ANZ Banking group has been working in the international financial market since 180 years. The business group is undertaking its business activities in nearly 34 different countries. The ANZ bank is one of the most efficient banks at global level and in Australia the bank is among the top four banks of the country. The international headquarter of the bank is located at Melbourne. Ever since the inception, the bank has put forth continuous efforts to reach to its current position (ANZ, 2018).
The organization is listed on the Australian Stock Exchange (ANZ, 2018). As a result the company is required to disclose the steps taken by the organization towards the fulfilment of the recommendations related to the Corporate Governance Council. The organization needs to consistently report on the measures taken by the organization in order to abide by the corporate governance principles at the end of every financial year with proper explanation wherever required (ANZ, 2018).
The organization releases corporate governance statement on a yearly basis in order to throw light on the organizations approach towards the governance. The corporate governance structure provides a strong structure to the company and helps in taking responsible decisions for the benefit of the organization. The main aim of the corporate governance principal is to ensure accountability in the organization, maintain fairness in its operations, and encourage transparency as well as to promote responsibility within the organization (Inter Raoues, 2018).
Corporate governance in simple words can be understood as the policies and processes that are adopted by the organization in order to control and govern the company. These governance principles help the companies to move ahead and achieve their goals and objectives in a successful manner. Good corporate governance has the ability to encourage honesty and transparency in the business environment which boosts the structured planning within the organization (Schroeder, 2017). With the help of good corporate governance the organization is able to maintain a balance between the needs of different shareholders. Corporate governance ensures that the organization is fulfilling its duties and responsibilities towards their shareholders and stakeholders. A good corporate governance is ensured within the organization when the company shares the financial, operation as well as the all the other necessary information to the shareholders of the company as well as to the general public in order to maintain transparency within the company (MSG, 2018).
The structure of the governance is one of the most important corporate governance principles. This is supported by the structure of the board of directors and the duties discharged by the board of directors. It is very important that the right group of people govern the organization which should be based upon the experience and skills of the board members. The structure of the board of directors of ANZ includes seven non-executive and independent directors and apart from this one executive director. According to the constitution of the company the company the Board has all the rights to delegate any of its powers to the responsible committees of the board. There are five principal board committees of the banking group which is governed by its own Charter. As the board of directors there are certain duties that need to be accomplished by the board members in order to fulfil the corporate governance principles. At ANZ, the board members undertake all the efforts to fulfil the activities and duties as the board members. The board members develop and implement the charter for the respective committees. The board members provide with necessary advice related to the sustainability issues being faced by the organization. The organizational culture is reviewed frequently by the board members (ANZ, 2017). In order to discharge the duties freely without any hesitation it is very important that independency is enjoyed by the board of directors. This is the main reason behind the high number of non-executive directors in the list of board of directors of ANZ (ANZ, 2017). Hence, from this it can be inferred that the ANZ banking group has adopted good corporate governance in the organization as it has focused on the structure of its board of directors and has also ensured its independency.
Independence of auditors is another important aspect of good corporate governance. It is very important that the audit of the company is independent from the management of the company. The internal audit of the company should enjoy the respect as well as the cooperation of both the board of directors as well as the management of the company in order to work with confidence within the company. This also ensures transparency within the company. It is the duty of the board of directors to make formal arrangements in order to appoint the auditors of the organization. The board should ensure that a cordial relationship is shared between the two in order to ensure smooth functioning of the company (NCCG, 2018). The financial reports prepared by independent auditors are able to reflect the true financial position of the company and the auditor is able to reflect their experience and knowledge without any other consideration. Independency ensures that the auditor remain free from any kind of negative influence that may impact the organization in the long run (Salehi, 2008). Independence of auditors is important as it saves the organization from frauds as well as is also able to bring into notice any kind of change initiated from the owners or the management of the organization which is disturbing (Bahrawe1, Haron, & Hasan, 2016).
In order to maintain financial stability within the organization the ANZ banking group has adopted the system of independent internal audit. Hence, there is a clear demarcation between the role of auditors and the management of the company. The internal audit of the company works under the Charter released by the board of directors. The Audit Committee of the company looks into all the activities and matters related to auditing. The main role of internal auditors within the organization is to present the board as well as the management with all the necessary details that will help in taking the right decisions for the company. The internal audit of the company comprises of seven general managers that take care of their respective divisions. The audit committee of the company has to work in line with the risk management team of the company so that any adverse conditions can be avoided in a very strategic manner. The external auditors of the company also provides independent opinions through the financial report of the company and also makes sure to tell the organization that they are following the necessary regulations and compliances or not. The external auditors of the company conduct auditing of the company on the basis of the Australian Accounting Standards. The ANZ banking group has developed Stakeholder Engagement Model in order to maintain a balance between the stakeholders of the company and the external auditors. The appointment as well as retention of the external auditors is taken care of by the Audit Committee of the company (ANZ, 2017). This reveals that the company is strongly in favour of good corporate governance and has taken all the possible steps in order to ensure that the principles of corporate governance are adopted and implemented by the company in a successful manner.
Good corporate governance means the establishment of a strong structure between the management of the company and the directors of the company along with the staff members and other important internal and external stakeholders of the company. Accountability, transparency, responsibility, creating long term value etc. are some of the common principles of good corporate governance. Good corporate governance ensures that everyone is held responsible for their acts (Mukher, 2018).
The Australian Stock Exchange has released certain corporate governance principles that need to be followed by the organizations listed under the ASX. Corporate governance is important in Australia as it is used to determine the cost of the capital of an organization in the global capital market (ASX, 2006). These principles are applied in the Australia market in order to ensure that the Australian companies are able to compete at global level with efficiency. This also helps the Australian firms to stay transparent to their stakeholders (ASX, 2014). The ASX Corporate Governance Council was established by ASX in order to make principles and recommendations related to corporate governance in order to ensure investor confidence by understanding the expectations of the stakeholders. These principles and recommendations aim to reflect the international good practice adopted by the Australian organizations. Hence, this is the main reason that the ASX has given special emphasis to the adoption of principles of corporate governance within the Australian Company (ASX, 2010).
In order to compete in the global world almost every organization follows the corporate governance principles. But there are times when wrong decisions are taken because of which the organization fails to adhere with the corporate governance principles. As a result there are certain consequences that are faced by the company. Non adherence to corporate governance principles will increase the operation risk and will further negatively impact the interest of the stakeholders of the company (Zerban & Madani, 2017). There are many different consequences of non adherence to corporate governance like economic consequences, social consequences, legal consequences, and environmental consequences. Following are some of the consequences that may be faced by ANZ banking group if they fail to adhere to the corporate governance principles
Economic consequences: With the help of the corporate governance principles the organization is able to protect its investors as well as other stakeholders. If the organizations fail to adhere to these principles then there are chances that the organization may lose the confidence of the shareholder in the organization. This will create a problem in front of the organization at the time of raising capital for the company. This may lead to lack of risk management within the organization. Hence, the company will face many negative repercussions of this in order to sustain in the economy (Lister, 2017).
Social Consequence: The social consequence of non adherence to corporate governance is that the customers will start to show less interest in the organization and there are chances that the existing customers may go to some other organizations. Hence the company will lose its competitive edge in the society.
Legal consequences: The legal consequences include the penalties that may apply on the organization from the Australian Stock Exchange. As the corporate governance norms and principles are decided by the ASX Corporate Governance Council the council has all the rights to undertake legal proceedings against the companies who are not adhering to the corporate governance principles. The ASX uses these standards in order to calculate the capital of the company. Hence, non adherence may disrupt the working of ASX and strict actions can be taken against the company (Monaco, 2002).
Political Consequences: the political consequences can be very severe. There are chances that the license can be dismissed of suspended by the government for non adherence to the corporate governance principles. This can be considered as ethical misconduct by the government institutions and on the basis of this charges actions can be taken against the company (Russo, 2018).
Hence, it can be concluded that it is very important that the organization thinks about the betterment of the whole company and its stakeholders along with the society as whole. This can be achieved by adopting the corporate governance principles which will help in achieving the objectives of the organization and also to add value through its operations. If the organization fails to adhere to the corporate governance principles the repercussions of this are very bad and may lead to the closure of the business. Therefore, it is very important that the organizations adopt good corporate governance with the help of available standards given out by the Australian Stock Exchange. This will help the company to attain competitive edge in the international market. ANZ is a leading international organization and hence, it is very important for the company to follow and abide by the corporate governance norms in order to maintain its competitive edge in the market.
Agency Theory: this theory discusses about the relationship between the principals that is the shareholders and the agents that is the executives or the management of the company. This theory states that the principal that is the owners of the company appoints the agents that are the management in order to undertake the operational activities effectively. This theory states that the principals of the organizations believe that the agents will work in the benefit of the organization. But, the agents on the other hand may not take decisions in the favour of the principals. The organizations that have this kind of environment are believed to have applied the agency theory of corporate governance. In this theory the agent that is the managerial posts of the organization may develop self-interest and may work in his own favour by ignoring the interest of the organization. Because of this reason the separation in ownership and control was practiced within the organization so that, the organization can be saved from fraudulent activities. In this theory the agents give emphasis to only those projects that have right returns and do not care about any social responsibility (Ebary, 2018).
Business Ethics Theory: It is believed that the business is working ethically when the organization takes care of what is wrong and what is right for the company as well as its stakeholders. This theory emerged because of the concept of corporate social responsibility concept. After the adoption of this concept by the organizations an ethical angle was given to the operations of the businesses. The operations of the business were started to be viewed from the viewpoint of adding value to the business and whether it is harming or not to any stakeholder or the society. Morality, transparency and accountability are some of the main aspects of ethical theory of corporate governance. This theory is adopted by almost every organization as today the value created by the organizations is considered to be the ultimate goals of the organization (Abdullah & Valentine, 2009).
References
Abdullah, H., & Valentine, B. (2009). Fundamental and Ethics Theories of Corporate Governance. Middle Eastern Finance and Economics Law, 4(4), 88-96.
ANZ. (2017). 2017 Corporate governance statement Law. Retrieved from shareholder.anz.com: https://shareholder.anz.com/sites/default/files/anz_corporate_governance_171105.pdf
ANZ. (2018). ASX Announcements. Retrieved from shareholder.anz.com: https://shareholder.anz.com/announcements
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Inter Raoues. (2018). Corporate Governance Principles. Retrieved from www.interrao.ru: https://www.interrao.ru/en/investors/corporate-governance/basic-principles/
Lister, J. (2017). Risk of Non-Compliance in Corporate Governance. Retrieved from bizfluent.com: https://bizfluent.com/info-8046955-risk-noncompliance-corporate-governance.html
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