AMP Limited or AMP is an Australia-based financial services company which offer its services in Australia and New Zealand. The services of the company include financial advice, superannuation, and investment products, banking products, saving accounts, home loans, and others. Recently, the company has been involved in the investigation of the Australian Securities and Investments Commission (ASIC) and Banking Royal Commission due to its unethical behaviour (Ferguson, 2018). The top level management of the corporation has failed to ensure that a standard of care is maintained by them to ensure that the company is performing its operations in an ethical manner. The public reputation of the company is adversely affected after the Banking Royal Commission 2018. This report will evaluate the corporate governance and ethics system which is implemented by AMP in order to perform its operations ethically. Various deficiencies in the corporate governance structure of AMP will be highlighted in this report. The circumstances due to which the breakdown of AMP occurred will be analysed in the report. The mechanism which is implemented by the company to protect whistle-blowers will be discussed in the report to evaluate whether these policies are sufficient to protect the interest of stakeholders. Lastly, various strategies will be recommended for AMP which should have been used by the company to avoid the scandal.
AMP is a leading organisation in Australia which operates in the finance industry. The operations of the company affect a large number of people based on which it has adopted a corporate governance structure which directs the management in conducting their operations ethically. Under this structure, the company focuses on maintaining transparency by issuing a corporate governance statement each year. The company includes information regarding its operations under this statement which could raise certain ethical concerns. The company has established a corporate governance charter which provides outlines for the operations of the board and other managerial personnel. It provides key provisions which they have to follow in order to maintain a high ethical standard. Various roles and responsibilities are also included in the charter of the company which is followed by the board and management team of the company (Aspris, 2018). These policies are in conjunction with the constitution of the company along with various laws. The corporate governance structure also includes a code of conduct of the organisation based on which the company takes its business decision while complying with legal and ethical principles.
This code sets out the behaviour of the company who represents AMP and its values. This code is supported by the employee policies of the company which ensure that the company serves its customers while complying with regulatory obligations (AMP, 2018a). However, there are various deficiencies in this system which affects the stakeholders of the company. Firstly, there is no facility for ethical training which is given to the management team of the company. Due to lack of training, it is easy for the management to violate the policies given under the corporate governance structure of the company along with ethical values. There are not strict adherence policies implemented by the company on those individuals who breach the corporate governance policies (Jo & Harjoto, 2012). There is no procedure for overseeing the operations of the enterprise due to which it is difficult for the company to ensure the management and the board is complying with the corporate governance and ethical policies.
There are around 20 occasions in which the company has found blatantly lying to the corporate regulator (Ferguson, 2018). Moreover, a whistle-blower has leaked various information regarding unethical practices of the corporation which shows that the management of the company did not care regarding its customers or employees. The board of the company has also alleged for interfering with “independent” investigation conducted by the ASIC (Ferguson, 2018). These issues have raised many concerns such as whether it is justified to give the company the social licence to operate its business. Anthony Regan provided that the company knew about the fact that it is charging fees from customers due to administrative error, however, the reality was that it was a deliberate decision which was made by the management of AMP. The corporation becomes aware regarding this issue in 2008, however, it continued till 2013 after which the report was breached by the ASIC (Royal Commission, 2018). In 2015, the company told ASIC that “no systemic issues were identified” in its audit which was conducted by PwC, however, this was a false statement. The internal emails of the company and draft reports reveal that the audit was not independent. These breakdowns are the result of a weak corporate governance system due to which the company is unable to comply with ethical policies.
The board and the management team of the company did not comply with the provisions given under the code of conduct, and they have certainly failed to fulfil corporate governance principles. To ensure that corporations are acting ethically, it is important that they maintain transparency in their corporate governance structure. They are also required to comply with the principles and recommendations which are issued by the Australian Securities Exchange (ASX). The company has failed to comply with first principle issued by ASX which provides that organisations should lay a solid foundation for management and oversight (ASX, 2010). Due to lack of oversight policies, the management of the company was able to act unethically. Another principle which is violated is failure of the company to promote ethical and responsible decision making since its board of directors have been indulging in unethical activities such as charging fees with customers and told them administrative error. It has also failed to comply with the principle of making timely and balanced disclosure because the company has not maintained transparency in its operations (Boatright, 2017). Due to these failures, the breakdown of the company occurred in which the company was found guilty of interfering with independent audit and failed to comply with its corporate governance policies.
AMP has implemented a whistleblowing policy in its corporate governance structure which is focused on encouraging and protecting whistle-blowers to report the unethical behaviour of the company. Under this policy, the company is focused on building a supportive work environment which aligns this policy with the values of the corporation. The culture of the company fosters values such as professionalism, integrity, and honesty based on which its whistleblowing policy is created (AMP, 2018b). The company has provided People & Culture Advice Line for its employees where they can call anonymously to report any unethical or immoral actions of the company in order to protect them. Moreover, whistle-blowers are encouraged by the management to report regarding the wrongdoing of the company to their managers. However, all these policies are not effective since they did not protect the interest of the whistle-blowers or the stakeholders of the enterprise (Rachagan & Kuppusamy, 2013). There are a number of incidences reported in which the board of directors and senior executives of the company were found guilty of violating the corporate governance policies.
There are various examples in which employees reported regarding the unethical behaviour of the company, however, the managers did not take any actions or hold them liable for reporting the same (Chanticleer, 2018). The whistle-blowers are not protected in the company since the management fired them for reporting the wrongdoing of the company. Moreover, these policies are not sufficient to ensure that the interest of the stakeholders of the company is protected (Ayuso, Rodriguez, Garcia-Castro & Arino, 2014). The stakeholders of the company include customers, employees, government, environment, and others. The company has made false claims to the ASIC regarding the independence of the audit and other details which show that it has failed to consider the interest of ASIC (Ferguson, 2018). The company has also continued to charge its customers by providing that it was an administrative error whereas it was a decision which was made by the board. The employees have also accused the corporation of acting as dictators while they report the wrongdoing to their senior management. Thus, the policies which are implemented by the corporations are not sufficient to ensure that the rights of its stakeholders are protected.
Since the corporate governance structure of the company has failed, following strategies can be implemented by the company. These strategies are based on ASX principles and recommendations along with effective corporate governance policies.
Conclusion
In conclusion, AMP has been involved in over 20 incidents in which it blatantly lied to regulatory authorities and its senior level management was also involved in unethical practices which adversely affected the independence of the audit of the organisation. These examples show that there are various deficiencies available in the corporate governance and ethics system of the company. The corporate governance system of the corporation did not provide training, and it did not oversee the operations of the management and employees due to which the breakdown of AMP occurred. Although various policies are implemented by the company for the protection of whistle-blowers, however, these policies are not sufficient. They did not enforce the management to take any actions to protect the interest of whistle-blowers or stakeholders. Various strategies are recommendations which should have implemented by AMP to avoid the scandal. An effective CSR structure would have increased transparency in the operations of the company which would have leaked the information regarding unethical practices of senior level management. Proving training to employees and punishing them for violating these policies would have ensured the compliance of these policies. Moreover, a system to oversee the functions of the management and the board would have assisted AMP in avoiding the scandal.
References
AMP. (2018a). Corporate governance. Retrieved from https://corporate.amp.com.au/about-amp/corporate-governance
AMP. (2018b). Whistleblowing policy. Retrieved from https://www.amp.com.au/content/dam/amp/digitalhub/common/Documents/global/whistleblowing_policy_website.pdf
Aspris, A. (2018). AMP’s Murray right to question the value of corporate governance rules. Retrieved from https://theconversation.com/amps-murray-right-to-question-the-value-of-corporate-governance-rules-100954
ASX. (2010). Corporate Governance Principles and Recommendations with 2010 Amendments. Retrieved from https://www.asx.com.au/documents/asx-compliance/cg_principles_recommendations_with_2010_amendments.pdf
Ayuso, S., Rodríguez, M. A., García-Castro, R., & Ariño, M. A. (2014). Maximizing stakeholders’ interests: An empirical analysis of the stakeholder approach to corporate governance. Business & society, 53(3), 414-439.
Boatright, J. R. (2017). Ethics and corporate governance: Justifying the role of shareholder. The Blackwell Guide to Business Ethics, 38-60.
Carroll, A. B. (2015). Corporate social responsibility. Organizational dynamics, 44(2), 87-96.
Chanticleer. (2018). Whistleblower reveals more unethical behaviour inside AMP. Retrieved from https://www.afr.com/brand/chanticleer/whistleblower-reveals-more-unethical-behaviour-inside-amp-20180510-h0zx4g
Ferguson, A. (2018). Stinking AMP reveals our soft line on corporate dishonesty. Retrieved from https://www.smh.com.au/business/banking-and-finance/stinking-amp-reveals-our-soft-line-on-corporate-dishonesty-20180417-p4za66.html
Jo, H., & Harjoto, M. A. (2012). The causal effect of corporate governance on corporate social responsibility. Journal of business ethics, 106(1), 53-72.
Rachagan, S., & Kuppusamy, K. (2013). Encouraging whistle blowing to improve corporate governance? A Malaysian initiative. Journal of business ethics, 115(2), 367-382.
Royal Commission. (2018). AMP. Retrieved from https://financialservices.royalcommission.gov.au/public-hearings/Documents/Round-2-written-submissions/amp-case-study-1-fees-for-no-service.pdf
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