Q The assignment discusses about BUSN104 MONEY MATTERS- The practices of a company from socially responsible framework Home, - BUSN104 MONEY MATTERS BUSN104 MONEY MATTERS Ethics and Sustainability Introduction The organizations are responsible for carrying out their business operations in an appropriate manner. The ethical rules and regulations are to be followed for ensuring the business operations are not affecting the stakeholders and the environment. In Australia, the financial and banking industry is often considered as “too big to fail”. After a number of financial and banking scandals in 2018, the Federal government of Australia calls for the Royal Commission into Financial and Banking Services. National Australia Bank has also carried out inappropriate conduct which affected a large number of stakeholders. NAB is considered to be the largest business bank of Australia and also works with small, large and medium businesses. The bank has more than 30000 individuals who are responsible to serve 900, 000,00 customers and clients at more than 900 locations in New Zealand, Australia and around the world. The bank has been able to expand its business operations within the market. Main Context Conduct regarded by the Royal Commissioner as inappropriate The banking royal commission has been established by the Australian government to enquire and prepare a report on misconduct in the banking industry. The commission has been entrusted with the task of an enquiring and forming report on the financial conduct, practices, and behavior of the financial institutions (Hayne, 2019). The National Australia Bank was guilty of overcharging their customers without providing them with adequate services. The bank was also charging fees from their dead customers for facilities provided by them. The royal commission has stated that the staffs of the National Australia bank were bribed by debtors of the bank in order to get their loans waived that they have secured through false documents. Eleven employees of the bank including six branch managers had generated false pay slips and Medicare cards. The whistleblower has first raised concern when commissions were being paid to the financial planners and accountants for referring people as lenders. The whistleblower has stated that bribes were given in the counters in white envelopes (Chung, 2018). The commission has stated that more than 60 people were involved in this banking scam which includes falsification in loan documents, dishonesty in taking the signatures of the customers on forms and providing loans to unsuitable persons. The chairman and chief executive officer of the National Australia Bank were forced to resign from their post after the release of this report. The National Australia bank has outmoded the commonwealth bank which had the highest level of distrust. Practices of the company from a socially responsible framework National Australia Bank is of view that corporate responsibility is an important element for executing strategy, backing communities and achieving apparition to become Australia's leading bank. The bank aims to give utmost attention to its customers. The bank helps people in achieving affordable and fair financial services. The bank along with its partners work to address societal issues like gender equality, domestic violence, affordable housing and Indigenous success that in turn helps in building connected and strong communities (NAB, 2019). The bank has adopted a sustainable approach towards addressing risk arising out of climate change and opportunity evolving because of the shift to a low-carbon economy. The bank applies a wide range of approaches like corporate responsibility and philanthropy to address environmental and social challenges. It has acknowledged corporate responsibility management along with governance structure and internal communication so that all can understand the corporate responsibilities. The National Australia bank board has to be provided with the updates of its achievements at least twice a year regarding social, environmental and governance risks. An annual materiality assessment is being conducted by the bank to prioritize social, environmental and governance theme (Portney, 2015). The bank also engages the external shareholders to communicate to them the decision of the bank and to receive input from their side. The bank is also committed to achieving the sustainable development goal as set out by the United Nations General Assembly. The bank is committed to making a sustainable and positive impact on the environment. Effect on the shareholders’ wealth The alleged malpractices have imposed a significant impact on the shareholders' of National Australia Bank. The share price of the bank has declined by 29% and there are also changes in the share prices and earnings per share. Both earnings per share and share price of the bank have been declined in each year. The rate of decline was 0.9% from 2018 to 2019. The share price is seen to be declining much faster than earning per share (Simply St, 2019). The rate of decline was 6.6% in each year. The market share of the bank has been declined from the year 2018 to 2019. The lower price to earnings depicts the reticence and it is around 11.45. The share price return and total shareholder return is also important to be considered for the shares. TSR integrated into the value of the discounted capital raisings and dividends relying on the assumption that the following dividends are being reinvested (Eun and Resnick, 2014). TSR provides a clear view of the return provided by the stock. TSR of National Australia Bank was 7.5% for the last five years. The data shows that it exceeded the return on the share price. The shareholders of National Australia Bank lost 11 percent due to the impact of the malpractices. The shareholders of the bank are getting less return because of the decrease in the market share of the bank. Royal Commission is also carrying out investigations against the organizations carrying out inappropriate practices. Sustainability and socially responsible outcomes The National Australia Bank was guilty of misconduct and has outmoded the commonwealth bank in matters of distrust among the customers. The chairman and the CEO of the bank were forced to resign from their post after the release of the report regarding the bank. A sharp decline in trust among the customers of the bank was noticed immediately after the publication of the report of the royal commission (Elmas, 2019). A survey has revealed that before the release of the report of the royal commission only 36.9% of the Australians use to distrust National Australia bank but after the release of the report, more than 53.7% of the Australian citizens have started distrusting National Australia bank. This is the highest level of distrust any bank has noticed in Australia. The National Australia Bank has put its profit report before the royal commission to regain its lost trust. The bank has also made efforts to involve the stakeholders in the decision-making process. The bank wants to get reconnected with the local communities and earn their lost trust by playing the role they want (NAB, 2018). A board has been set up which looks after the social, environmental and governmental achievements of the National Australia Bank. Determining changes to the company's behavior National Australia Bank took actions after the report provided by the Royal Commission. The CEO of NAB stated that works would be carried out with regulators and government with a view to take positive actions on the remaining areas as quickly as possible. The areas are broker arrangements, BEAR accountabilities, and explanation of the small business. Some of the changes announced by the organization are as follows: • NAB would not charge default interests to the agricultural customers who are affected by drought. • The board customer committee would oversee the processes of the bank for enduring fair service and products outcome and evaluating the customer complaints and feedback. • Eradicating grandfathered commissions for the financial planning advisors of NAB. National Australia Bank has also decided to increase the protections of the Code of Banking Practices to the small businesses having total borrowings of less than $5 million. The CEO of the bank stated that the recommendations of the Royal Commission would lead to a more customer focused and better organization. The commission has challenged appropriately to NAB for closing the gap between the where the organization needs to be and where it is today. The organization is focusing on earning back the trust and confidence in order to overcome its issues (NAB, 2019). It consisted of compensating the customers, creating a payment system and developing a culture for putting the customers in first place every time. Conclusion The Royal Commission has taken appropriate steps for determining and evaluating the malpractices carried out by the banks of Australia. National Australia Bank should also learn from its misconduct which affected a large number of stakeholders. The final report of the Royal Commission is supported by NAB with believing that it would lead to more transparent and better financial services focusing on the rights for the customers.