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1.1       Introduction

The challenges faced by the international banking industry are related to survival in highly competitive financial sectors and improve the quality of services and products to attain customers’ satisfaction (Johnson & Scholes 2012). Apart from the achievement of financial and economic targets, the concerns for environmental protection and betterment of society are also rising in the international banking industry. The advancement of environment concerns, hazards of rapid industrialization to human and the planet’s environment, and responsibility of a sustainable business are some important considerations. As Afsharipour (2011) added that expectation of the banking sector to fulfill the responsibility of internal and external stakeholders have been increased in recent decades. Hence, apart from providing competitive services to customers, the concerns for employees, stockholders, community, and other stakeholders is one of the main considerations of corporate governance in banks (Das and Ghosh, 2004).

This paper is based on the proposal of a tentative research in the areas of corporate governance and sustainable banking practices in Australia. The challenges and issues faced in implementing the sustainable and responsible business practices of large private banks of Australia will be undertaken in view of the corporate governance framework.  The research will evaluate the necessary corporate governance measures needed by the private banks in Australia to fulfill the responsibility and sustainability in the areas of environment, social, people, and ethical business activities.

This paper is organized in three major sections and sub sections. The first section of introduction deals with the brief introduction of topic, problem statement, aim and objectives, research questions and rationale of this research. The second section is comprised on the conceptual framework and development of hypotheses. The last section entails the research, tentative research methodology discussion for the proposed research. Gantt chart and research budgeting are also components of the methodology.

1.2       Problem Statement

The notion of corporate social responsibility (CSR) has derived the attention of management to target business practices in a wide spectrum of ethical concerns. The companies and corporations are now required to show the progress towards attainment of balanced goals of shareholders and other stakeholders in society (Shalman 2010). The external issues like recent financial recession have also affected the banking operations around the globe.  The recession of 2008-9 has dropped share markets, shaken the trust of stockholders and customers, unemployment and restructuring in the banking sector of US and Europe, and decline in investment and mortgage financing sectors have impacts on the global banking industry (Amadeo, 2015).

In this scenario, the analysis of the impact of sustainable and responsible business practices on corporate governance frameworks of banks is important. The study will provide a comprehensive evaluation of the role of banks in improving the customers as well as community and society states to uplift the standards of living. The policies of banks towards stakeholders will define the role of corporate governance in the evolution of sustainable business practices in the banking industry of Australia. There are very rare studies found in this area apart from major researches on the banking industry of UK and US (Hansen 2011). 

 

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1.3       Objective of the study

Aim of Research

To evaluate the relationship of corporate governance and sustainable business practices and their impact on social, environmental, and ethical aspects in Australian banking industry

Secondary Objectives

  1. To evaluate the literature related to corporate governance and sustainable business practices in the banking sector.

  2. To evaluate the consumers and employees perception about the sustainable business practices of Australian banks

  3. To determine the relationship of corporate governance and sustainability performance of Australian banks

1.4       Scope of the study

The scope of the proposed research will be limited to the four main players of Australian banking sector Australia and New Zealand Banking Group (ANZ), National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), and Westpac bank. The corporate governance practices in post recession stage from 2009 till present are considered with their impact on the sustainable and responsible behaviour of these banks. The perceptions of employees and customers will be considered as the performance indicators of these banks in the concerned areas.

1.5       Rationale of the research

The survival from recession has also affected the consumers trust level and banks attend to secure stable positions. The huge losses to the world’s large banks and high unemployment in this sector had turned into bankruptcy of some countries like Greece and Iceland (Sharma, et al., 2011). In this scenario this research is very important to analyse the issues and challenges faced by four largest banks of Australia. The feedback from employees and customers will add in the information to be collected from employees and customers.  The other benefits of this research can be the ways in which banks services and initiatives of CSR affected the perception of consumers and employees. The role of board of governors, managers, and employees will be clarified in deciding the role of banks in the society. The research is also important to describe the underlying issues in the Australian banking industry related to ethical banking practices.

1.6       Expected Research Outcome

The expected research outcome will define the nature of relationship and dependence of corporate governance on CSTR and sustainability initiatives of Australian leading banks. The role of directors, managers, and employees will be clear and the perceptions of customers will be used to determine the actual performance of these four leading banks in Australia.

2.         Conceptual Framework and Hypothesis

The rising concern of consumers about environmental degradation and service standards of corporations is an alarming indicator of the banking industry as well (Nicholson et al 2012). The customers are directly connected with the banks services for long time and trust their banks for security of their financial transactions and banking needs. On the other hand, Shalman (2010) expressed that as the trust of consumers and employees is shaken like that in the case of Lehman brothers US or BCCI bank UK, the questions are raised about the sustainability and responsibility of banks towards greater good of society (Armour 2011). The education of externalities in the areas of people, employees, customers, social, environmental and ethical needs are attuned by the BOG initiatives to establish a single norm of practices to meet the needs of all stockholders in the society. In this respect the development of sustainability frameworks like Triple bottom line have affected the norms of the banking industry as well (Nicholson et al 2012).

2.1       Understanding of Corporate Governance

Corporate governance understanding to scholars refers to the business decisions and principles that apply to control the mechanisms of business in a large corporation (Hansen 2011). According to the study of   Harjoto and Laksmana (2016), corporate governance stands for the norms and business laws that served to establish the relationship of board of governors, directors, managers, and shareholders to resolve agency issues. On the other hand, severe financial scandals like that of Lehman brothers, Enron, and BCCI bank have transferred the attention of critics to the evolution in the traditional role of corporate governance. As per Shailer (2004), the need of ethical practices, accountability, reporting, and disclosure are the issues related to corporate social responsibility and sustainability. The role of investors and regulators is to keep on rising in the banking industry as well to pledge the commitment of honest and transparent principles of corporate governance. The dilemma of fulfilling the stockholders demands of maximum profits and the society requirement of responsible and sustainable business are difficult to manage in corporate governance frameworks. According to Aguilera et al (2010), banking industry amid the tight monetary policies, financial recessions, and financial targets, gain of a status of sustainability and responsible business practices is also important. 

2.2       Role of Corporate Social Responsibility

Corporate social responsibility consideration in an organization is related to the initiatives taken by the organization to act as a responsible entity towards the environment preservation and community development (Persefoni et al 2014). The accountability of the organizations is considered with respect to the economic, social, and environmental aspects that constituted the framework of triple bottom line (Gompers et al, 2003). Though, the role of sustainability and responsible policies are attached to the term CSR in broad perspectives but it is not just limited to environmental preservation only (Shalman 2010). The researchers argued that though the banking industry is not directly connected with the environmental and social aspects but backing of companies that violates environmental protection laws and exploit people through unethical business practices can make the practices of banks unethical too (Panayiotou (2009). In this aspect it is important to consider that apart from being accolade on international sustainability platforms, report of Oxfam (2014) revealed that the big four banks of Australia, ANZ, CBA, NAB, and Westpac are involved in backing timber and agricultural companies to grab large lands in developing countries. Also, these four banks are criticized for backing oil and fossil industry, apart from the scandals of dodgy financial advice, internal trading, and rate fixing in these banks (Conversation 2015).

2.3       CSR and Sustainability reporting

According to the studies of Chaudhury et al (2011) and Yeung (2011), the undertaking of the banking sector initiatives of corporate social responsibility are connected with the policies and principles of corporate governance. The core areas of sustainability to be considered in the proposed research are related to economic, social, environmental, and ethical sustainability. According to Yeung (2011), ethical business practices are one of the most important areas in CSR in the banking industry and defines the overall standing of banks on CSR and sustainability issues. On the other hand, (Gustavson (2008) discussed the role of banks in assurance of respectable working environment for employees and secured investment options for customers as unimportant areas of CSR. Likewise, Baker (2011) asserts that CSR is the responsibility if banks to fulfill in view of the long term standing with employees and customers and for effective performance in society. Therefore, the relationship of sustainability and CSR is evident with corporate governance structure in the banking industry as well.

In view of the findings from literature and their objectives of this research, the conceptual framework of the proposed research can be shown as below:

The variables of CSR along with the performance of banks in four selected areas of sustainability will act as independent variables and the corporate governance performance will be considered as the dependent variable.

The dependent variable of corporate governance will be considered as profit, BOG stability, expansion, and CRM of the bank. The independent variable of sustainability will be measured with the help of performance of banks in social, economic, environmental, and ethical sustainability.

Based on the above conceptual framework, the null and alternative hypotheses will be expressed as

Ho(null):         Corporate governance has a positive and significant relationship with sustainable and responsible business practices of Australian banks.

H1 (alternative): Corporate governance has NO positive and significant relationship with sustainable and responsible business practices of Australian banks.

 

3.      Methodology

The proposed research will use an explanatory or descriptive methodology that suits the aim and objectives stated in the sections discussed above. The collection of secondary and primary data will be based on the choice of various methods as described in the pages below:

3.1       Literature Review:

Selection of the secondary data will be used to conduct an in-depth and argumentative critical analysis of the literature on corporate governance and sustainable practices of the banking operations in Australia. The relevant and updated scholarly research studies will be selected from the sources like Google Scholar, Emerald, John Wiley, and Science Direct. The journal articles in the period of 2005 till 2016 will be searched on these data bases. The secondary data collected from the wide selection of articles will be analysed by using thematic analysis so that the literature review can be divided in specific sections and subsections (Saunders et al 2012)

3.2       Research Philosophy and Approach

The suitable research philosophy is positivism as a logical and scientific collection and analysis of data is proposed (Schwab 2014). The descriptive methodology will support the analysis of relationship between the variables of responsible and sustainable business practices and corporate governance. The deductive approach supports descriptive methodology as it provides a top down approach from broad theory to test the specific hypothesis (Saunders et al 2010).

3.3       Primary Data Collection

3.3.1    Survey Strategy

The surveys are used to collect accurate, quantitative, and cost effective data for deductive approach. A variety of information will be collected from customers of selected four private local and foreign banks in Australia. The surveys will be conducted online and personally administered in the nearest bank branches. Sample of 60 customers will be used to collect data from the customers of selected banks.

Questionnaire of the survey will contain two sections of participants demographics and opinions of customers on the responsible and sustainable services of banks. The first section contains multiple choice questions related to age, income, profession, gender, and period of customer relationship with particular bank. The next section will be comprised on variables of sus6aianbility, responsibility, and corporate governance of banks related with customer services. The items will be designed on a 5-point Likert scale and comprised of scale ranges from 1 till 5 (5 for ‘strongly agree’ and 1 for ‘strongly disagree’). The items in this section will mainly be related to the sustainable projects for community, customer care services, and the level of banks service quality. The corporate governance of banks will be measured with the help of items related to the banks performance, CEO and board of directors public image, scandals/ issues in media/ unethical practices/ or cases against the bank, and other management issues.

3.3.2    Interviews:

The second mode of primary data collection is employees interviews, will be used to collect more in dept information about corporate governance and organizational structure. Interviews for 2 bank managers for each selected bank will provide in-depth information about banks policies related to people, social, and economic areas of sustainability. Also, the structure and prevalence of corporate governance and its efficiency will be discussed in these interviews.,

 These data collection methods will be used to collect information related to keeping sustainable and responsible business practices of selected banks in Australia. The operations, customer relationship management, organizational structure, business performance, and HRM are main areas of corporate governance and sustainability in the banking sector.

3.4       Data Analysis Methods:

The qualitative data will be collected from interviews and thematic analysis tools will be used to analyse this data. On the other hand, the quantitative data from customers’ survey will be analysed by using correlation and regression methods. Statistical analysis software SPSS will be used to perform this analysis. The inference will be drawn from graphs, tables, and verbal interpretation of results. The descriptive methodology will be followed in this data analyses section for both qualitative and quantitative data. The hypothesis stated for the research will be tested with regression analysis. This analysis will validate the relationship of corporate governance with sustainable practices of selected banks.

The discussion section will contain a critical review of research findings in view of the literature of corporate governance and sustainable business practices in the banking industry. Therefore, a mixed method approach will be basically used to interpret and discuss the findings of primary and secondary research data. The interpretation of results and analysis will help the researcher to accept or reject the stated hypotheses.

3.5       Dissertation Structure

The proposed study will be organized in five chapters, brief description is as follows:

  1. First chapter introduction will cater the introduction and background of study topic, aim and objectives, hypothesis, and significance of study.

  2. Critical review of literature related to corporate governance and sustainability practices in banking industry.

  3. The research methods to be followed are discussed in this section. Methods of data collection, analysis, and presentation of data are main components of this chapter.

  4. The data analysis and research findings are presented and discussed in view of literature.

  5. The conclusion and recommendation for the proposed study will be highlighted in this final chapter.

 

3.6       Project Schedule

Following Gantt chart will describe the time required to finish the proposed study

Task Name

Start Day

End Day

Duration (Days)

Project Proposal

7/05/2016

26/05/2016

19

Literature Review

27/05/2016

10/08/2016

73

Data Collection

11/08/2016

26/10/2016

45

Data Analysis

27/10/2016

22/11/2016

25

Final Report Submission

23/11/2016

20/12/2016

27

 

3.7       Project Budget

The budgetary consideration involved the expenses on stationary, use of computers and printers, paper, and expenses on conduct of surveys and interviews. The approximate budget for the whole project is amounted to$4500 in total. The distribution of this budget is as follows:

Purpose

Estimated Amount to be Spent

Literature Review

$600

Data Collection

$1800

Data Analysis

$1500

Transportation

$600

Total Estimated Budget

$4500

 

 

References

Aguilera, RV, Rupp, DE, Williams, CA and Ganapathi, J. (2007). “Putting the S back in Corporate Social Responsibility: a multilevel theory of social change in organisations”, Academy of Management Review, vol. 32 no. 3, pp. 836–863

Afsharipour, A., (2011) A Brief Overview of Corporate Governance Reforms in India, UC Davis Legal Studies Research Paper Series

Armour J., (2011) Enforcement Strategies in UK Corporate Governance: A Roadmap and Empirical Assessment

Baker, M. (2011).Corporate Social Responsibility,[Online] Available: http://net/csr/articles.php

Chaudhury, Suman Kalyan Sanjay Kanti Das, Prasanta Kumar Sahoo. (2011). Practices of corporate social responsibility in banking sector in India: An assessment, Research journal of Economics, Business And ICT,Volume-4,2011,Page no.-76.

Conversation (2015), australias banking four pillars wobbly on sustainability record accessed from http://theconversation.com/australias-banking-four-pillars-wobbly-on-sustainability-record-44521

Das, A. and S. Ghosh, 2004. Corporate Governance in Banking System: An Empirical Investigation, Economic and Politica l Weekly, March 20, 2004, pp. 1263 – 1266

Gustavson, R. (2008). The directors’ perspective of corporate social responsibility. Cariberra: The Australian National University.

Hamel, G., & Prahalad, C.K. (2010).Strategic Intent. Harvard Business Review, [Online] Available: http://www/hbr.com

Hemingway, C. A., &Maclagan, P. W. (2004). Managers’ Personal values as drivers of corporate social responsibility. Journal of Business Ethics,[Online] Available: http://www/jbe.com

Gompers P., at el, (2003) Corporate Governance and Equity Prices, Quarterly Journal of Economics.

Harjoto, Maretno A. and Laksmana, Indrarini, The Impact of Corporate Social Responsibility on Risk Taking and Firm Value (2016). Journal of Business Ethics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2782615

Hansen, H. K. (2011). Corruption and risks. Managing corruption risks. Review of International Political Economy, 18(2), 251–275.

Johnson G., & Scholes, K. (2012).Exploring Corporate Strategy. (8th ed.). New Jersey: Prentice Hall.

Oxfam (2015), Australian banks and land grabs, accessed from https://www.oxfam.org.au/what-we-do/food-and-climate/australian-banks-and-land-grabs/

Persefoni P., Evanthia Ioannidoua, Anagnostis Kipourosa, Lambros Tsourgiannisb, Georg Friedrich Simet., (2014). Corporate Social Responsibility in Greek Banking Sector – An Empirical Research, Procedia Economics and Finance 9 ( 2014 ) 193 – 199

Sapovadia V., 2009,  Operational Risks in Context to Corporate Governance Practices in India, Mombai: SSRN

Shailer, GEP 2004,‘anintroduction to corporate governance in Australia’, Pearson Education Australia, French Forest NSW 2086.

Sahlman, WA 2010, “Management and the financial crisis: we have met the enemy and he is us”, Economics, Management, and Financial Markets, vol.5, no.4, pp11-53.

Nicholson, G, Kiel, G & Tunny, JA 2012 , ‘BoardEvaluations: Contemporary Thinking and Practice. In: T. Clarke & D. Branson, eds. The SAGE Handbook of Corporate Governance. London: SAGE Publications Inc, pp285-324.

Yeung, S., (2011). The Role of Banks in Corporate Social Responsibility, Journal of Applied Economics and Business Research JAEBR, 1(2): 103-115

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