Reference no: EM132323959

Case Study ONE

Background: In December 2017, after years of opposition, dismissal and resistance by the Federal Coalition Government and the financial sector, a Royal Commission into Misconduct in the Banking, Superannuation and financial Services Industry was finally appointed under Comm Kenneth Hayes. The Commission examined the behaviour of the big banks (ANZ, NAB, CBA and Westpac) as well as a range of other organisations involved in the sector (AMP and OOOF being two). The Commission spent a significant proportion of the year hearing testimony from a range of witnesses, including those from the financial sector (the banks and financial providers), business lobby groups (Australian Bankers Association), consumer and support organisations, law enforcement agencies (ASIC and APRA) affected consumers. The media reported some extraordinary admissions and findings. In the end, however, many commentators expressed disappointment with the final report of the Commission, seeing it as "damp squib". The stockmarket also apparently perceived the report as weak compared to what was anticipated with the effect being the bank stocks rebounded in price and demand for the trading days after the release date of the report.

The major findings of the Commission were as follows - some have already been promised (see herefor a summary):
• That ASIC and APRA consider criminal charges against organisations linked to the "fees for no service" practice (but no organisations were named)
• That ASIC oversee the superannuation sector
• That APRA and ASIC be empowered to impose civil penalties for breach of superannuation regulation (along with other modifications)
• That a national farm debt mediation scheme be established
• That a last resort compensation scheme for consumers and Small Business be established
• That APRA and ASIC enforce via penalty regimes and legal action rather than issue of infringement notices
• That ASIC and APRA be scrutinised by a regulator-oversight body
• That Mortgage brokers be paid a fee/levy by customer, not financiers
• That car dealers be limited in "add-on: financial packages they could sell

Questions:
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)

Case Study TWO: Contract
Some links below. Plenty more on the internet, particularly here
Introduction and Background:
In August 2015, Fairfax Media published the findings of an investigation into wage fraud in Australian 7-eleven franchisee operations. The investigation claimed that thousands of casual workers and visa holders were:
• Being paid below award wages
• Working long hours but being poorly or not paid for that time
• Being paid appropriately but being required to repay a proportion to their employer, thereby effectively being underpaid (cashback).
7 Eleven hired Allan Fels (previously head of the ACCC) to design a compensation scheme but later assumed control of the scheme. Since this first story broke, there have been other stories involving such and similar practices, emerging from energy (Caltex), fast food (Pizza Hut), agriculture (labour hire companies), supermarkets (sub-contractors under "chain arrangements"), hospitality (cafes and restaurants), construction (building and related trades) and aspects of the service industry (eg home, aged and child care). Given that a lot of the stories centred on the particular vulnerability of visa holders in Australia (including international students), the (Cwth) Joint Standing Committee on Foreign Affairs, Defence and trade held an investigation into the situation, in which it was reported that the Australian government had established a Migrant Workers' Taskforce in October 2016 (chaired by Fels) and sponsored the Fair work Amendment (Protecting Vulnerable Workers) Act 2017.
Despite such moves, subsequent media and FWO investigations over 2018 have found continued legal non-compliance and exploitation in relation to Woolworths'subcontractors, a Refrigerated Transport operator, a Massage company, a Perth-based security company, several up-market Melbourne restaurants, a plumber and a domestic violence shelter......et al......

Questions:
• 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?
• What common factors can you identify in the exploitation cases that have been reported/investigated?
• Should there be freedom of contract in relation to employment contracts? Why or why not?
• What risk management issues should an employer or potential employer consider when deciding on terms and conditions of employment?
• 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?

Case Study Number 3: VW Emissions Scandal

Introduction:
For several decades, diesel-powered vehicles have been spruiked by manufacturers and governments as a solution to the issue of harmful vehicle emissions and their impact on the environment and contribution to climate change. Partly in response to this perception, the range and supply of diesel-powered passenger cars has grown markedly in recent years while the data on their polluting emissions seemed to bear out the assertions and claims as to their relative benefit compared to petrol.
In September 2015, the US Environmental Protection Agency publicly accused VW of cheating on emissions testing for diesel cars (a test to certify the particulates (nitrogen oxide) emitted from engines did not exceed maximum levels). The accusation blew the whole tawdry story apart. A mere 4 days later, VW admitted installing defeat devices in 11 million vehicles. The CEO resigned, denying he knew of the fraud. Other brands from the VW stable (Audi and Skoda for 2) then came under the spotlight, while other makers also came under scrutiny, these including Suzuki, Nissan, Peugeot, Citroen, Fiat Chrysler, GM, Renault, Daimler, BMW and Porsche. Investor and Government legal action against VW (that led to VW committing to pay more than US$ 22 billion in fines and compensation. Fraud charges were laid by the US against Executive Oliver Schmidt.
Concerns arose not only in terms of the financial loss suffered by buyers and investors but around the health and environmental impacts of "dirty" cars. The EU introduced tougher tests and France and the UK declared an intention to phase out the sale of diesel cars by 2040.

Questions:

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?

Case Study Number 4: Australian Wheat Board

The case is included in (2012) Contemporary Challenges in Corporate Governance, Wells, P. and Mueller, J. (eds) RossiSmith, Oxford, pp 89-100. Although the case is not solely on the matter of managing legal risk, significant aspects of it involve just that. It is demonstrates the links and interrelationships between legal risk and other aspects of risk that may impact on a company or other organisation.

Questions to consider (rather than the discussion questions at the end of the case study):
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?

Note: You need make only 4 case study and follow IRAC method.