PART B – Commonwealth Bank Stakeholder Analysis                                                          (8 marks)




A strong banking sector is critical to a strong economy. Many have argued that Australia was shielded from the worst effects of the Global Financial Crisis due to the strength of its banks. To be strong banks depend on the support of their shareholders, the trust of their customers, and an effective working relationship with government and regulators.


In terms of market capitalization, on 1 October 2017, the “Big 4” Australian banks were the largest companies on the Australian Securities Exchange, with the Macquarie Group Limited the 10th largest.  Australia’s ten largest companies are included in the table below:




S&P/ASX 50 Index (1 October 2017)
Code Company Sector Market Cap ($bn) Weight (%)
CBA Commonwealth Bank of Australia Financials 130,330.0 10.61
WBC Westpac Banking Corporation Financials 108,348.0 8.82
ANZ Australia And New Zealand Banking Group Financials 86,947.5 7.08
NAB National Australia Bank Limited Financials 84,592.2 6.89
BHP BHP Billiton Limited Materials 82,797.4 6.74
CSL CSL Limited Health Care 60,628.4 4.94
WES Wesfarmers Limited Consumer Staples 46,861.6 3.82
TLS Telstra Corporation Limited Telecommunication Services 41,507.6 3.38
WOW Woolworths Limited Consumer Staples 32,632.2 2.66
MQG Macquarie Group Limited Financials 30,945.3 2.52


Source: Australian Securities Exchange (https://www.asx50list.com/)


However, banks have long been controversial in Australian society.


There has been a lively debate about whether the Australian government should initiate a Royal Commission into banking industry practices “Coalition MPs may cross floor to vote for banking royal commission” (David Lipson, ABC, 30 Oct 2017)


In August 2016 the Prime Minster announced that the heads of Australia’s big four banks must appear before the House of Representatives economics committee every year, saying the banks “operate under a social licence…they are built on a foundation of trust and they have to earn that trust through being open and accountable at all times.” (The Conversation,4 August 2016)


In May 2017 in his annual budget speech the Federal Treasurer announced that the government would apply an annual levy (a “bank tax”) that will only affect large banks in Australia. Despite protests from the banks the public has not raised significant objections to the tax.



In September 2017 all four of Australia’s largest banks announced they will stop charging a fee for customers of other banks to access their ATMs (automatic telling machines). Some have speculated that this move was, in part, motivated by a need to renew the banking industry’s “social licence”.


Commonwealth Bank of Australia Limited (CBA Bank)

Of all the Big 4 banks the Commonwealth Bank has perhaps been the most controversial in recent years.


Financial Planning

In July 2014, under the heading Commonwealth Bank CEO Ian Narev apologises to customers, news.com.au reported “for a decade, CommBank has been embroiled in a scandal involving forged signatures and dodgy financial planning. They’re finally saying sorry” (Wenlei Ma, Victoria Craw & Wires, news.com.au, 3 July 2014).



In March 2016, Ruth Fogarty from the ABC reported “CommInsure, one of Australia’s biggest life insurers with about 4 million policy holders, has been caught out using unscrupulous practices buried in the conditions of the fine print of its contracts to deny, delay or avoid paying claims” (Ruth Fogarty, ABC, 8 March 2016)



“The Commonwealth Bank is facing another scandal as the Australian Transactions Reports and Analysis Centre (AUSTRAC) launches civil proceedings accusing the bank of being complicit in money laundering. This exposes a deeply worrying prospect, that the Australian public are vulnerable to crime and terrorism directly funded through the Australian banking system.

AUSTRAC alleges CBA breached the Anti-Money Laundering and Counter-Terrorism Financing Act (2006) 53,700 times since 2012, where transactions were not reported by the bank, or reported too late. The bank faces a potential penalty of A$18 million per breach, which could amount to billions of dollars (Thomas Clarke, The Conversation, 5 August, 2017).


CEO Resignation and senior executive remuneration

In August, 2017 the Commonwealth Bank announced that its Chief Executive Officer, Ian Narev, would be leaving the bank. Mr Narev’s remuneration was reduced by more than 50%, “partly as a result of the money laundering scandal”. Additionally, the bank’s Board of Directors “decided to eliminate the short-term bonuses of all senior executives for the 2017 financial year” (Michael Janda, ABC, 14 August, 2017).



Class Action

“On 9 October 2017, Australia’s leading class action law firm, Maurice Blackburn Lawyers…filed a shareholder class action on behalf of aggrieved Commonwealth Bank of Australia (ASX:CBA) investors. The class action was filed on behalf of investors who suffered losses due to the share price fall following the institution of legal proceedings by AUSTRAC against CBA” (Andrew Watson, Ronald Koo, Maurice Blackburn, 9 October, 2017).



Consider the position of five key stakeholder groups of the Commonwealth Bank:

  1. Directors and management
  2. Shareholders
  3. Customers
  4. Employees
  5. Government/regulators.


  1. For each group identify their primary “stake” in the CBA. For example:
    • what do they contribute to the bank?
    • what do they expect from the bank in return?

(suggested: 200 words)


  1. For THREE of the stakeholder groups, discuss their behavior in the context of established ethical models, such as:
    • The hierarchy of ethical decision-making
    • Stakeholder theory
    • Normative theory
    • Descriptive theory
    • Kohlberg’s six stages of ethical reasoning

You do not need to consider each stakeholder group relative to all the models. Please make sure you cover at least three models in your answer.

(suggested: 600 words)



PART C – Commonwealth Bank – Recommendations                                          (8 marks)


Put yourself in the position of a consultant engaged by the Commonwealth Bank to advice on repairing the CBA’s reputation, and restoring trust in the bank.


Having completed some preliminary research, you (as consultant) have identified five possible areas for remedial action:

  1. The Board in relation to key changes to the bank’s corporate governance
  2. Management regarding implementing the Board’s strategy
  3. Human Resources Department in relation to employment practices
  4. Employees in relation to professional behavior toward colleagues and customers
  5. The overall culture of the organization


The Board welcomes the findings from your preliminary research. However, they take the view that implementing corrective action across all five areas at once has the potential to introduce too much change too quickly. You are directed to advise the Board to select the three highest priority areas and present recommendations.




Prepare a memorandum, addressed to the CBA’s Board of Directors that:


  1. Identifies the THREE highest priority areas, and
    • explains why they are highest priority areas, and
    • why a focus on that area will contribute most to “repairing the CBA’s reputation, and restoring trust in the bank”.

(suggested: 200 words)


  1. For each of the three priority areas make one/more recommendations that will serve the objective of “repairing the CBA’s reputation, and restoring trust in the bank”.


In drafting your recommendations consider including one/more of the ethical decision- making models:

  • A descriptive model of ethical decision-making; and/or
  • The AAA 7-step ethical decision-making model
  • Rest’s four-component model

(suggested: 600 words)


PART D – Personal Reflection/Ethical Lens Inventory (ELI)                              (4 marks)



At this stage of the unit we have considered:

  • some key ethical theories
  • some case studies of ethical failure
  • professional ethical obligations; including some key areas of ethical sensitivity, such as:
    • fraud
    • conflicts of interest; and the
    • corporate environment


Ethical Lens Inventory (ELI)

You have also completed your individual Ethical Lens Inventory, and had the opportunity to consider it in the light of the ethical theories, case studies, professional obligations, and key areas.


Motivation at Work (MaW)


There is no need to submit the MaW career assessment report. However, please consider the report and compare/contrast with your ELI, and other unit content.


Put yourself in the position of being offered a graduate role with the Commonwealth Bank.

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