BMA735 - Management Ethics - Retail Food Group Case Study - IOOF Holdings Case Study - Management Assessment Answer

BMA735: Management Ethics Assessment Answer

Assessment Task:

Assessment task 2: Case study 2
IOOF Holdings

A scandal at financial services giant IOOF involving claims of insider trading, front running and "misrepresentation" of performance numbers raises issues about culture and the insidiousness of vertical integration. Internal emails and documents obtained by The Australian Financial Review reveal breaches and errors in unit pricing in some of IOOF's cash management trusts. A July 2014 Risk and Compliance Committee (RCC) document prepared for the group's advice division describes an incident in 2009 were clients were paid too much in their cash management account, which resulted in clients since then "receiving a diluted distribution". The document said: "Communication to financial planners and clients – none to date."

An email exchange between two compliance officers tasked with compiling a list of breaches in a handful of IOOF's cash management trusts, made the bombshell comment: "There seems to be just as many unit pricing incidents as there were breaches." The emails, composed on March 31, 2014, are referring to a request by the Australian Prudential Regulation Authority (APRA) to supply all investment breaches and unit pricing errors in several IOOF Funds, including Questor and IIML. It lists 15 separate incidents between 2012 and 2013. They include a Platinum Asset Management unit pricing error in late 2012 and a Questor Cash Management Fund issue in September 2012, which over distributed to a few internal unitholders to the tune of at least $6 million.

What began in 1846 as the Victorian Grand Lodge of the Independent Order of Odd Fellows friendly society has grown into a 650,000?customer listed company. IOOF controls $150 billion of investor funds and uses almost 1200 financial planners who struggle with a hotchpotch of technology courtesy of acquisitions and a low?cost research department. IOOF demutualized in 2002, but it has grown significantly in the past few years through acquisition, including buying Bridges Financial Services, Shadforth, Lonsdale and a majority stake in Ord Minnett. The merger frenzy has made IOOF the second largest non?bank financial planning network in the country. The acquisitions have created the challenge of trying to marry a hotchpotch of technologies, platforms, dealer groups – both aligned and owned by IOOF – and different cultures. At the same time, costs have been slashed to help boost profit margins – and bonuses. As former stockbroker and fund manager Mike Mangan said, however: "It seems the whole financial services industry, with rare exceptions, is unethical at best; corrupt at worst. Occasionally someone with ethics comes along like an IOOF whistleblower. And they get fired for their ethical stand." IOOF has had a number of whistleblowers over the past few years who have not survived the company. In the most recent case, the whistleblower, an equities analyst, spoke up to the human resources department, then ended up on stress leave then being sacked in May,

Assessment task 2: Case study 3
Bupa Seaforth

The spotlight has turned to the nation's aged care system in recent months, with a spate of ugly and criminal incidents targeting the elderly or invalid. New government statistics show a 177 percent increase in the number of aged care homes where a serious risk to residents was identified in the last financial year, and a 292 percent increase in the number of facilities that refused to comply with rules. Prime Minister Scott Morrison recently announced plans for a royal commission into the aged care industry after an aged care scandal was revealed at Bupa’s Aged Care Home at the beach?side suburb of Seaforth in northern Sydney. Bupa was established in the UK in 1947 as the not?for?profit British United Provident Association. In 2007, Bupa created what is now Australia's largest private health insurance group, with 3.98 million lives covered, after merging with HBA, MBF and Mutual Community. Bupa has recently diversified away from its core health insurance business and
is now an international healthcare company with services that include travel insurance, health insurance, care homes, expatriate insurance, health assessments, occupational health services, and hospitals. Bupa Aged Care is one of Australia’s leading residential aged care providers with more than 70 care homes across the country. Bupa Seaforth opened in October 2016 but its federal government funding has been suspended for new residents for six months due to its poor performance. Relatives of residents at the scandal?plagued beachside aged care home labeled the conditions at the exclusive Bupa Seaforth as “horrendous”. One staff member, who spoke on the condition of anonymity, said the home was a “disgrace”, blaming poor pay and being constantly short?
staffed. The northern beaches facility failed to meet more than 30 of 44 basic care standards, including staffing levels, medication and pain management, and even clinical
care. The government found there was an “immediate and severe risk to the health, safety or well being” of care recipients. It put the home on a strict six?month improvement plan, with a warning that if it doesn’t shape up it faces being shut down. Aged Care Minister Ken Wyatt said incidents such as this were of the “utmost concern”, adding the royal commission into the aged care sector would help ensure better standards in the future. Just last year the home was given the green light to operate for another three years after passing a regular audit without a hitch. The snap audit was prompted by the alleged abuse of resident David Nabulsi by a staff member. The 82?year?old was allegedly bashed with a shoe and roughed up in a shocking incident captured on a secret video camera his daughter had installed after suspecting something was wrong. Police arrested and charged a 35?year?old Hornsby man over the incident. Bupa said it was "shocked and
saddened" by the allegations, and that the employee had been dismissed. At a fiery meeting last Friday, Bupa management is also understood to have been told by the families of elderly residents were seriously concerned about the possibility of further staff assaults on patients. Greg Stockley, whose mother Lorna, 84, has lived at the
home for almost two years, described the conditions as “horrendous” and said his mother was often given other people’s medication or none at all. “The food is like pig slop. There was shepherd’s pie I wouldn’t feed to my dogs,” he said.

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