Article

Last night's 4 Corners (http://www.abc.net.au/4corners/) made for uncomfortable

viewing, and not just for CommInsure policyholders, although they have many reasons to worry if they ever need to make a claim.

All investors want to make an acceptable return on their capital. Most want to do so with a clear conscience. Today, some Commonwealth Bank shareholders might be feeling that's no longer possible.

If you followed the financial planning scandals of 2014, the joint ABC/Fairfax investigation into the Commonwealth Bank's insurance arm has a familiar plot: forged and deleted documents; small-print gotchas; sacked whistleblowers; human misery; profit maximisation at all costs; defensive management; and a corporate regulator missing-in-action.

There is, however, one notable difference. Whereas the advice scandal pushed people into financial misery to make a few bucks, this time the bank is preying on customers with extremely serious health problems, some of whom are terminally ill, to save a few bucks. Same but different.

Narev's shame at the harrowing cases Adele Ferguson put to him during the programme was palpable and apt.

Shareholders might try and assuage any discomfort by reaching for the 'bad apples' argument. The bank has 46,000 employees and annual revenues of over $23bn. It's inevitable that an organisation of this size will suffer a scandal or two and Narev subtly made that case by offering to meet with a handful of victims rather than own up to a broader problem.

Unfortunately, this position won't wash. In both scandals, senior staff alerted management to the malpractice. Both were subsequently sacked. In the advice scandal, the bank had to be dragged kicking and screaming to a compensation scheme for its victims after trying to short change them. Change was promised but now, two years later, the same unethical, fraudulent behaviour reappears.

You can bet that over the coming weeks the number of cases will increase in direct proportion to the publicity these early cases receive, just as they did when the financial planning scandal came to light. Bad apples will soon fill every truck, revealing that this is a systemic problem, one where a rotten, sales driven culture harms vulnerable people in the most brutal way imaginable.

Abolishing commissions on risk products like life and TPD insurance, as is the case with most financial products, is a no-brainer at this point but what else?

In CBA branches across the country staff may be wondering why they're working for an organisation that treats people like this. They might also know that this is not a culture that changes behind close doors. The length that advice victims are having to wait to get recompense is evidence of that.

With a toothless corporate regulator - one that initially let CBA design its own compensation scheme - unable or unwilling to force change, a Royal Commission into the finance industry, with CBA its focus, is warranted.

Whether we get one or not is another matter because CBA has taken out its own insurance policy, donating almost $100,000 to the Coalition in the 2014-15 year. Nor is CBA alone. Since 2010, the finance sector has donated over $5m to the major political parties, a pitifully small amount if it helps avoid a Royal Commission.

Over the coming months we'll find out whether our politicians will pay out on that policy and rebut such calls, as they did over the advice scandal, or succumb to public pressure by saying enough is enough.

In the meantime, investors with an ethical bent face a dilemma. If CBA has a rotten culture and there is no real prospect of that changing, do you really want to remain on the share register?

Question: What are the issues?

Include some reference to what do we mean by ethicsUsing information in the case - provide examples of moral principles, standards or values that are relevant?