Weekly Blog #4

I do not agree with the statement that Boards of Directors and CEOs should not be accountable for their employee’s actions. In fact, it precisely because of these higher ups within companies that employees may be led to commit fraudulent acts. According to the banking Royal Commission many banks had fostered flawed working cultures that could have for example rewarded aggressive sales tactics. Investigation into the misconduct of NAB revealed that the actions of their employees were a consequence of unachievable targets set for them and a flawed incentive-based remuneration design (Yeates, 2018). This pressure placed upon workers by their higher ups is one of the aspects of the fraud triangle. I have experienced this type of pressure before when I was younger. During tennis class a competition was held, and the winner would receive a prize I highly coveted. I played my heart out and at times heavily considered cheating or using underhanded tactics but instead fell short in the finals.

Some of the crimes committed by banks include “…incorrect charging of fees, market manipulation, procurement scams, money laundering breaches, privacy breaches, sexual harassment, fraud, forgery…”(Frost, 2018) hawking and more. The Royal Commission recommends that financial service entities should now review their governance and culture as often as possible (Chartered Accountants, 2019). Employers are vicariously liable for the actions of their employees if they are not able to prove that they occurred in spite of their due diligence.

Chartered Accountants. (2019). Banking Royal Commission Final Report Summary. Chartered Accountants. https://www.charteredaccountantsanz.com/news-and-analysis/media-centre/press-releases/banking-royal-commission-final-report-summary

Frost, J. (2018). Banking royal commission publishes a decade of banking's dirty laundry. Financial Review. https://www.afr.com/companies/financial-services/banking-royal-commission-publishes-a-decade-of-bankings-dirty-laundry-20181107-h17mdl

Yeates, C. (2018). Fraudulent loans an 'inevitable' result of flawed culture, says union. The Sydney Morning Herald. https://www.smh.com.au/business/banking-and-finance/fraudulent-loans-an-inevitable-result-of-flawed-culture-says-union-20180305-p4z2xv.html

Useful Links

Link to Key Findings of the Royal Commission: https://aicd.companydirectors.com.au/membership/company-director-magazine/2019-back-editions/march/royal-commission