ACCG Case Study

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Macquarie University *

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1000

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Management

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May 6, 2024

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ACCG1000 p.1 Introduction Ethics can be defined as the moral principles that are provided by socially accepted values through years of cultivation either it be systemic, social or cultural; it involves itself with the behaviours and actions of individuals and how they conduct themselves accordingly. This report will contain various information on the role of ethics in a business environment and present a case that has violated these widely accepted ethical principles; the Westpac Bank scandal will sufficiently cover all aspects of the required writing with appropriate and relevant information which supports the greater idea that ethics is of extreme paramount. Each category will be critiqued accordingly in relation to the code of ethics and how the violations pertain to Westpac Bank’s technological and organisational misapprehension. Body Westpac bank is regarded in the Australian financial industry as the second largest bank in Australia and is considered as one of the ‘Big Four’ banks; Westpac has an estimated total net worth of over 900 billion dollars in the lapsed financial year of 2019. Westpac bank has an organisational structure that consists of five divisions: BT Financial Group, Consumer Bank, Commercial and Business Bank, Westpac Institutional Bank and Westpac New Zealand, these core groups are what makes Westpac Bank function and create wealth for their customers. In 2018, Westpac Bank were accused by AUSTRAC of 23 million breaches involving money laundering and child exploitation within their domain, which directly violated Australian anti- money laundering and counter-terrorism finance laws (David Chau, 2020). These 23 million violations also directly contrast the code of ethics firmly outlined by ASIC and APES 110 Code of Ethics for Professional Accountants in the financial institution's licensee obligations; these obligations are in place to ensure that firms and corporations follow these standards in a law abiding approach. Ethical issues can be deduced from the violation of the fundamental principles outlined in the APES 110 code of Ethics for Professional Accountants: integrity, objectivity, confidentiality, professional competence and due care, and professional behaviour (see appendix A for further information). The ethical dilemma faced by Westpac Bank was the accusation of breaching the code of ethics and in doing so, the law. Westpac Bank have admitted that they did not take due care and perform with competence under the circumstances of transactions to ‘high risk’ countries. This was almost purely following a teleological approach by only worrying about the outcome of money and not worrying about the impending consequences. AUSTRAC who filed the indictment for anti-laundering and counter-terrorism violation, spoke of the 23 million breaches of Australian regulations and ethics during court, “these contraventions are the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the Board.” Westpac have ultimately acknowledged their blunder and were adamant that they would work closely with AUSTRAC to rectify their wrongdoings upon those who were harmed.

ACCG1000 p.2 The impact of this scandal upon Westpac and their stakeholders was huge as it saw Westpac potentially having to pay 900 million in fines and penalties for their unlawful and irresponsible actions. Westpac Bank saw quite a large hit to their shares from the incoming lawsuit as from the first day of close saw their share price plummet 3% and a total share market decline of 1.4% ( Byron Kaye , Paulina Duran , 2019). They breached the National Consumer Credit Protection Act by irresponsibly lending money causing a loss upwards of 260 million dollars (David Chau,2020). Westpac stakeholders most affected were the shareholders and customers of the company who openly told the board to “just go” according to The Guardian news article. During their annual meeting, a mammoth 600 shareholders flocked into attendance to protest the board who had unanimously decided that CEO Brian Hartzer was to step down. After three weeks of this debacle, shareholders and customers of Westpac were still feeling the pinch as Westpac shares plummeted a further 6.3% to 9.3% from before the scandal, wiping 8.8 billion dollars from their market value (Scott Murdoch, Bryan Kaye, 2019). This was also heightened by numerous customers leaving as they felt they couldn’t trust Westpac anymore which almost acted as a social penalty. Westpac bank have shown sympathy for their blunders in processing and apologised that they have let these violations and breaches slip past their securities and staff. Westpac’s own CEO Brian Hartzer acknowledges the seriousness of the situation and commented, “[Westpac] should have done better” when discussing the court proceedings with reporters. The impending result is an agonising wait to see the total sum of money to be paid, although reliable news sources suggest the total fine could reach a maximum of 3 billion dollars in a worst case scenario; regular consensus says 1 billion dollars will be the total penalty (Elizabeth Knight, 2019). Throughout this whole process, Westpac have remained apologetic even with their ethical standards still under fire from remaining stakeholders. Westpac are obviously going to be negatively affected from their ethical wrestling match with the media, reassuring stakeholders that this was a minor blunder and how Westpac will provide a greater emphasis on their ethical standpoint. My views on business ethics have been consistent with what has been presented to me from the lectures as my understanding of corporate ethics is synonymous with established laws and regulations. The debate between morals versus ethics has only strengthened my understanding and respect for the code of ethics and provided me with the objectivity of making decisions; this advances me with the understanding that a neutral position must be adopted and one’s moral compass is negligible in a professional, ethical dilemma. A teleological approach on business with a deontological ethical perspective should be implemented sparingly into every action of a business and how a greater emphasis on humanitarian approaches is achieved. A study into ethical theories suggested that acting teleologically inclined, means we are categorising our value based on socially accepted desires, therefore an acceptance of deontological ethics is ultimately practised (Abderrahmane Benlahcene, 2018). This supports my original view that a combined approach of both these theories must be practised in the processing stage and outcome evaluation stages to optimise results and production. Conclusion

ACCG1000 p.3 To conclude, Westpac should undertake a refresher course on corporate ethics and understand how their breaches have not only violated Australian law, but affected human lives as a result of their lackadaisical processing and security. A greater emphasis on the importance of ethics should be given and harsher penalties for misconduct should be enacted. This only strengthens the case for greater regulation of the finance industry and coming fresh from the royal commission into banking seems to be warranted as a result. Word count: 1084 APPENDIX APPENDIX A Fundamental Principles 100.5 A Member shall comply with the following fundamental principles: (a) Integrity – to be straightforward and honest in all professional and business relationships. (b) Objectivity – to not allow bias, conflict of interest or undue influence of others to override

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