The Issue at Commonwealth Bank of Australia
Discuss about the Corporate Governance and Social Responsibility Disclosure.
In the current business environment every organization initiates the business process in such a way that they do not harm the interest of stakeholders, instead keep them satisfied with their corporate social responsibilities. The company uses their differential culture and values to define ethics for the organization. Ethical issue in business is the issue that is caused in the organization if the employees breach the moral values present in the environment. The business ethics is typically concerned with the moral judgment of the rightness and wrongness of an event caused by a person. These decision or activities initiated in the organization may be implemented by the people but it affects to the stakeholders and the society at large. The corporate social responsibilities help an organization to run sustainably in the business environment by increasing the satisfaction level of the customers (Vaughn 2015).
A news article from the Australia financial Review is selected for the analysis of the ethical issue. The article was presented on the issue of Commonwealth Bank (CBA) when they were held liable for data breach of around 19 million accounts. The Commonwealth Bank is one of most renowned bank worldwide that is being confronted for facing difficulty in managing the data security in the organization. This issue is hampering the reputation of the bank due to information breach scandal. The management of Commonwealth bank stated that they are facing the issue data security; also the organization has lost financial information of its 20 million account holders. But they also claimed that the account security of the account holders has not been compromised by the organization. The information that was leaked only included the customer names, account numbers, address and transaction details from 2000 to 2016. Any information that can hamper the interest of the customer was not leaked. Further, the latter part of the essay discusses about the ethical decision making process in accordance to the philosophies identified in the system (Duarte, and Hanstad 2016).
It has become one of the most important tasks for the organization to initiate their business activities in such a way that it aligns to the interest of stakeholders in the society. The company should always stick to their values and commitment made by them with respect to the customers present in the society. Further, the essay represents the unethical act implemented in the society by the Commonwealth Bank of Australia. The company has faced difficulty in managing the privacy of the account records of the account holders of the company specifically 9.8 million people (Smith 2018). The information was stored in the two magnetic tapes that were to be damaged by the subcontractor in the year 2016. The company has issued the statement that the unethical cause that been implemented from their end and they are under strict investigation for the cause of this event (Chell, et. al., 2016). All the information starting from the name of accountholders, account number, transactions done from 2000 to 2016, address was leaked by the company account by the magnetic tape. The subcontractor Fuji-Xerox was asked to discard the tape by damaging it so that no person can make illicit use of it.
Importance of Corporate Social Responsibility (CSR)
Further, it should be noted that the Commonwealth ban is under severe threat of disposing their image because of the unethical act implemented by the company that resulted in harming the interest of the customers present in the environment. This act resulted in data breach and security threat for the accountholders of the bank. As the bank was unable to destroy the tape that included all the information about the customers, due to which it was being unethically used by some unknown source. It should be noted that the bank does have a standard and ethical format to store all the information and discard it properly as well (Kolk 2016). It is important for the organization to keep the interest of the stakeholder aligned with the activities of the company as this act has made the customer feel unsecure for their account. Also, the customers have started receiving messages for the balance of their account due to the ineffective damaged control in stir of revelation. In response to the ethical issue, the company issued the statement that the information that is being leaked in the environment is partial information that is used by the company to issue financial and periodical statements of the customer. No person can make use of this information to give into action for their fraudulent activities because the information is not enough (Hartman, DesJardins, and MacDonald 2014).
Further, it was also stated by the company that the information breached does not include the PIN or password of any customer’s account. This act stated that the bank is unable to properly comply with the security requirements of the clients. The company breached one of the most major social requirements or organizational legislation that is to keep the information of clients secret. In regard to which, the company is also facing various allegations and proceedings under the Data Protection Laws implemented in the environment (Sabag, and Schmitt 2016). Public trust is being hampered along with the privacy and security of the sensitive information about the clients. The company is now facing several issues relating to their image as the Australian Prudential Regulation Authority also stated that the company has now fallen from the grace, and is badly eroded. Also, the Buzzfeed News stated that the company has introduced a team to mend the missing tape and this project has been named as ‘Project Chesapeake’ (Smith 2018). After having this attractive name for the project, the company was unable to track any information related to the unethical event. The Office of Australian Information Commissioner (OAIC) is now having conversation with the bank in order to attain proper information about the case. In response to the enquiry made, the company also stated that they are unable to assure the demolition of the two tapes having information about the customers. This unethical effect made by the company Commonwealth bank has spread awareness in the banking industry with response to the ethics and the responsibility of the banks towards their customers. Further, it is the responsibility to inform the customers about the unethical act implemented by them (Crane, and Matten 2016).
Unethical Act by Commonwealth Bank
The bank should adopt more initiatives to secure the position of the company and manage the corporate social responsibilities as well. The CSR activities and the act of corporate citizenship activity should be initiated by the company in such a way that the organization completely satisfies the customers without hurting their interest (Pearson 2017). As discussed above that the organization has shattered the trust of the stakeholders of the company due to waiving their roles and responsibilities present in the environment and not acting according to the rules and guidelines of the company. Now the people of the company believe that the organization has broken their trust and not fulfilled their responsibilities against them in the environment. The customers feel that the company has not acted according to the guidelines formed by them and breached their interest by levying the data security responsibility (Andriof, and McIntosh 2017). Thus, subsequently the satisfaction of the customers is reduced in the market due to the loss of confidential information about the customers in the market without their consent. As the company is unable to fulfill their corporate social responsibility and corporate citizenship, they lost the trust of their customers on their activities. In order to rectify the past mistakes made by them in the environment, the organization has initiated various steps as well (Jizi, et. al., 2014).
The company is again aiming to develop its reputation among the stakeholders present in the market. Thus, it should be noted that the company is strongly facing the issues in ethical breaching the data of clients stored with them. The company has failed to initiate certain actions that were initiated with respect to maintain signified image in the market. The company needed to dispose off the tape that included such information about the clients, but due to non-performance of this event the company is now facing severe penalties and ethical case with them (Den Hond, de Bakker, and Neergaard 2016). The company is now performing several events to keep the customers interested in their activities and satisfy them as well. Although, this process will take time but the company will again achieve the trust of the customers if they regularly perform their corporate responsibilities in the environment. Further, from the information gained from the article it should be noted that the Bank has initiated a good decision by publicizing the data breach event to the public socially. The head of the company issued a video stating the event, how it happened and the new security principles made and implemented by them as well. In order to maintain their dignified image in the market, the company now aims to comply with all the rules, laws and legislations presented in the Data Security Laws for the banking sector (Trevino, and Nelson 2016).
Public Trust and Privacy Breach
The CBA should make use of the below presented format of ethical decision making process to initiate an effective and ethical decision in the environment. The ethical decision making process includes the use of moral philosophies along with the theory of ethics that the company can use to make an ethical decision in the environment. The process is explained below:
Identification of ethical issue: Under this process, the company needs to initially identify the issue that is related to the breachment of ethical rules and guidelines present in the environment. In news article stated that the company CBA is facing the issue of data breach under which they have failed to secure the sensitive information of 20 million accountholders of thee company (Amartya 2017).
Gathering of information: After identifying the ethical issue caused with them, the company needs to gather all the information related to the case. They need to identify different rules and guidelines related to the effect of data breaching and reducing security of customers (Cheng, Ioannou, and Serafeim, 2014).
Analysis of data: after gathering information the company needs to analyze the gathered information with assistance of the regulators and banking authorities. After analyzing the event, t was found out that the company has not destroyed the tape in which all such information about the company was stored. This process resulted in leakage of the personal information of the clients (19.8 million specifically).
Consideration of Alternative: The Company had conversation about the case with many officials and experts for suggesting a better way to manage the issue. This step provides strict principles, rules and guidelines to the company for regaining the public trust.
Make a decision: After analyzing all the options in the above mentioned case, the company needs to choose the best decision that is fit for their organization and will help them to maintain their image ethically and sustainably. The company can make use of the justice theory of ethics to initiate an ethical decision in the organization. The justice theory explains that the person should initiate a decision in the society on the basis of providing equality in the environment. The justice theory initiates equality in the decision making process, the decision should not harm he interest of the stakeholders present in the society. According to this policy the company should initiate a decision that is fair and justified in the environment; the decision should not harm the interest of any person or create inequality (Saeidi, et. al., 2015).
Initiatives by Commonwealth Bank
Implementation of decision: After making the decision on the basis of moral approaches, the company should implement that decision in their business process to implement corporate citizenship.
Conclusion
Thus, in the limelight of above mentioned events, it should be noted that the companies present in the environment should strictly follow their corporate social responsibility in order to maintain the trust off customers present in the environment. The above mentioned essay outlines the ethical issue of data breach issue in the company Commonwealth Bank. It also explains the reason of occurring of the event and the ways in which the company can take adequate ethical decisions to mitigate its effect.
References
Amartya, S., 2017. What do we want from a theory of justice?. In Theories of Justice (pp. 27-50). Routledge.
Andriof, J. and McIntosh, M. eds., 2017. Perspectives on corporate citizenship. Routledge.
Chell, E., Spence, L.J., Perrini, F. and Harris, J.D., 2016. Social entrepreneurship and business ethics: Does social equal ethical?. Journal of business ethics, 133(4), pp.619-625.
Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), pp.1-23.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
Den Hond, F., de Bakker, F.G. and Neergaard, P., 2016. Introduction to managing corporate social responsibility in action: Talking, doing and measuring. In Managing Corporate Social Responsibility in Action (pp. 15-26). Routledge.
Duarte, M. and Hanstad, T.I., 2016. Realizing global justice: Theory and practice. Etikk i praksis-Nordic Journal of Applied Ethics, 10(2), pp.1-10.
Hartman, L.P., DesJardins, J.R. and MacDonald, C., 2014. Business ethics: Decision making for personal integrity and social responsibility. New York: McGraw-Hill.
Jizi, M.I., Salama, A., Dixon, R. and Stratling, R., 2014. Corporate governance and corporate social responsibility disclosure: Evidence from the US banking sector. Journal of Business Ethics, 125(4), pp.601-615.
Kolk, A., 2016. The social responsibility of international business: From ethics and the environment to CSR and sustainable development. Journal of World Business, 51(1), pp.23-34.
Pearson, R., 2017. Business ethics as communication ethics: Public relations practice and the idea of dialogue. In Public relations theory (pp. 111-131). Routledge.
Sabag, ?. and Schmitt, M. eds., 2016. Handbook of social justice theory and research (pp. 10-14). New York, NY: Springer.
Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. and Saaeidi, S.A., 2015. How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), pp.341-350.
Smith, P., 2018. Commonwealth Bank under fire again for data breach of 19m accounts [online]. Available from < https://www.afr.com/technology/web/security/commonwealth-bank-admits-customer-data-breach-affecting-19-million-accounts-20180502-h0zkh7> Accessed on 25 May 2018.
Trevino, L.K. and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.
Vaughn, L., 2015. Doing ethics: Moral reasoning and contemporary issues. WW Norton & Company.
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