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Agreements And Contract And Managing The Legal Environment, Federation University, Australia

BULAW5911 Managing The Legal Environment


Case Study 1: Royal Commission

1. Why was there pressure exerted on the Federal Government to have a Royal Commission?

2. What arguments did the Government and Financial Services Sector use to reject the call for a Royal Commission?

3. Using one bank or other provider as an example (so you can use either IOOF, NAB or any other provider testifying before the Commission), what governance issues did the commission investigations and hearings identify for that provider?

4. From a governance perspective, how has that provider responded to the Commission findings?

5. What (if any) implications do those specific findings have for corporate governance in Australia? (when answering this question, consider the PCG on the ASX website)

Answer: Issue: During the year of 2017, the Banking and Financial services industry after facing extreme opposition and resistance by the Federal Coalition government decided to appoint a Royal Commission under the commandment of Kenneth Hayes. According to the media, there were reports of certain unusual admissions and results and a majority of the commentators described the report of the Royal Commission as a damp firework. The first stage of the hearings explored issues associated with the treatment of potential consumers by banks and monetary service providers such as NAB and Commonwealth Bank. From an authority perspective and mindset, the NAB detailed its response, involving a range of various activities and actions to the findings and recommendations of the committee investigations. The first implication is that the interconnected emphasis on culture will reverberate with boards of mainly public listed firms and organisations who are tackling the demands and expectations of the stakeholders and consumers. The second implication is regarding the recommendations made to the financial regulators and this "call to arms" can tend to have consequences for how they involve with industries outside the concerned sector. What legal and legislative solutions or remedies does the Royal Commission has for the false prospectus of the banking organisations.

Rule: The Act is known as the Royal Commissions Act, 1902 and it received Royal Assent during the month of August in the year 1902. The legislation states that a Royal Commission has the major authority to issue a summon to an individual to ensure his/her presence at the hearning called by the Commission in order to submit evidence and generate documents stated or explained in the summons.
The extensive pressure exerted on the government was mainly to appoint such a body that examined and assessed the behaviour of the big banking organisations and other firms specifically involved in that particular sector. It was easy for the concerned government to make criticisms on the tightening of the banking regulations and norms without having the patience to acknowledge the recommendations made by the Royal Commission. During the investigative year, the Royal Commission incurred a significant proportion of the time listening to testimonies from various witnesses including financial providers, law enforcement agencies, business lobby groups and consumer organisations. According to the rule, if pleaded guilty the banking organisations and monetary services provider would have to consider and apply all their recommendations as introduced. According to the principles of the Australian Corporate governance, a company should lay foundations for administration and oversights and ensure appropriate structuring of the board. A company should promote ethical and effective decision-making and protect the integrity in the financial reports and documents.

Analysis: In other terms, the main reason behind this decision was the absence of authoritarian intervention by certain government authorities and to ensure whether the financial organizations were involved in corrupt activities. In the year of 2016, Scott Morrison ignored the repetitive calls for the commission body and exclaimed it as a populist whimper. The Australian stock market described the report of the Royal Commission as weak despite the results being positive and beneficial. The commission investigation identified violations or breaches of responsible lending obligations and it also identified that the financial planning division of the organisations incurred fees for no service adversely influencing the monetary well-being of the potential consumers. Any type of industry which includes the stipulation of services to potential consumers will desire to appropriately consider the devised recommendations about the management of disagreements.

The National Australia Bank supported and considered 72 of the recommendations made by the Royal Commission and had completed 26 of the considered recommendations. The banking body has supported the findings of the Royal Commission and believes that it will eventually lead the pathway to a more translucent financial services industry. Australian royal commissions always have been appointed under legislation but at both the state and Commonwealth levels.

Conclusion: Hence, after the pressure from the four big Australian banks and other government bodies, the appointment of the Royal Commission proved to be successful and beneficial. Hence, it can be said that the criticisms and arguments shared by the monetary service providers and government bodies were wrong and the explorations and findings of the Royal Commission was proved. Independent commission investigations and enquiries pose similar difficulties and challenges particularly in view of the nature of the proceedings and time-frames in which commissions conduct their work according to command. The National Australia Bank supported and considered 72 of the recommendations made by the Royal Commission and had completed 26 of the considered recommendations. The banking body has supported the findings of the Royal Commission and believes that it will eventually lead the pathway to a more translucent financial services industry. The final report of the commission investigations and NAB's own reform scheme together has set out a clear path helping NAB to gain the trust and loyalty of the consumers. Hence, it can be said that proper corporate governance helps in providing a flexible structure to the Australian business organisations in order to maintain governance disclosure and governance interests of the public.


Case Study 2: Contract

1. What, if anything, is different in an employment contract as compared to other types of contract such that they tend to attract higher levels of regulation and enforcement?

2. What common factors can you identify in the exploitation cases that have been reported/investigated?

3. Should there be freedom of contract in relation to employment contracts? Why or why not?

4. What risk management issues should an employer or potential employer consider when deciding on terms and conditions of employment?

5. Referring to one example of where employee exploitation has been identified, what steps should the employer have taken to address the legal risks of the situation?

Answer:Issue: The main difference between an employment contract and other types of contract is that it establishes both the legal rights and responsibilities of the two concerned parties i.e. the company and the employee. Some of the certain factors that have been identified in the specific exploitation cases are meagreness of consideration, poverty, lack of employment and education. However, there is an immediate requirement for the freedom of contract in order to enable the market function effectively and economically. An employee should always have the legal right to specific fair terms and non-discriminatory conditions of the workplace in order to gain an equal opportunity for higher duties and jobs. The company is dealing with employee exploitation cases within its operations and this has caused a major impact on the performance and brand image of the organisation. What legal remedies can Australia 7-Eleven franchise consider for managing the lanour exploitation cases filed against them.

Rule: The Fair Work Act, 2009 is known as the act that governs the employment of all the employees and staffs employed within the organisation assisted and supported by other territory and state legislative programes and schemes.

In simple terms, an employment contract is defined as the type of contract utilised in labour law to characteristic roles, rights and responsibilities between different parties to a negotiation. According to the Australian Labour Rights and Restrictions, all workers have the same rights and responsibilities at the workplace in spite of their visa status and citizenship. An employer in Australia needs to abide by the Australian workplace and immigration rules and norms including paying the right pay rate to the worker and provide a safe working environment. According to the Civil Law jurisdictions, there are various doctrines that can be inferred into the prevailing relationship between the two involved parties. During the execution of the contract, an employer needs to ensure whether the risks intrinsic to the prevailing relationship are appropriately addressed by simple and understandable language in the contract. In the employee exploitation situation of 7-Eleven company, firstly the employer needs to examine the regular schedule of the employee, the overall work the employee has done, the level of interaction with other employees and subordinates.

Analysis: An employment contract includes the specification of the employee's working hours for the concerned organisation and another main difference is that it affects both the organisation and the employee. The workers are not clearly informed regarding their deserving entitlements as concerns wages, annual leaves, working hours and many more. The casual workers and visa holders do not receive a contract written in their own language that they understand or some of the workers do not even receive a contract at all and this calls for labour exploitation. The limitation of liability seeks to bound the payable amount in damages on a violation or impose a time frame in which the casualties and damages are recoverable. An employee should also first respond effectively to the internal complaints regarding exploitation and discrimination by devising a complaint mechanism or create a healthy working environment.

Conclusion: Hence, it can be concluded that exlcusive of the employment contract, all other types of contract are not enforceable under the law. An employment contract is enforceable in a legal law court whereas other types of contracts are not enforceable by law. Hence, it can be said that the rights and responsibilities of the workers cannot be taken away by agreements and contracts. The pay rates and different conditions of the workplace have been set by the Australian law and government bodies. The legal environment of a country tends to include various limitations and restrictions on the potential of the concerned party to contract independently and also entail various provisions into the contract. Hence, the answer to this is yes as the balance of authority between the employer and the employee should be balanced appropriately.

But still, it can be concluded that an employee can file a discriminative behaviour or action complaint with the Commission board if they feel like the workplace conditions and terms distinguish against them. In these cases, an employer can utilise a minor mistake against the individual by analysing the flaws and gaining insights into the earlier employment records of the employee.


Case Study 3: VW Emissions Scandal

1. What likely motivations drove VW (and others) to cheat on the tests over an extended period?

2. What were the likely results of this cheating on the social and market perceptions of VW and its products?

3. What are the long and short term implications for VW (and others) as a result of the publicity around the manipulations?

4. What impact do you think these implications have on their strategy and governance?

5. What does the VW story suggest in terms of risk management?

Answer: Issue: The company and it's expert engineers planned to cheat on the emission tests because they were constantly failing in exploring a technical solution to develop diesel engines within the organisation's stipulated budget and time-frame. The emissions scandal at the automotive business organisation has started to hamper the brand image of the company on the different platforms of social media despite the Audi brand being sheltered. The automotive organisation has dealt with a downward trajectory because of its traditional product line but Japan's Subaru is introducing newly designed vehicles into the market at overlapping value. Volkswagen had to also deal with reputational losses including lowering the prices of its cars to sift product or issuing promised returns to accumulate capital. The emissions scandal of Volkswagen is caused by the amalgamation of three main factors including flaws in the processes, misconduct and unethical attitude in some segments within the company. What legal remedies and solutions can Volkswagen consider for the restructuring and image improvement of their brand.

Rule: The EPA Authority to regulate and control emissions by the engines is dependent on the Clean Air Act amended in 1990. The installing of the software devices in the diesel vehicles of the model year 2009-2015 evaded the emission standards of the EPA. The vehicles in which the softwares were installed emit up to 40 times more pollution that the standard rule of emission. The goals and objectives set by the automotive business company was simple and ambitious in nature and the diesel vehicles promised high fuel efficiency without the extensive use of power or energy. The emissions scandal has proved to be a public relation crisis for the US automotive markets and it will tend to end in lower diesel diffusion. The main aim of the TAGS i.e. Australian Governance System is to help and support the business organisation's board to acknowledge and improve in the best way they can. The automotive organisation had to initiate changes in its strategy paying focus on resolving the issues and risks but also to change its digital marketing strategy in order to gain back the trust of the consumers.

Analysis: The whole chain of mistakes and corrupted activities was not intervened at any specific point of time but it can be said that the idea of a scandal aroused from a perspective in some segments of the company that managed violation of the regulations and norms. The buzz score of the automotive company dipped to its lowest level and was expected to drop down even further hitting the organisation hard. The company had to face heavy criticisms and insults on the social media platforms including 24% of the overall digital content engagement mentioning emission scandal. After the emissions scandal, certain automakers have been benefitted including Japan's Subaru as the company's overall market inflected positively in the same year when the market share of Volkswagen company inflected negatively. The company's annual report stated provisions including $18.4 billion for legal and clean-up expenses and $1.2 billion for contingent liabilities. The business organisation initiated an extensive recall of the products and services sold with affected systems and engines in the European Union. The lack of contingency plans was one of the main risks that could increase the reputational damages.

Conclusion: The EPA is performing closely and extensively with its associate California's Air Resources Board to appropriately apply the specific settlement with the automotive business organisation. Hence, it can be concluded that the expert and professional engineers of the automotive company designed the processors in such a way that they displayed only readings during the stipulated test conditions and this means that they were conscious of the ethical dilemmas and issues. Hence, it can be said that the ethical scandals result from aware decisions to conduct the wrong activity because the people making the effective decisions are encouraged to achieve the goals and objectives. The volumes in the US has dealt with influences in the short-term and India being connected to the chain of imports and exports for the automotive organisation, the country had to face the consequences of the development. Hence, it can acknowledged that the concept of risk management takes place in all the individual segments of the monetary business world and it occurs when an potential investor purchases low-risk government bonds over challenging corporate bonds.


Case Study 4: Australian Wheat Board

1. Why do you think AWB was able to pursue the behaviour that led to the scandal?

2. Why did the AWB scandal attract so much attention both nationally and internationally?

3. Who was affected by the scandal and the final outcome?

4. Why are the answers to 1 and 2 important in terms of legal risk management? Why and how?

5. How important is organisational reputation to sustainability of the organisation? Why?

6. Do you think the AWB should have admitted wrongdoing early or was it better to deny? Why? What else (or alternative thing) should it have done?

7. Who lost the most? Do you think that reasonable as a reflection of culpability? What does that suggest in terms of the focus of legal risk management?

Answer: Issue: After the Desert Storm war between the US and Iraq, the invaded country was busy in recovering the rigorous damage caused to its infrastructure and business markets. The main loser in this scandal was the all-inclusive price for grain that was paid for by the purchasing of the Iraqi oil and this scandal would have helped the Iraqi people to break out of the regulations and norms of the Resolution 661. The AWB scandal resulted in national and international litigation and conviction but somehow the criminal charges filed by the US were dropped and the civil charges were successfully filed. It was important for AWB to acknowledge the knowledge of the economic and legal factors as well as the details of the market in which they were collaborating with Iraq for the corrupt activities. For example, AWB damaged its corporate reputation with its own hands and it bought a significant loss of assistance and support for the company's monopoly power eventually hampering the long-term sustainability of the board (case study).

It was better for the Australian Wheat Board to admit wrongdoing early because there was a certain fee that was to be recovered from the UN escrow A/C by its addition in the cost of wheat. At the core of the humiliation, AWB was guilty of transferring $300 million to the Iraqi government via an Arab based trucking company. What legal remedies does AWB have against the issues and problems filed by the UN Security Council.

Rule: In the Resolution 661 of UN Security Council that was adopted in the year of 1990, it noted the refusal of Iraq to meet the terms and self-defense right of Kuwait. In return, the Council consider various steps and measures to apply international sanctions on the country of Iraq.

When the Iraqi markets opened for the purchase of food and sale of oil, they also created an environment specifically designed for benefits and advantages. Legal risk management is defined as the specific process of assessing authoritarian and non- authoritarian responses to potential risks and choosing among them. It is important for every business organisation to consider its corporate reputation and image as one of the profitable assets despite the enormous technological changes in the business markets. According to the situation, AWB had to pay a certain fee amount to Iraq and hence, it was the very point that AWB knew that paying of such US dollar fees to Iraq is barred and banned according to the sanctions of the UN and Australian regime policy. The corrupt decision was not driven by the majority of the Australian people and since then, the country has been paying a price via the deregulation of the grain markets of Australia.

Analysis: This enthusiasm motivated the AWB to enter into the challenge and get involved in the corrupt activities with Iraq. The main reason behind the national and international publicity of this scandal was the violation and breaches of the UN resolutions and this is because violating the UN resolutions is considered as an international sport even to the stage of nuclear weapons. The North American farmers were the main people who got affected by this scandal and due to this, they lclaimed $1 billion as compensation from the AWB which later got dismissed. Yes, it can be said that a good corporate reputation is important for the business organisation to perform exceptionally in the respective business field. The initial denial strategy by the board failed to relax the people plus the situation deteriorated markedly and eventually as a witness the Canadian Wheat Board referred the fraud to the UN. The oil-for-food scandal made global headlines and completely destroyed the country's control system of wheat export defined as the single desk. Hence, it can be concluded that AWB and Australia's grain plus wheat industry suffered and lost the most in the scandal.

Conclusion: The main purpose of the trade between the AWB and Iraq was to safeguard its UN contracts of wheat supply under the food for oil contract (case study). During the time of the scandal, the country was associate of the Iraqi Coalition of the Willing and it severely affected the relations between foreign countries. The answers to 1 and 2 are important because it is important for the organisation to address the objectives of legal risks management. A proportion of 40% of the organisation's performance in the markets is attributed to non-monetary factors linked to its corporate image and reputation. It was surely the fault of the deregulated market that opened the way to the country for the export of wheat to international countries including Iraq being the major mistake.


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