Analysis of the conduct and misconduct of NAB

In this report, the corporate governance and social responsibilities of the National Australia Bank (NAB) will be discussed. The National Australia Bank (NAB) is among the top financial institutions of Australia. NAB is also the listed company of the Australia Stock Exchange (ASX). Recently in the report of the Banking Royal Commission the conduct of the bank has been in question (ABC News, 2018). Banking Royal Commission is a body that conducts inquiry, set up by the Crown on the recommendation of the government. The importance of stakeholders for a company will be elaborated in this report. The Corporate governance of the NAB will be analysed from the corporate governance theories, theories of the Corporate Social Responsibility and theories of Creating Shared Value. The discussion on the Corporate Governance of the National Australia Bank is based on ASX 2010 Principles and recommendations. The Directors conduct will be analysed by the ethical theories as well as the theories of justice and economic distribution.

The Banking Royal Commission had submitted his report in that various conducts of the employees of the National Bank of Australia had been coming into the Banking Royal Commission misconduct. The Staff of the NAB had been found to be in the bribery in the banking Royal Commission inquiry. They are found to be charging unnecessary fees from the clients for the services they had not provided. They had also found charging fees from the clients who are already died (Hurchens, 2018).  The NAB was criticized for hiding the information from the Australian Securities and Investments Commission (ASIC) for the scale of fees for no service. The major misconduct was between from the year 2009 to 2015 where the staff of the bank had been found to be in the inappropriate planning. Many of the financial advisors of the company had breached their duties and their license had been terminated by the ASIC (Bartholomeusz, 2018). The commission has been given to the gym trainers and the non-financial experts in the introducer program for referring the clients to the National Australia Bank (NAB). Major breached like forged documents for settling down the loans. It was also revealed in an article of the newspaper that there is volatile and a toxic culture in the bank. It can be concluded from the report that there been an issue in the corporate governance and in the ethics of the directors of the National Australia Bank (Hurchens, 2018). However it is not proved that the bank has conducted these things but due to the series of scandals that had been comingthere is poor corporate governance and the ethical culture in the organisation (Bartholomeusz, 2018).

Stakeholder Theory and its application on NAB

The Stakeholder theory is being recognised as the well-known theory of the corporate governance. As the name suggests the Stakeholder Theory is about the stakeholders of the company. The Stakeholders states that the shareholders are just one of the stakeholders of the company. The stakeholder theory is a bigger term as it includes customers, investors, government, people, employees and the others. The stakeholders should be a first priority for the company as the success of the company depends on its stakeholders. The company is required to take care of the interests of the stakeholders to run in a long way. Therefore it is required that companies must consider the priorities of the stakeholder in making plan and policies. It becomes necessary that the companies not only took the interest of the shareholder to be in the priority but also the interest of the stakeholders should also require to be considered. The National Australian Bank has not taken the interest of the stakeholder in the priority as the clients had been cheated by the bank employees. They had charged unnecessary fees from the clients for no services. The Company had cheated their clients and has done unethical practices and they had made forged documents for settling down the loans. The director of the companies has the duty towards their customers who are the part of the stakeholder theory but they had failed to give priority and its results they had faced a lot of criticism in the country for their Misconduct. The company has faced a legal, social, economic and the political implication due to the non-implication of the Stakeholder Theory. Thus from these types of breaches it can be said that the bank has failed to apply this theory in their organisation. This theory main motive is to suggest that the companies not only consider or work in the shareholders but they are also required to work for the interest of the Stakeholders. It can be said from the conduct of the NAB and its impact that the stakeholders are the main part of the organisation (Heath, 2018).

The theories of corporate governance will guide the companies to how to make a good governance environment in the company.

This theory states the relationship between the shareholders and the executives or managers and the shareholders. The Agents are the executives or the managers of the company and they work for the principal. In this Theory, the principal is the shareholders who hire agents so their interest can be fulfilled. So According to this theory, the directors, managers and the executives of the company must work in the interest of the shareholders. This theory states the relationship between the principal and the agents and they must work in Cooperation so that that the company interest must be fulfilled. However, sometimes it does not goes like this and they do not see the interest of the Shareholders but see their own interest. In the report of Banking Royal Commission, it was revealed that the staff of the National Australia Bank has been found to take the bribery and the series of these scandals was out in that report. The staff of the company has not followed this theory and this results tha it affects the company reputation. If the staff of the bank has followed this theory than might this implication would have not been possible. The staff of the NAB for the opportunistic behaviour has forgot the interest of the shareholder. They had failed to meet basic motive of this theory to separate ownership and the control but according to th report of the Banking Royal Commission it has not been followed (Finacial Management, 2018).  

Corporate Governance Theories and their implications for NAB

The Stewardship theory is related to the protecting of steward and increasing the wealth of the Shareholders. It can be only possible by the good performance of the company. Stewards are the executives and the managers of the organisation and they must work for the shareholders. This theory is very different from the agency theory as in this theory individualism has not been practised and the goal of the organisation and that of stewards. The better results can be acquired for the company and there is a responsibility of the company to satisfy the needs of the stewards and the autonomous actions of the executives of the executives of the company. The National Australia Bank has failed to comply with these theories as is required by the companies to operate in the manner as the management of the company has failed to work in the interest of the company. The management has the work for increasing the wealth of the organisation but due to the misconduct of the management, the company has paid millions of money as compensation to the clients. The company has suspended many of his employees who had been found to be in the suspension of the employees. Hence, it is proved that this NAB and his staff have failed to comply with the Stewardship Theory. This theory is also been suggested for unifying the roles of the CEO and the (ChairmanCarroll and Buchholtz, 2012).

There is required for the NAB to apply both these theories in the organisation for the better performance and these types of acts cannot be repeated. The Corporate Governance theories has its own impact on the organisation and if failed like NAB than it can lead to severe results. The organisation had been required to adopt the changes that can happen in the organisation 

The Corporate social responsibility has the movement aimed at encouraging the companies to get more aware of the impact of their business on the rest of society, including their own stakeholders and the environment. The Corporate Social Responsibility is the business approach contributes to sustainable development by delivering the social, economic and the environmental benefits of all the stakeholders. The National Bank of Australia has failed in Corporate Social Responsibility. The Company has focussed to fraud practices like charging fees for no services. These acts of the NAB staff has created an anti-social impact and failed to take care of their stakeholder but they only cheated their stakeholders. The Company has nowhere followed this theory and that has a major impact on the society. To achieve the four aspects of this theory is difficult but the NAB has failed to comply with any of the aspects. Thus, the National Australia Bank can be said to have failed to apply this theory on every aspect(Grindle, 2017).

Theories of Corporate Social Responsibility and their lack of implementation in NAB

The theories of ethics are the guidelines to the companie to follow the ethical culture in the company. The NAB must take guidance of Ethical that how to implement the theories of guidance that is required to implement in this guidance that how the implementation of these theories can help the organisation. These theories guide the companies to take decisions (Akhigbe and Zolnourian, 2018). These theories are-

This theory suggests that while taking the decision it is necessary that they must take care of their duties and the obligation when the ethics are in play. This means that the person will follow his or her obligations to another individual or the society because upholding one’s duty had been considered ethically correct. It is said that the deontologist will always retain the promises as a friend. The companies who stick to the deontologist theory produce very consistent results because these decisions are based on the individual’s set duties. However,those companies who failed to apply thetheorythey are required to understand that this theory implication is in the interest of the company. The National Bank of Australia is required to take guidance from this theory of deontologist.The staffs of the company have not followed this theory while making decisions. As the Staff has not showed their duties and obligations while making the decision that has affects the companies in many ways (McCahery, Sautner, and Starks, 2016).

This theory is based on the one able to predict the consequences of a certain action. Utilitarianism is divided into two parts, act utilitarianism and rule utilitarianism. Act Utilitarianism is an act of a person performed that benefits the many people not regarded as the personal feelings or the societal constraints such as the laws. Whereas, the Rule Utilitarianism takes the law into the account in consideration with the fairness. It benefits the most of the people it is considered through fairness and through the available just means. It gives justice and includes the beneficiaries at the same time. The National Australia Bank has failed to apply these theories tothe culture of their organisation. Therefore, in the reports it had been stated that the culture of the NAB is a toxic and unethical culture in the bank. The work of the NAB is not at all justified according to this theory. The work is not done with fairness and in accordance with the law (Filip, Saheba, Wick and Amir Radfar, M.D.2016).

Theories of Ethics and their application in NAB’s decision-making process

This theory of John Rawls is based on the surrounding justice. These theories help the individuals to cope up with the ethical dilemmas. Rawls had viewed that every individual has an equal right that is the most extensive basic liberty that is companionable with the related liberties for others. Rawls has also provided the freedom that one can engage in the activities till the time he or she will not infringe the rights of others. The NAB staff had infringed this theory as their staff had infringed the rights of their customers. The Justice Theory also states that the difference in the socio-economic culture should be set aside so that everyone can take the advantage and the positions and the offices should be open to all. The National Australia Bank has failed to apply these theories tothe culture of their organisation. Therefore, in the reports it had been stated that the culture of the NAB is a toxic and unethical culture in the bank. The bank has cheated with millions of amounts that is the infringed of this theory (Filip, Saheba, Wick and Amir Radfar, M.D.2016).

The Corporate governance principles and Recommendations are that every ASX listed bank has to follow these principles and Recommendations. These principles and recommendation are therefore for the good governance of the company (Arora and Sharma, 2016). The National Australia Bank has also in their annual statement has stated that they had approved all the recommendation of the ASX Corporate governance (NAB, 2018). These principles lay that the company must lay down a solid foundation for the management of the company. The other recommendations like that the organisation must structure that can add the value and the acts should been ethical and responsible (Macey and O’Hara, 2016). It is important for the organisation while reporting that it can safeguard the corporate integrity. The company must time to time make disclosure so that it can help the shareholders and the investors can take the information from the website of the company. The principles recommend that the organisation must respect the rights of the security holders. The bank must implement the programs for the benefits of the security holders (Grindle, 2017). The principles say that the risk has been recognised and it had been managed to recognise that risks. The suggestion made by the ASX that the organisation must make the committee for the remuneration distribution, so the remuneration and can be done fairly and responsibly. These suggestion and the principles that has been recommended by the ASX the bank has to Comply and in failure to do so than there been a huge penalty. The ASX principles are so that the corporation can conduct good governance in their organisation. The NAB has also stated that the company must have followed all these principles and all the steps have been taken for the good governance in the organisation (NAB, 2018). The NAB governance cannot be proved the good governance after the revelation in the report of Banking Royal Commission that the bank conduct had been found doubtful. The series of scandals of the bank staff had been came out. The unethical and toxic culture of the organisation proved that bank has failed to apply the principles of the ASX in their organisation. The NAB has breached all the principles and the recommendation of the ASX (ASX Policy Charter, 2018).

Conclusion

It has been analysed that the NAB has failed to provide good governance in their organisation and therefore the companies are recommended that for the good governance firstly they have to follow the ASX principles and Recommendation. If these principles were taken seriously by the NAB than there may be the unethical culture had not been emerged in the organisation. The companies must start the training programs in the organisation in that the ethics should been guided (Arlen and Kahan, 2017). The NAB also must ensure that the directors and shareholders work in the cooperation so that the shareholders should been informed with every decision of the management. It is required that the organisation must work like the family as there been a familiar environment been created in the organisation. The company must ensure that every employee has been monitored by the top management on the timely basis. The NAB directors must do work more than their skills and expertise as they can push back their hands by giving the excuse that work was is not of their expertise (Royal Commission, 2018). These recommendations if the bank has taken into account before as it was informed about the acts of their staff that have charged fees from the client for no services can be prevented if was timely monitored by the bank (Martínez-Campillo, 2016).

Conclusion

It can be analysed that the corporate governance is an important part of the organisation. It can say from the report of the Banking Royal Commission that the National Bank of Australia has failed to provide the good governance in their organisation. The NAB has also failed to comply with the principles and the recommendations of the ASX. The theories of the corporate governance that if had implemented in their organisation than the conduct of the bank might be something else. The Stakeholder theory also proved to be useful for any organisation as from that theory it can be analysed that the stakeholders should be taken into a priority for any organisation. The stakeholders are a wide term that includes customers, people, employees, government and many more. The company is run due to their stakeholders and the NAB has only failed to fulfil the requirements of the stakeholder. The NAB has also cheated their stakeholders. The ethical culture in the NAB was worst and they have not applied the theories of utilitarianism and the deontology in the decision-making and for the fairness and the justice. The Companies governance can be proved by these acts and therefore the company had been provided with recommendations that may help the company to provide good governance in their organisation.

References

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