility: combining ethical theories and accessibility-based approaches. Transportation, 43(3), pp.473-490.

Villa, J., 2015. Ethical Understanding in the Banking Sector. In Ethics in Banking (pp. 35-91). Palgrave Macmillan, London.

Vinnari, M., Vinnari, E. and Kupsala, S., 2017. Sustainability Matrix: Interest Groups and Ethical Theories as the Basis of Decision-Making. Journal of Agricultural and Environmental Ethics, 30(3), pp.349-366.

Yin, W., 2017. Sovereign wealth fund investments and the need to undertake socially responsible investment. International Review of Law, 2017(1), p.9.

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