Problem in the system of corporate governance and ethic at AMP

AMP is Australia based organization providing financial advice, superannuation, banking products, saving accounts and home loan services and is situated in Australia and New Zealand. It has been investigated that the managers of the company has failed to apply the methods which were important to complete the activities in an ethical manner. And this failure is seen after the banking Royal commission 2018 (AMP, 2018a).

This report will focus on corporate governance and ethic system that should be performed by AMP for managing the activities in an ethical manner. Deficiencies in corporate governance of AMP will be considered in this report. Next part will emphasize on the reasons responsible for the breakdown of AMP.  The last phase of this report will recommend the ideas through which the company can reduce the scandals.

It can be evaluated that large number of people were affected by the activities of the company and that is the only reason the company considered corporate governance structure so that it can be simple to maintain transparency by giving the statement of governance in every year. The Company created a corporate governance charter providing the outline of activities of board. Provisions were also given to be considered so that high ethical standards can be maintained (Aguilera, Judge and Terjesen, 2018).

All the policies considered in the charter are related to the constitution of the company and were important for the company members to follow. This corporate structure consists of the code for the business decisions keeping in mind the ethical and corporate views. Also, employee’s policies ensure that company manages its activities with customers by considering the overall regulatory obligations (Dion, 2017).  If proper policies are considered by the management then it can be simple for the employees to focus on their activities by considering the ethical values and norms.

There are many deficiencies in the system which impacted the stakeholders of the company. One of this is related with the lack of ethical training. And due to this it was simple for the team to violate the policies, and there was no such policy for such breaching of the rules. There were also no methods to focus on the activities to manage the policies of corporate governance and ethics.

It was seen that the corporate evaluations were not followed by the company almost in 20 occasions. The information of the company stated that the information was not given in a proper manner to the customers. According to board of director interference were seen in the activities of investigators. Due to this a big concern was raised, whether to give social license to the company or not. The information also stated that the company charged fees from the customers and this decision was made by the management of AMP (Schneider and Scherer, 2015).

In 2015 company stated to ASIC that there was no problem in the organization, but statement was also wrong. The audit was not done on the independent platform and it was clarified by examining the internal mails and the reports of the company. And hence the breakdown is result of all these unethical activities performed by the company (Armstrong, Blouin, Jagolinzer and Larcker, 2015).  The negative results achieved by the company are just because of the unethical activities considered by the company. It is necessary to maintain these activities so that it can be simple to achieve large market share in the competitive market.  If the activities of the company are managed in an unethical manner then it can be seen that employees will also not consider the policies which are ethical in the workplace.

Reasons for Breakdown

The top management did not undertake the provisions provided by the code conduct and also were not able to satisfy the principle of corporate governance. There should be proper transparency in the corporate governance in order to confirm that the company is performing the activities properly. The principles and recommendations provided by the Australian exchange should be considered by the company. Effective team principle of ASX was not considered by the organization and this has overseen the policies which resulted in the usage of unethical activities (Levit and Malenko, 2016).

The organization also failed to encourage the ethical activities and proper decision making and the unethical activities like taking fees from customers were undertaken by the management. These failures were responsible for the engagement of organization with the independent audit. This has also given negative impact on the overall activities of the company and it has been seen that by taking from the customers without giving proper knowledge has affected the entire growth of the company. To take the fees from the customers is considered as one of the unethical act which affects the entire image of the company in the market (Mason and Simmons, 2014).

AMP involved the whistleblowing policy in the corporate governance system which focuses on boosting whistleblowers to inform about the ethical behavior of the company. By considering this policy the company created a supportive work culture which compiles the overall organizational values (Davies, 2016). By considering this it has been seen that supportive work culture is necessary which can help the company in maintaining the overall values of the company.

There are such incidents where the top management people and the employees or the workers have guilty of not following the policies of corporate governance structure in the manner it should have been executed. The whistleblowing policy boosted the values like professionalism, honesty and integrity. There were many reports which state that the policies were not enough to ensure that stakeholder’s interests are secured. Also, it helps to focus on the workers who are following the unethical activities but the management did not do anything about this. The whistleblowers were not secured in the company as the team fired them for providing the wrong information. Stakeholders of the organization also consist of customers, employees, government and environment (Matthews, 2016). The company has also made many wrong claims to ASIC which are related to independence of the audit and other information which states that it was unsuccessful to consider the entire interest of ASIC. Despite of having the proper knowledge related to charging fees from the customer is administrative error, board of directors still considered (AMP, 2018b). So, the policies of the company are not satisfactory to ensure the security of stakeholders. The negative impact is also analyzed on the overall level of satisfaction of the employees in the workplace.

It is important for the company to consider the corporate governance strategies as they were not successful. These strategies consider the principle of ASX and they were recommended along with the corporate governance policies. These strategies focus on having the transparency by creating the disclosure in the organizational activities. Also, these disclosures should be for the ethical and unethical activities to ensure that the management people do not use the power of their post to support unethical activities (García-Sánchez,  Rodríguez-Domínguez and Frías-Aceituno, 2015).

Whistle blowers and mechanism sufficient to protect the various stakeholders

Next strategy recommended for AMP is providing a proper practice to its employees so that they can understand the value of using corporate governance policies in proper manner and perform the ethical activities and not stop promoting the use of unethical activities. It is considered that practicing these policies will play an important role in ensuring the usage of ethical activities and also the management with employees can undertake their role in ethical policies. Training can boost the practice of ethical activities and also the behavior of employees towards these activities. So, a proper training should be provided to every employee of the company, so that AMP can prevent the future scandals and requirements of whistleblowers to showcase the ethical behavior of the company (Larcker and Tayan, 2015).

There were no proper measures taken by the organization and the management people to punish the worker who is supporting unethical activities. It is recommended for AMP to include punishments in their corporate governance policies, for those whoever is violating the policies or using unethical activities (Tricker and Tricker, 2015).  There were many top management people who were engaged in unethical activity as well, but the board of directors did not take any measures for this. Such people can be punished to encourage the unethical practice in the company. It is important for the company to punish the employees who are involved in using unethical activities so that positive impact on other activities can be considered. It is necessary for considering the ethical practices in the workplace as it can help to accomplish goals and objectives so the company in an effective manner (Filatotchev and Nakajima, 2014).

The company should also undertake the strategies and methods through which they can have eye on the workers and management people whether they are performing the ethical activities or not. And if they are not performing the ethical activities then they should be punished so as to promote the environment in which the ethical activities are promoted (Stout and Blair, 2017). And if the activities of the employees or workers and the management people are not taken under observation then it will be easy for the employees to practice these unethical activities and ignore the corporate governance policies as they will not provide information to anyone. So, by having a proper observation on the activities performed by the employees it can be easy for the company to reduce the future scandals which were performed without any problems. And this will also encourage the use of ethical activities and using the corporate governance policies, and will result in proper functioning of the company. Through this it can be simple to achieve positive outcome in an effective manner (Klettner, Clarke and Boersma, 2014).

Conclusion

By analyzing the paper, it can be concluded that AMP an Australian based organization was engaged in more than 20 incidents in which the regulatory authorities are not considered, and not only the employees but also the management of the company were involved in using unethical activities and violating the corporate governance policies, and this violation of the policies affected the independency of the audit of the company. No one in the company was practicing ethical activities not even the top management people and this was overseen by the board of directors as well. All these factors show that there were many problems and deficiencies in the corporate governance system and also the ethics system of the organization. There was no encouragement to any employee for practicing the ethical activities and using the corporate governance policies properly. Also, the management did not undertake any measures to promote the use of ethical practices as they were also involved in practicing unethical activities. The company did not focus on providing the training to the employees and workers so as to promote the use of ethical activities and creating good and positive environment in the company. And all these deficiencies resulted in the breakdown of the AMP. Many policies and rules were implemented by the company for securing the whistleblowers, but these policies and rules were not enough to secure whistleblowers.

Recommended strategies

It is also concluded that the board of directors did not forced the management people to impose the activities which could have helped them to maintain the security, so that the interest of stakeholders can be maintained. There are many activities and measures which are discussed in the report which should be undertaken by the company so as to reduce the chances of future scandals and can be helpful in maintaining the entire activities performed in the company. Also, it is recommended for AMP company to ensure that the top management people are not involved in using the unethical activities or violating the corporate governance policies of the company, as it will affect all the employees and the workers who are working under them and hence creating a negative environment in the company and also affecting the image of the company.

Creating an environment with proper transparency in the working activities from lower to top level is highly recommended to the company, as it can reduce the usage of unethical activities. And this overall transparency can be enhanced if there is a proper CSR structure. But there was a serious problem in the company where the information is leaked by the people of top management who are involved in practicing unethical activities. Another recommendation which is provided in the report for the company is that they should provide a proper training to the employees and the workers of the company so that they develop a feeling or we can say a positive feeling where they will not be violating the policies and consider these policies in a good and proper manner.

As discussed in the report it is also important that the board of directors should have an eye and proper observation on the overall activities that are being performed in the company. And this observation should not be kept on employees only, but the top management people should also be considered in the observation, so that there is no practicing of unethical activities and violating corporate governance policies by any member of the company. If the recommendations which are discussed in the report and proper functions will be undertaken by the company, then they can easily reduce the chances of any kind of scandal in future. So these strategies can help AMP to reduce the overall usage of unethical activities.

References

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AMP, 2018a. Corporate governance. . [online]. Available at: https://corporate.amp.com.au/about-amp/corporate-governance [Accessed on 22 October 2018].

AMP, 2018b. Whistleblowing policy. [online]. Available at: https://www.amp.com.au/content/dam/amp/digitalhub/common/Documents/global/whistleblowing_policy_website.pdf [Accessed on 22 October 2018].

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