Write an essay on The corporate governance.
The corporate governance is mainly referred to the procedures, mechanisms and the relations that help in controlling and directing the corporations. The structures of governance and the principles help to identify the responsibilities and the distribution of rights among the various contestants inside the business. These include – creditors, managers, shareholders, board of directors, other stakeholders, auditors and regulators. This also involves the measures and regulations for building any decision in the corporate affairs. Therefore, it can be said that the corporate governance involves the methodologies by which the goals and objectives of a corporation are pursed and set in the framework of the dictatorial, societal and the environment of the market (Simpson and Taylor 2013 p. 155). The domination device involves the observation of the events, performances, strategies and the verdicts of the affected stakeholders, firms and their agents. However, the practices of the corporate governance are affected by the attempts in order to align the stakeholders’ interests. In this report, the corporate governance statement of a publicly listed company whose business performance has been criticized publicly i.e. Wesfarmers Limited has been selected for this assignment in order to understand its governance protocols and practices.
Wesfarmers Limited is a publicly listed company under the stock exchange of the country Australia i.e. Australian Stock Exchange. It belongs to a conglomerate industry and is headquartered at Perth in the Western Australia. The company was founded in the year 1914 and it serves the country Australia, New Zealand, Bangladesh and the United Kingdom. The company serves in the field of retail and also in the fertilizers, industrial and safety products. The other fields where the company plays an important role include – coal mining and chemicals. As per the financial year 2015, Wesfarmers is the largest Australian company depending upon the total revenue and it has also overtaken its retail rival “Woolworths Limited”. It has also been noted that the particular organization Wesfarmers is considered as the largest private employer within the country Australia as it employees around 210,000 employees (wesfarmers.com.au 2016). In addition to this, the particular firm has a shareholder base of around 500,000. The main aim of the company is to give a satisfactory return to all its shareholders. Wesfarmers aims to satisfy the demands of its consumers by the provision of services and goods on a professional and competitive basis. The other objectives of Wesfarmers include – providing safety to the working environment for its employees, to reward them for good performance and to provide them opportunities for more advancement.
The Board of the company Wesfarmers is considered as a strong advocate of good corporate governance (Simpson and Taylor 2013 p. 265). The management of the firm has dedicated to provide a agreeable return to all the shareholders and has also decided to fulfill all the obligations of the firm regarding the corporate governance. It has been found that for the betterment of the corporate governance of the firm, Wesfarmers compiles with the third edition of the Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council that was released on 27th March of the year 2014. The outline of the corporate governance practices of the firm Wesfarmers for the year ended 30th June 2015 has been structured below as per the Corporate Governance Statement of the organization.
The function of the Board of the firm is to endorse the planned direction of the firm and also to observe and guide the administration department of the firm. The Board protects and enhances the interest of the shareholders of the firm i.e. the employees, suppliers, consumers and community (Said, Crowther and Amran 2014 p. 158). The roles of the management and the Board are dedicated to a higher level of practice of corporate governance and foster a compliance culture that provides value to the ethical behavior, corporate and personal integrity, respect for all and accountability. The Managing Director of the firm has the responsibility for managing the operations and regulations of the firm on a daily basis and this is supported by the Leadership Team of the firm (Kathy Rao, Tilt and Lester 2012 p. 146). It has been found that the Board is also responsible for the control and the strategy of the business of Wesfarmers.
The Board of Wesfarmers is composed of directors who help to bring in an suitable mix of experience, skills, diversity and proficiency to the Board decision-making. Currently, the Board of the firm is composed of 11 directors that include 9 non-executive directors (Monks and Minow 2011 p. 39). As per the corporate governance statement for the year 2015, it can be said that the skills, expertise and the experience that the Board represents include – the CEO level experience in capital markets, ASX listed company experience in banking and finance, Strategy and risk management in digital and e-commerce, governance in executive remuneration and human resources, financial acumen in retail, customers and marketing, government policy and regulatory policy in industrial and resources and the international experience in the corporate sustainability (Mäntysaari 2012 p. 123). Therefore, the company appointed Mr. Archie Norman as an advisor of the retail sector in the year 2009 for handling any issues related to the retail sector. The reason behind this is that he has a significant retail experience.
The Chairman of the company Wesfarmers has been chosen from the list of the non-executive directors who are independent. His tasks are to commence in the Board Charter (Mallin 2013 p. 112). As per the corporate governance statement of the company Wesfarmers for the year 2015, Dr Bob Every is the present Chairman of the firm.
The Directors of the company Wesfarmers are predictable to put views and judgment to the negotiations of the Board, which are autonomous of management and are free of any business or any other association or any situation that might interfere substantially with the objective work out, independent or tolerant judgment that have regards to the company’s best interests as a whole (Kogut 2012 p. 218). Before accepting the invitation of becoming a director of an outside organization, each of the non-executive directors is needed to the Chairman of the present company. By taking the new appointment letter into consideration, the Chairman of the particular firm has to consider the followings:
An autonomous executive is considered as a non-executive manager who is not the part of the company’s administration and thus he or she is free of any business or any other association that might interfere significantly or that might be alleged reasonably to interfere substantially with the self-governing work out of the judgment (John and Makhija 2011 p. 156). However, the Board assesses the independence of every non-executive director regularly in the focus of the information that every executive is needed to reveal in relation to other relationship with the firm or material contract. This can be made in accordance to the terms and conditions of the appointment of the director, the Board Charter, the Corporations Act of 2001 and the Conflicts of Interest Policy of the company Wesfarmers (Jalilvand and Malliaris 2012 p. 209). Each one of the non-executive director might get involved with other professional firms or even with other companies that might have dealings with Wesfarmers on a time to time basis.
Generally, it has been found that the Board considers every change to the interests, associations, positions and relationships of the non-executive director that might put up with her or his sovereignty. The assessment of the sovereignty by the Board of the company and the criterion beside which the assessment denotes the significantly of any factor, circumstances or information is developed on the basis of the principles of the ASX. Particularly, it can be said that the factors which are relevant for assessing the director’s independence are set out in the recommendation chapter of the report, the guidelines of the materiality is applied as per the standards of Australian Accounting (Hilb 2012 p. 199). In addition to this, any kind of autonomous advice of the proficient is provided by the Board at its judgment and the progress in the global standards of corporate governance. A relationship with the interference of materiality is considered by the Board that might reasonably be distinguished to the interference of materiality, independent judgment of a director that is composed of such consequences and substance. Therefore, there is a sensible and a real possibility of the director’s role that might affect the judgment of the director across all aspects. The relationships and the position of all the directors of the company Wesfarmers is generally reviewed by the Board on the date of the annual report of the firm and eight out of the nine non-executive directors of the firm are considered as independent (Gottschalk 2011 p. 188). Mr. James Graham does not want to be an independent by virtue of his present position of Chairman. As the Board dogged that the engagement of Mr. Graham is in the best interests of Wesfarmers, thus his appointment continued. The other reasons for which the appointment with Mr. Graham continued in the organization were the presence of his substantial knowledge, expertise and technical competences. Within the organization there are several protocols and policies in the workplace that includes the Conflicts of Interest Policy of the firm Wesfarmers, the Code of Conduct of the organization Wesfarmers, the Gresham Mandate Review Committee Charter, the Standing Notices of the firm’s Directors and Board Charter of Wesfarmers in order to ensure that any kind of conflicts regarding various interests that might takes place within the organization and this can be managed as per the ASX principles and all the applicable laws (Davies 2011 p. 136).
The Board of the organization Wesfarmers is of the view which represents the profile of the tenure. The length of the tenure of the directors regarding their services is represented the length of providing service on the Board. This length of the tenure profile is appropriately balanced in such a way that the succession and the plan of renewal of the Board are managed over the medium term to long term (Goergen 2012 p. 196). The present directors of the firm Wesfarmers have an accurate mix of expertise, experience, skills and diversity to allow the Board to discharge the farm duties and also to deliver the strategic precedence of the organization as an expanded business along with present operations of the business in the field of supermarkets, department stores, office supplies and home improvement, energy and fertilizers, chemicals, coal, industrial and safety products.
The Directors of the firm Wesfarmers are also responsible for risk management. There are various divisions of risk management functions that are related with the company. These are – Board, Wesfarmers Finance Director and Managing Director, Audit and Risk Committee, Management and Group assurance and risk. However, among all these divisions of the key risk management, the directors of the firm Wesfarmers mainly deal with the division Wesfarmers Finance Director and Managing Director. The function or the responsibilities of the directors of the firm Wesfarmers include – providing a declaration regarding the full year and half year of the financial statements to the Board (Ferris, John and Makhija 2014 p. 242). The other function is to assess and also to offer declaration to the Board of the company that the risk management of the Group and the interior control schemes are also operated effectively and efficiently in the material respects.
The corporate governance plays an important role in the recent years for all the Australian organizations, especially due to the collapse of some of the firms that incurred a loss of billions of dollars. This incident was also responsible for many job losses, livelihoods and investments in the country. Thus, De Kluyver (2013) stated that implementation of proper corporate governance is an essential factor. As per Crowther and Aras (2013), the implementation the ASX Principles has resulted into minimal change in the features of board of directors of an organization. This change has also been found in the company Wesfarmers. The ASX Principles of the corporate governance also highlights on the proportion of non-executives directors, genders of directors, the size of directors, their qualification level, numbers of other directorships held and the age (average) of the directors (Boubaker, Nguyen and Nguyen 2012 p. 126). Opined to Clarke and Branson (2012), it can be said that the particular company Wesfarmers are abide by all the rules, regulations and Principles of ASX as the particular firm follows all the factors of the ASX Principles, like – gender biasness is absent within the firm, 11 directors are there within the organization structure that is equivalent to the rules of ASX Principles, even the various directors of the specified firm have various skills, knowledge and experience. Thus, it can be said that Wesfarmers follows all the rule of ASX principles, so it runs smoothly. As per Boubaker, Nguyen and Nguyen (2012), corporate governance is the relationship between the various participants like the Board of directors, shareholders and senior management that helps in finding the right direction and the performance of the companies are also analyzed. Therefore, it has been found from the corporate governance of the organization Wesfarmers that the aim of the management and directors of the firm is to satisfy the shareholders by providing better percentage of dividend and they are also concerned about the board of directors for managing the regulation and risks of the firm. However, Boubaker and Nguyen (2015) stated that the firm has resulted into ethical failures and accounting irregularities. In addition to this lack of control has also been found within the firm. The firm has accepted the application of continuation of the service of those persons whose has better skills, knowledge and experience towards the work but the person who does not have such higher level of experience , knowledge and skills, the company does not accept the application of continuation of job (Baggini 2012 p. 45). Therefore, this can be said that the company fails to operate and regulate its business in an ethical way.
Conclusion
Therefore, it can be said that the particular company Wesfarmers follow all the rules, regulations and policies of corporate governance. It also follows the ASX Principles, thus the company runs effectively, efficiently and successfully in the competitive market. However, it has been found that only in some of the cases, the company does not follow the ethical rules and thus break them. It can also be said that the company fails to run its business in an ethical way in order to keep efficient, skilled, knowledgeable and experienced people within the organization for longer period of time. Thus, it can be said that sometimes for breaking the ethical rules and regulations of the business, the business performance of the particular company Wesfarmers has been criticized publicly. So, Wesfarmers should always follow the rules of corporate governance in order to run the business ethically and successfully.
References
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Boubaker, S., Nguyen, B. and Nguyen, D. (2012). Corporate governance. Heidelberg: Springer-Verlag.
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Kathy Rao, K., Tilt, C. and Lester, L. (2012). Corporate governance and environmental reporting: an Australian study. Corporate Governance: The international journal of business in society, 12(2), pp.143-163.
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Wesfarmers.com.au (2016). Corporate Governance – Wesfarmers. [online] Wesfarmers.com.au. Available at: https://www.wesfarmers.com.au/about-us/corporate-governance.html [Accessed 1 Jun. 2016].
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