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Assignment Task - Critically analyse a recent article related to the The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in light of the role of ethical values and human dignity in economic decisions.

Answer - Critical Review


This article was first published in March 2019 as the "governance direction", the official journal of the Institute for Governance. This article highlights issues that may resonate with Australian companies and highlights the misconduct of the Royal Commission in the banking, pension and financial services industries. While the Commission and the report focus on the financial sector, many of the issues highlighted in the report are common in other industries.

The Hayne Commissioner has proposed a wide range of pension proposals that will have a broader impact on the financial services industry. In view of the possible and indeed conflicts in the sector, the report recommends that trustee trustees be prohibited from acting in any other capacity and should focus on fulfilling their duties as trustees of pension funds. This directly targets the dually regulated industry trustee - both as a trustee of the pension fund and as a responsible entity for managing the investment plan. The government expressed support for this proposal, and if it is legislation, this change will require some dual regulatory entities to reorganize its affairs.

The Hayne Commissioner emphasized that specific practices inherent in the industry (such as specific cost structures) are not an excuse for poor customer outcomes. For entrenched conventions, there is a need for a solid reason, and for consumer-oriented industries, the reason is based on the interests of consumers, and the convention is not actually aimed at the interests of consumers (Atkins & Charlton, 2019). The Commissioner also revealed that market participants observed that they should make significant changes to their behavior in the market, but they did not introduce or implement these changes in their own organizations because of beliefs or perceptions that were unfavorable to the pioneers. The Commissioner believes that these are areas of regulatory intervention that apply to the entire industry to eliminate the disadvantages of first-mover advantage.

In the article, the author clearly stated that his consideration and discovery of industry norms is not to interfere with the broader development or operation of industry norms. However, he also commented that when approving the industry code of conduct, ASIC may consider whether a particular clause is designated as an "enforceable regulation" and that the unenforceable terms of the industry specification will continue to play an important role in setting industry standards. .

The Haynes Commissioner's report scrutinized the insurance provided by Australia and the industry's inability to address information asymmetry and low customer value (Mittal & Garg, 2019). It emphasizes that all major sales-based businesses need to revisit their sales skills (such as using unsolicited calls and asking employees to overcome objections). Although the report recommends a deferred sales model to address the issue of buyers with unidentified insurance product information, this approach has broader appeal. Proving that sales are an informed consent for specific needs will greatly assist any regulatory agency in demonstrating the health of the sales culture within the organization.


1. Provide a brief discussion of the article and point out the three most important issues contained within the article. Do not simply summarise.

Brief discussion of article and three most important issues

This paper emphasizes the need to make judgments or reach opinions on all aspects of ethics, honesty and fairness, and even non-financial risks - they cannot subcontract this responsibility to consultants and seek to avoid it by doing so. They must be held accountable for the misconduct that occurs in the entity they are responsible for, and then take effective measures to resolve the misconduct (O'Brien, 2019).

Misconduct is driven by the pursuit of profit by the relevant entity and the pursuit of income by the individual, whether it is personal compensation or personal business profit. Excluding life insurance and general insurance from conflict compensation reform Selling insurance as a financial service (but not including the processing and settlement of insurance claims)

Undoubtedly, this article has sparked major debates and major changes between legislators, industry, regulators and communities. The Commissioner believes that most of the potential misconduct identified by the Commission has violated the law (Tobin, 2019). Consistent with this, many recommendations focus on implementing and complying with existing laws, including:

  • Focus on cultural, governance and non-financial risks within financial services entities, including reviewing compensation and incentive structures (the Commissioner concludes that it is a key factor in most of the misconduct found);
  • Changing the regulatory culture of the regulator - using litigation as a result of breach of contract enforcement (rather than the outcome of negotiations, notice of infringement and enforceable commitments);
  • reduce the power imbalance between financial services entities and consumers; and
  • Simplify (rather than increase) the financial services legal matrix.


2. Point out the underlying concepts which are relevant to the article.

Underlying concepts relevant to article

Banks, pensions and financial services institutions regulated by industry regulators are monitoring the culture of their industry, and when they observe that $7 billion was mistakenly taken from Australians, it is considered unrealistic by many. It also ignores a system characterized by deep-rooted anti-competitive behavior that harms consumers, misconduct, illegal and unreasonable behavior, and the reality of evolving ecosystems and financial technology (Turnbull, 2018). The new reality in Australia's banking, pension and financial services industry is that Australians have changed dramatically in the mood and expectations of the industry and given them more power. As part of the design and implementation of cultural reforms, the industry must seek, rather than avoid, the voices of many Australian societies. Through the transparency and continued participation of its consumers, shareholders, communities, employees, governments, special interest groups and the entire Australian community. Recognizing that any attempt to oppose Australia's expectations and power reality will continue to bring huge costs to the industry. This paper finds that when ethical information is included in "things that are considered legitimate - what the company represents - employees at all levels have institutional innovations". For example, Australian banks have referenced positive social, environmental and cultural impacts. Without a single understanding of culture and a core value that underpins the culture of all industry participants, deep-rooted structures, norms, rules and practices will not surface (Wilks et al., 2019). Challenged and replaced by industry, not by regulators. Sharing existing industry pioneers and celebrities in managing cultural and cultural change is critical. Without it, the culture of bigger, stronger and harder to change entities - industry elites - will hinder the transformation of the industry and increase the legitimacy of the industry.


3. General critique - whether you agree/disagree and why.

The contents of this publication are for reference only. It is the latest version on the date of release. This content does not constitute legal advice and should not be relied upon. Legal advice on your specific situation should always be obtained before any action is taken in accordance with this publication (Atkins & Charlton, 2019). This paper is based on the principles and issues outlined by the Hayne Commissioner in his report. His recommendations and supporting comments should of course be related not only to financial services entities, but also to entities in non-financial enterprises space. The content of the report is universally applicable, especially in terms of culture and governance. Importantly, any interpretation of Hayne's recommendations or requirements, whether CG&R or FS, must be explained by his clear approach to key issues, basic principles and general rules (Mittal & Garg, 2019).

4. Conclusion

The CFA Institute ("CFA") represents investment professionals in the investment and financial services industry. On behalf of these professionals, we address issues affecting the integrity and accountability of global and local financial markets. CFA and its member associations have strong and credible voices and have established strong ethics practices and self-management culture advocates around the world. CFA members follow clear ethical and professional standards of conduct. Of the more than 150,000 licensees worldwide, approximately 3,000 chartered holders in Australia hold professional positions in the financial services industry, from fund managers and analysts to accountants and financial advisors. Our charter holders include some of the most respected financial services industry members in Australia and New Zealand.

As an association of like-minded individuals, we do not represent the interests of a single organization or institution. Instead, we are an independent industry voice, and because of our defined tasks, there is no conflict of interest. CFA seeks to build a stronger financial services industry in Australia by working with industry and regulators. Our goal is to make community members a highly qualified and respected monetary guardian of the community and a trusted advocate of their rights. Commissioner Hayne emphasized that the primary responsibility of culture lies with each entity, but he points out that APRA can also play a role (especially because the most problematic entities of culture are least likely to change them internally). He believes that an effective entry point for entities to assess their culture is through their pay and governance structures, which show the values of the entity and the expression of its culture.

As for the role of APRA, the Hayne Commissioner emphasized that the assessment of culture is an important part of mainstream prudential regulation and cannot be seen merely as an additional "add-on" of regulation. He disapproved of APRA's previous "retraction" from the previous independent assessment of organizational culture. Noting that APRA's regulatory resources are limited, Hayne's Commissioner emphasized that APRA "must have" resources to oversee the culture and keep moving forward.


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