Social Responsibility of the Commonwealth Bank of Australia

This report targets to view how Commonwealth Bank of Australia receives social responsibility and to highlight CSR advantages and the merits of CSR to CBA's acts and brand ideas. This report will express an introduction concerning CBA and highlight what CSR is. It will include examining CSR which consists of four kinds of social responsibility; economic, legal, ethical and philanthropic. It will also study the recent accusations of illegal money acquisition at CBA and how this has tilted their share price to ascertain how effective their CSR initiatives are overall.

Introduction

Commonwealth Bank of Australia (CBA) is one of the most profound providers of financial services in Australia which provides services ranging from banking at retail, insurance, managing finance, pension, investment, commercial finance and so on to more than sixteen million consumers both in Australia and other countries. With its headquarters in Sydney, Australia the bank has grown to become one of the leading financial institutions on a global scale providing services to individuals and businesses in eleven countries across the globe including the United States of America, the United Kingdom, New Zealand amongst other nations. The bank has approximately 1350 branches and close to 5000 ATMs under its name coupled with a labor force of more than fifty thousand employees. This report aims at looking at the various initiatives adopted by the Commonwealth Bank of Australia that demonstrate corporate social responsibility pertaining to the year 2017 and those they intend to adopt years to come.

Definition and Elements of Corporate Social Responsibility

Fallon (2017) states that corporate social responsibility is a dynamic and expansive process that has no one direct standard or method of defining what it entails. Different organizations have different strategies in place and opinions that define their corporate social responsibility initiatives. Corporate social responsibility involves the identification and consideration of the needs of company's range of stakeholders in carrying out the operations of the organization. CSR can also be seen as a socially driven obligation where the organization aims at solving social problems within the community with an aim of increasing their reputation amongst the members of the community. Deigh, Farquhar, Palazzo & Siano (2016) emphasize that corporate social responsibility can be grouped into four types that demonstrate the various elements of CSR that can be employed within an organization: economic (making profit), legal (obeying the law), ethical (to be ethical) and philanthropic (to be a good corporate citizen).

Economic

Deigh, Farquhar, Palazzo & Siano (2016) point out that the economic perspective is one of CSR the most primal duties under CSR as the company needs to ensure they run successful business operations and make profits to their stakeholders such as customers, employee, investors and community at large.

Legal

Every company should obey the rules and regulations under which they operate under. These regulations include those set by independent regulatory bodies and those set by the company's management.

Ethical

The company is expected to have principles in place that promote moral behavior which can be evidenced by the activities of the organization during their normal operations.

Philanthropic

Under this principle, the organization makes a voluntary contribution to the society in the form of promotions, donations and even voluntary work.
In analyzing the CSR activities at CBA, the main focus will be on the economic component and the legal component of their CSR activities to determine their effectiveness.
3.0 Analyzing CSR in CBA using Economic and Ethical Elements of CSR
CSR at Commonwealth Bank of Australia includes fulfilling the expectations and needs of their stakeholders and ensuring that the broader business elements reflects these expectations; and using views obtained from stakeholders to inspire their manufacturing of products and rendering of services. This falls under the economic perspective of corporate social responsibility.

Education

In terms of education, as the first CSR activity that falls under both the philanthropic and economic component of CSR, CBA has made a commitment for 25 years to invest in education and this has kicked off with a three-year commitment from 2015-2018 valued at 50 million US Dollars. According to the company's CSR Report of 2017, some of the achievements the organization has been able to claim include: more than 500,000 dollars distributed towards research grants for education, the running of a Start Smart financial education program attended by 574,246 students, a number of teachers being awarded a 45,000 US Dollars fellowship and 50% of students in schools saving regularly through the company's School Banking.
These initiatives have been put in place to teach children about the value of money and the vitality of long-term financial wellbeing from a young age. It also imparts within the children the importance of having a saving culture from a young age as seen from the School Banking initiative. By supporting education and even the providers of education, the bank aims at aiding in preparing the labor force of the future by harnessing the benefits of a good education system. On one side, by providing educational opportunities to children, they enable them to be more attractive within the job market therefore creating more opportunities for them to gain employment. I believe that this initiative has a philanthropic component as they are voluntarily giving back to the community.

Good Business Practice

Good business practice has been another CSR initiative that focusses on using policies that are sustainable and transparent to those who have a stake at the company. This initiative focuses on the ethical component of CSR in Commonwealth Bank of Australia. Some of the plans that CBA has in place under good business practice include playing a role in climate change, lending and investing responsibly, listening and responding to the needs of their stakeholders, contributing to the community and employing the diversity within the community in the organization.

In the year 2017, according to the company's corporate social responsibility report for the same year, CBA was able to have more than 4% of the employees in managerial roles being women, 48.5% reduced levels of emissions in Australia from 2009, climate bonds worth 1.02 billion US Dollars have been prepared, the company has invested a total of $ 272 million in the community and they have employed Aboriginal Australians who make up 0.8% of their total work force.

Criticism of CBA's CSR Initiatives

The above CBA initiatives have been effective so far, however, they will need to work on their Good Business Practice which has come under scrutiny as a result of cases of money laundering that have been brought to light by the financial intelligence agency, AUSTRAC. The agency claims that CommBank has been having systemic non-compliance to anti-money laundering regulations in place to govern financial institutions in Australia.

Clarke (2017) noted that CBA has failed to report the issue that involves transactions that total to more than 61 million US Dollars which constitute approximately 53,700 contraventions against the counter-terrorism and anti-money laundering financial act especially in relation to their intelligent deposit machines. The IDMs, according to Reuters (2017) were used as the main platform for money laundering where cash deposits were made using fake names with the money going to drug syndicates. It has also been mentioned that CBA did not respond to these findings made by AUSTRAC in that they did not monitor transactions being made with the aim of managing the financial risk involved as a result of the money laundering.
Smyth (2017) asserts that in December, CBA admitted to failing to respond to these allegations which they claim were caused by an error within their systems. The bank admitted to non-compliance with the financing obligations and regulations including the lack of appropriate risk assessments of their intelligent deposit machines. The bank faces a class action lawsuit by their shareholders as a result of failure to inform their shareholders of this issue for two years which they were aware of this ongoing issue. The lawsuit will be on behalf of the shareholders who invested with the company between July of 2015 and August 2017.

Holland (2017) points out that this will negatively affect the share price of the company as a result of reduced investor confidence in the company. In addition to this, the company faces stiff fines which will adversely affect their financial performance for years to come. Hutchens (2017) stresses on this by pointing out that the company's share price already started declining, by more than 5%, after the announcement of their money-laundering scandal showing the adverse effect that this will have on the company's reputation.

Conclusion and Recommendations

Other than their Good Business Practice initiative that has been violated by their money laundering scandal, the other CBA's initiatives related to corporate social responsibility are effective. I believe they are holistic in that they cover the diverse tenants of CSR including economic and philanthropic. To recover from this scandal, the bank will have to put up various regulations in place to mitigate the loss of reputation from the adverse effects of this scandal. They will also need to convince their shareholders and wide stakeholders as to effective policies they will put in place to ensure they do not have future cases of money laundering.

References

CBA. (2017). Corporate Responsibility. Retrieved January 07, 2018, from https://www.commbank.com.au/investors/corporate-responsibility.html
Clarke, C. (2017, December 13). CBA admits 53,000 breaches of money laundering rules, expects more charges. Retrieved January 07, 2018, from http://www.abc.net.au/news/2017-12-13/cba-breached-money-laundering,-counter-terrorism-laws/9257224
Deigh, L., Farquhar, J., Palazzo, M., & Siano, A. (2016). Corporate social responsibility: engaging the community. Qualitative Market Research: An International Journal, 19(2), 225-240.
Fallon, N. (2017, December 29). What is Corporate Social Responsibility? Retrieved January 07, 2018, from https://www.businessnewsdaily.com/4679-corporate-social-responsibility.html
Holland , S. (2017, October 09). Why the Commonwealth Bank of Australia share price could fall further. Retrieved January 07, 2018, from https://www.fool.com.au/2017/10/09/why-the-commonwealth-bank-of-australia-share-price-could-fall-further/
Hutchens, G. (2017, August 22). Commonwealth Bank faces class action over money-laundering scandal. Retrieved January 07, 2018, from https://www.theguardian.com/australia-news/2017/aug/23/commonwealth-bank-faces-class-action-over-money-laundering-allegations
Reuters. (2017, August 03). Australia's Commonwealth Bank Accused of Massive Money-Laundering Breaches. Retrieved January 07, 2018, from https://www.nbcnews.com/news/world/australia-s-commonwealth-bank-accused-massive-money-laundering-breaches-n789181
Smyth, J. (2017, December 13). Financial Times Commonwealth Bank admits multiple breaches in money laundering case. Retrieved January 07, 2018, from https://www.ft.com/content/f293993e-dfe2-11e7-a8a4-0a1e63a52f9c