Question

Research the internet to find another company that struggled with the decision of leaving the community for the better of shareholders. Did they leave the community, or make it stronger? How?

Answer 1

I believe the prime example for dilemma related to shareholder value vs community betterment is the Commonwealth Bank. Australia's largest bank reported a total profit (PAT) of $9.93 Billion for FY17, which clearly suggests that their performance was exceptional in terms of increasing the shareholders value. Dividends were higher, the share price of the bank skyrocketed. But what is missing in the entire story is that tens of millions of dollars of this profit was allegedly laundered using Commonwealth Bank's Intelligent Deposit Machines (IDM's). This suggests that the PAT was basically public money and not something that the bank owns. All this resulted in a huge public outrage with slogans been made and shouted at for and against the Commonwealth Bank. Now, according to Australian Federal Police the matter was told about to the CBA Bank's management committee for a long time but they didn't respond appropriately, suggesting that there was conflict of interest regarding maximization of shareholders value or serving the community better.

Eventually, CBA, I believe, even though a little late, managed to leave the community a little better as they decided to change their top management. They also hired 50 top financial crime compliance professionals along with establishing various other norms and regulations to stop such crimes from happening again. CBA also invested heavily in their new financial crime monitoring technology which shows that they eventually want to serve the community better and not just increase the shareholders value.

The company, hence, I believe made the community a little stronger. It showed what all things can happen because of security breach. Yes, they lost a lot of public money but they brought in light something which would help the entire banking community to become more secure. They also stood against what was wrong and made sure that they were not comprising on community.