Banking royal commission http://www.abc.net.au/news/story-streams/banking-royal-commission/ Visit the page above and select one of the ASX listed companies being investigated by the Banking Royal...

BUS320 ASSESSMENT TASK3
Executive summary
This assignment is focused on the discussion of the ethical issue which has risen recently in front of Westpac banking corporation. In this assignment, the stakeholder theory has been used and the arguments on the basis of the sufficient number of theories of corporate social responsibility and corporate governance have been provided and the actions were taken by the company’s board directors have been evaluated and analyzed using the ethical as well as economical and justice distribution theories.
Contents
Executive summary    2
Introduction    4
Ethical case: Westpac banking corporation hit with $35 million penalty for settling the irresponsible home loan with the Australian securities and investment commission.    5
Ethical questions    6
“Corporate governance, corporate social responsibility and corporate social performance”    7
Corporate governance theories    7
Corporate social performance    8
Creating shared value    9
Stakeholder Analysis    9
“Discussion of corporate governance based on the ASX 2010 Principles and recommendations”    10
Level of board independence and Formation of board and diversity    11
Ethical analysis    12
Recommendation    14
Conclusion    15
Introduction
The banking industry is of supreme importance for both society and the economy. Thus, it is important that banks comply with all the rules, laws and regulations which are framed by the government for enhancing the confidence of the society and for ensuring the soundness of the operations. They should ensure equitable and fair treatment to all the stakeholders. The stakeholder’s interest may or may not coincide with each other. The conflict of interest should be ethically balanced by the banks by keeping in view the greatest good of most of the members. Further, the banks have the responsibility of ensuring truthful, full & translucent disclosure of the financial health and they should behave as the socially responsible corporate citizen.
Selected organization: Westpac banking corporation
Ethical case: Westpac banking corporation hit with $35 million penalty for settling the irresponsible home loan with the Australian securities and investment commission.
The Westpac banking corporation hit with the thirty-five million dollar penalty in order to settle the reckless home loan cases with the Australian securities and investments commission. The company has reached the settlement with the commercial regulator. The company has admitted that their automated loan assessment system breach responsible lending law, issues more than ten thousand home loans which should not have been approved automatically. As a result, the bank has to pay the civil penalty and regulator legal cost of $35 million for settling the case. The commission has reported that this is the largest civil penalty which has been awarded to any bank under the national credit act. The banking corporation has admitted that they the household expenditure measure have been used by them which is a relatively less estimate of basic living expenses for calculating the living cost of potential buyers. The bank should actually evaluate the declared living expenses of the customers instead of using household expenditure measure. The bank admitted that this practice breaches the “national consumer credit protection act”. This indicates that the affected customers who were approved for the home loans cannot potentially afford to repay the loans without any financial hardship.
This case was launched by the Australian securities and investment commission in March last year by using seven cases for demonstrating that the bank is using lower household expenditure measure benchmark instead of higher declared living expenses of customers (Koslowski, 2011). In addition to this, the Westpac banking corporation is also exposed to the potential lawsuits over the billion dollars in irresponsible home loans.     
The ASIC has also suspected that the bank does not properly assess whether the interest-only borrower of the bank will be able to manage to pay for their mortgage without any financial difficulty in future when the interest-only period will end & both the interest & principle payment has to be made by the customers. The interest and principle payment can add up to as much as the forty percent of the monthly repayment on the mortgage.
Ethical questions
The ethics and competitive advantage has the symbiotic relationship. The ethical practices help the banks in acquiring the brand reputation. This further helps the banks in expanding the customer and ultimately in increasing overall income. The good reputation usually attracts the ethically conscious client which solves the problem of nonperforming loans to a high extent. In addition to this, the bank that is well known for ethical conduct is able to retain and attract honest and bright employees (Paulet, 2011). It will make it easier for banks to raise additional capital in a cost-effective manner when needed.
In the present situation, the Westpac banking corporation hits the penalty because of the irresponsible home loans. The bank approves the loans to the customers which they could not potentially afford and the bank was also accused of the nonassessment of the long-term viability of interest only loans of the customers (Villa, 2015). The bank uses a lower household expenditure benchmark for determining the basic living expenses of the customers which breach the national Consumer Credit Protection Act.
The major ethical question which arises in this situation is how the Westpac banking corporation does not make proper use of information technology and engage in financing activities which were unsuitable for the customers. The basic ethical issue which arises in this situation is that the bank has provided the credits to the customers which cannot be paid by them without any financial hardship in the near future.
“Corporate governance, corporate social responsibility, and corporate social performance”
Corporate governance theories
Corporate governance has become the major concern for the customers. There are several theories of corporate governance such as the “agency theory, stewardship theory, stakeholder theory, resource dependence theory, transaction cost theory, political theory, and sociological theory”. These theories provide the...