The different ethical considerations help in maintaining the proper functioning of the business while operating as per the objectives of undertaking a fair entity. The ethical standpoints of the business contribute to the sustenance of the same while operating in the different offshore markets. Establishment of the Banking Royal Commission in the year 2018 was undertaken in order to investigate of the different misconduct in the banking, superannuation and financial services industry (Wishartand Wardrop 2018). The reports that were shared by the Royal Commission clearly portrayed that there are different ethical issues that are faced by the banking and financial service providing industry. The ethical issues have affected the proper functioning of the organizations as per the objectives of the business. The discussion brief emphasizes on the identification of the different ethical issues that are faced by the banking and the financial; service providing industry and thereby relate the same with different literature and theories that are perceived by the researchers earlier. It will be helping in identifying the ethical standpoints of the organizations while operating as per the objectives of the business.
The different issues that are faced by the banking and the financial service providing industry are:
Lack of transparency in the business processes and resistance to investigation- There are instances where the banking organizations have taken steps to maximize their profit margins through lack of transparency in the operations. The banking sectors in Australia should have operated as per the IFRS(International Financial Reporting Standards), which emphasize on fair reporting systems of the organizational position. However, in many cases, the organizations resist over the investigation that are undertaken by different agencies in order to maintain their secrecy of operations (MoosaandSilvapulle2012). For an instance,in 2016 the Commonwealth Bank of Australia lost almost 20 million customer accounts due to a security breach. However, the bank authority did not inform its customers about the breach in their customer details. Moreover, during the investigation the CEO Ian Narev deliberately expressed that there was no loss of customer information in order to stop further investigation (Hutchens, 2018).
Manipulating customers emotionally by exploiting their vulnerabilities- Making use of the emotional attachment of the customers in order to maintain the profitability of the banking institution is again a legal and ethical constrain that is characterized by lack of transparency in the processes of the business. Adherence to the ASIC(Australian Security and Investment Commission) standards would have helped in enhancing the banking operations by avoiding manipulation of the customers. Exploitation of the vulnerable elements that might affect the thinking capabilities and pressurize the same in order to undertake dealings with the financial organization is an ethical discord where the organization resorts to deceptive elements in order to retain the trust and loyalty of the customers. Misleading the customers for investing into different schemes through the promises of financial benefits also affects the morality of the organization to undertake fair trade with the customers (Subramanian 2013). According to the report of Reuters the National Australia Bank Ltd is alleged to manipulate the customers in such a great manner. In fact, the employees are forced to do such thing because of the prevalence of huge bonus and incentives that encourage the bankers to meet the targets by any means. Fraudulent activities are also an intrinsic part to extract more profit for the company (Barrett and Duran 2018).
Breaching a professional standard or a benchmark, which is widely accepted- Breaching of the professional standards by the organizations affects ethical undertaking approach of the business. The key idea of breaching a widely accepted conducted is based on the enhanced chances of profitability of the business (Wehinger 2013). However, organizations face a dilemma of maximizing the profit through compromising the brand name of the same or vice versa. The breaching of a professional standard in order to exploit the customers can be taken as one of the most important ethical issues that are faced by the banking and financial service providing sector. Therefore, the Royal Commission has taken steps to investigate on the activities that are undertaken by the banks and the financial service providers in order to prevent such unethical activities in the banking sector. As per the report of Royal Commission, the Commonwealth Bank of Australia charged clients fees even after their death. The investigation specifically looked into a case where the CBA financial planning arm was charged fees for a client from 2003 to 2015 despite she passed away in 2004 (Danckert 2018).
Normative ethics studies the morality of the actions or deeds that are performed by the people or organizations.Rossi and Sleat (2014) stated that the consideration of the Normativeethicshelps in judging the different actions as per the moral bindings. The different moral interventions and conventions helps in judging the actions that are undertaken by an individual or a group. In this connection the unethical practices that are undertaken in the different banking and financial sectors has affected the interests of the customers and the chief investors. The bribery and fraudulent activities has affected the loyalty and trust of the customers towards the banking and financial industry (Starnawska 2015). Therefore, the application of the Normativeethics in the practices that are undertaken by the banking and the financial service providing organizations would bring about positive changes in the functioning of the systems. Crane andMatten (2016) noted that the Normative ethics purely coincided with the outcome of the different activities that are undertaken by the individuals or groups of people. in this connection, the different ethical misconducts that are undertaken by the banking and financial service providing industry has led to a breach in the professionalism which has affected the brand name and the loyalty of the customers. The different issues that are faced by the banking industry in the recent years are correlated to the compromised normative ethical bindings, which have affected the goodwill of the businesses as an outcome. Matthews (2016) stated that the growth in the fraudulent activities in the banks has affected the trust of the people who feel reluctant to invest on the activities of the banks for getting a fair return on their investments. On the other hand, Rossi and Sleat (2014) stated that deception and bribery affected the functioning of the banks which is uncovered by the application of the normative ethical standards which focus on the outcomes that are unraveled by the unethical activities.
Conclusion
Therefore, it can be concluded that the proper functioning of the systems of the business undertakings and its decision making attributes are mainly based on the ethical considerations. The ethical considerations influence the proper functioning of the business systemswhile upholding the brand name and loyalty among the customers of the same. Different ethical issues are faced by the banking and financial service providing organizations, which are being investigated by theRoyal Commission. The application of the ethical theory has helped in underpinning the different aspects of the unethical nature of the activities that are undertaken by the banking sector and the manner in which they affected the loyalty and trust of the customers in the industry.
References
Barrett, J. and Duran, P., 2018. Australia’s NAB says incentives ‘root cause’ of fraud. [online] reuters.com. Available at: https://www.reuters.com/article/us-australia-banks-inquiry/australias-nab-says-incentives-root-cause-of-fraud-idUSKCN1GQ085 [Accessed 24 Sep. 2018].
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
Danckert, S., 2018. CBA charged client fees for 10 years after death. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/banking-and-finance/cba-charged-client-fees-for-10-years-after-death-20180419-p4zag1.html [Accessed 24 Sep. 2018].
Hutchens, G., 2018. Commonwealth Bank: information watchdog ‘dropped the ball’ over huge data loss. [online] The Guardian. Available at: https://www.theguardian.com/australia-news/2018/may/03/commonwealth-bank-information-watchdog-dropped-the-ball-over-huge-data-loss [Accessed 24 Sep. 2018].
Matthews, A., 2016. The financial services industry: Whistleblowing and calls for a royal commission. Precedent (Sydney, NSW), (136), p.35.
Moosa, I. and Silvapulle, P., 2012. An empirical analysis of the operational losses of Australian banks. Accounting & Finance, 52(1), pp.165-185.
Rossi, E. and Sleat, M., 2014. Realism in normative political theory. Philosophy Compass, 9(10), pp.689-701.
Starnawska, S.E., 2015. Banking failures and unethical leadership. Confronting Corruption in Business: Trusted Leadership, Civic Engagement, p.160.
Subramanian, A.R., 2013. Shadow banking and aftermath of financial crisis-An impact analysis to address the emerging challenges. Amity Global Business Review, 8.
Wehinger, G., 2013. Banking, ethics and good principies. Organisation for Economic Cooperation and Development. The OECD Observer, (294), p.14.
Wishart, D. and Wardrop, A., 2018. What can the Banking Royal Commission achieve: Regulating for good corporate culture?. Alternative Law Journal, 43(2), pp.81-88.
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