Corporate Governance And Management Of The Body Shop

Overview of The Body Shop

The governance and the management system of all organisation is liable for the preservation of the strength of the organisation as well as its survival in today’s rigid competition that is present in the business world (Too & Weaver, 2014). The part played by governance that is forced by the companies as an entity must always be unbiased for the phenomenon of change so as to cope or adjust with the significant developments which are taking place in both the internal as well as external environment of the companies. It is to note that the corporate governance considers every operations that are done in the companies. The activities like the control of operations, managing the responsibilities as well as the evaluations and logistics are related to the corporate governance. It covers to the set of policies which are developed for making an impact in a way in which a company is managed, operated as well as governed (Knudsen, Moon & Slager, 2015). Execution of the corporate governance results in effective and efficient implementation of the tasks and the policies that are required for satisfying the customers and the employees of a firm. It also lays emphasis on the cautious management of the processes that are engaged in the relation among all of the engaged stakeholders.

This paper shall elaborate on corporate governance and management of the company named The Body Shop. It shall analyse and assess the nature of its business along with the governance structures, processes, and policies that it has in place. It would also shed light on the roles of its corporate officers and determine whether the governance structures and policies reflect regulatory requirements. Furthermore, this paper will also elaborate on the facts of how the organisation addresses and mitigates risk as well as the possible improvements, the impact of internal changes in the business as well as of the external factors on the 2 to 3 year horizon.

The nature of the business

The Body Shop is one of the widely famous skin care and cosmetics firm which was founded by Anita Roddick in the year 1976 (Voigt, Buliga & Michl, 2017). It is a British chain of cosmetic. The company was founded distinguished for selling the company’s own wide range of products that are not tested on animals as well as nature friendly. Since then, the company is selling more than thousands of products all across the globe through its 3000 stores and outlets present in 66 different nations. The company aims for sustainable growth being a broad market leader in the cosmetics and for segment leadership. Since The Body Shop has incorporated the environmental and social responsibility as a core segment into its mission, it is focusing on promoting ethically and naturally sourced ingredients in its products. The company has purchases a large portion of the key ingredients that it make use of in making of its products from the small scale farmers. These farmers falls under the CFT (Community Fair Trade) program that safeguards the sustainable producer advantages like the fair price, minimum demand as well as the community development (Zhang & Liu, 2016). This program covers about twenty five supplier groups in total and they are mostly located in the developing nations present in the tropical regions which produces its 18 key ingredients such as sesame oil, Nicaragua etc. that are included in 93 percent of its products. As the company is continuing to expand its franchise shops and outlets all around the world, it might therefore consider reaching into the Chinese market. In country like China and India, the rich are getting richer and the poor are getting poorer after each passing day. This is basically because of globalisation as well as the economic factors. However, the company has a wide range of products and services for the customers belonging from all the segments, especially for the women. However, most recently, it has also launched some products for the men and it is planning to extend its product line as well which would offer more products on male grooming than most of the skin and cosmetics companies around Australia. It is constantly supporting with the campaigns and is also assisting in educating the common public about the causes. With the same, it also allows the shoppers to gain awareness on the environmental and the social issues. It is also to mention that it is building positive change as well in the market in this way. The company is getting its products’ ingredients by means of community trade. From the fair trade, the company is getting all the supplies that it requires.

Corporate Governance Framework of The Body Shop

The governance structures, processes, and policies it has in place

The Body Shop is known to have a very good framework which has been created for dealing with several different corporate related issues. There is a very well-structured program which is been fortified by different policies and processes of the company along with other related methods for appropriate guidance of the company directors in their day to day responsibilities. With the same, The Body Shop also has a very crystal clear reference guide to its corporate governance as well as its business operations (Sarason, 2018). The Body Shop’s board of directors that oversee the business along with the decision making routines also keeps a watch on the financial aspects as well. In addition to this, it also included the management of the standards in regard to the corporate governance in the several sectors of the corporations.

It is to note that the Board of The Body Shop is made of a total of 10 directors (Boedigheimer et al., 2015). Also, two are the executives and the six others are non-executives. Due to this, there is a very fair and equal division of the duties and responsibilities among them. On the other hand, as the non-executive directors are not dependent on each other, therefore they are still allowed to contribute their knowledge, skills and experiences at the time of board discussion in the organisation. Undoubtedly, the board of the company has the responsibility of caring for the operations, shareholders as well as the assets of the company. However, it is to note that the board aims at working together with these elements in the hope of increasing the performance. Due to these reasons, it is the responsibility of the board to finalise the strategic plans and budgets. With the same, for ensuring the competent operations of the business, the board of Body Shop conducts a review on a monthly basis in regard to the financial movements of the company.

Moreover, there are certain laws of the Body Shop which obliges the board in order to prepare the financial report every year which would be both reliable as well as accurate and would reflect the true nature of the firm. Considering all of these things, the Board of the company is the one which is dutiful for proper safeguarding of all the statements of accounting as well as to make sure that all the records are truthful or precise. With the same, they are also responsible of guarding the other assets of the company and for making the required steps for preventing the complication like fraud and the other related risks. However, it is also to note that apart from the board of directors of the company, it also have other committees as a part of the corporate governance (Isaak, 2016). They also have a good reference guide that also states about the duties along with the scope of authority that are implemented within the organisation. They are accountable for the several salary packages which are provided to the executive directors. Apart from this, there is a presence of nomination committee that is formed of basically the nonexecutive directors. It is their main responsibility to suggest the board upon which the people are to be chosen as the directors.

Board of Directors and Committees

The corporate officers and their roles as described in public documentation

The corporate officers of The Body Shop are employed by the corporation that hold an office like the vice-president, the president, the treasurer as well as the secretary. These officers are been appointed to these positions by the board of directors of the corporation. The responsibilities of these officers differs according to the powers that the corporation has given to them within the company (Grosser, 2016). The Body Shop’s corporate officers holds the fiduciary duties to the corporation named the duty of care and that of loyalty. The duty of care requires that the corporate officer act in a way which are in the interest of the entire corporation of the Body Shop, He is required to conduct the business in a manner that a similarly located, common prudent individual would, and the actions should be taken in a good faith as well. It means that he cannot act in negligible manner while performing his duties and responsibilities. He is asked not to enter any kind of contract without giving it a thorough read. Furthermore, as per the duty of loyalty, the corporate officer is required to avoid taking any such action that has the potential to cause the individual to benefit the corporation as well as the related stakeholders (Shah, Murphy & Mclntosh, 2017). It means that the very corporate officer of The Body Shop has the duty of not using the information that are obtained from the corporation in order to buy the securities and the stocks like “insider trading”. With the same, the corporate officer also is restricted to take the business opportunities in which the corporation has an interest and at the same time, he is also restricted from joining a business which is in competition with The Body Shop. The main competitors of Body Shop are Yves Rocher, Weleda, L’Occitane and Lush (James, 2017). All these brands are also aimed at providing natural products to their customers.

Whether the governance structures and policies reflect regulatory requirements

Ethics are at the heart of The Body Shop’s commitments in order to enable the sustainable growth as well as consumption. It provides a very general yet widely appreciated framework for the policies of the group son corporate governance along with on the health and safety strategies, environmental health, and relationship with the suppliers, social responsibility and the diversity, responsibility towards the customers, sustainable innovations as well as philanthropy. The Body Shop’s board of directors that oversee the business along with the decision making routines also keeps a watch on the financial aspects as well. In addition to this, it also included the conservation of the standards in regard to the corporate governance in the diverse sectors of the corporations. The board aims at working together with these elements in the hope of increasing the performance. Due to these reasons, it is the responsibility of the board to finalise the strategic plans and budgets. With the same, there is law of the company that requires or compels the board in order to strategically and cautiously make a financial report every year which would be both reliable and accurate and would reflect the true nature of the company. Considering all these things, the Board of directors of the company is the one which is responsible for proper safekeeping of the statements of accounting as well as to ensure that all these records are truthful and precise. It is also to note that this company has a very well-structured and clear set of code of ethics and every employees in this company are bound to assert their taking of the code. This code of ethics comprise of the dispute of interest policy so as to make sure that the important corporate decisions are been made by the persons who not only have any kind of financial interest in the result that are different from their interest being company officials. Hence, it is to state that the company is actively monitoring the compliance with the global financial policies, practices and the laws over important areas. All these areas comprise of the internal conflicts, reporting the financial accounting, safeguarding of the corporate assets along with the fiduciary accountability. The corporate officer of The Body Shop has the duty of not using the information that are obtained from the corporation in order to buy the securities and the stocks like “insider trading”. With the same, the corporate officer also is restricted to take the business opportunities in which the corporation has an interest and at the same time, he is also restricted from joining a business which is in competition with The Body Shop.

Corporate Officers of The Body Shop

How the organisation addresses and mitigates risk

The company has made joint efforts in order to limit the potential disruption present in the production from the climatic change. For mitigating the risks of short-term supply shocks, The Body Shop make use of intermediate distributors in order to possess greater amount of Community Fair Trade as the buffer (Zientara & Bohdanowicz, 2016). Furthermore, The Body Shop has also adopted the strategy of communicating about the demand forecasts with the producers one year in advance as well as performs a middle-year review as well. It does it so as to review the problems concerning productions and to address them ahead of the time. Moreover, the company has also created a new environmental standard for its producers under CFT. With the same, the company is committed towards “protecting the planet” on a long-term basis. It has also implemented some significant changes all across its supply chain in order to decrease its environmental influence (Hasan, 2018). Furthermore, it is also to mention that the company is at present maintaining good relationship as well as open communications with all its investors. The shareholders of the company are invited by the corporation on a daily basis whenever there are any kind of gatherings for discussing about the trade updates. It is also to note that the company is expanding its efforts excluding of its own network in order to decrease as well as to measure the carbon footprint.

Possible improvements/impacts of internal changes/external factors on the 2-3 year horizon

By the year 2020, The Body Shop aims to reduce carbon emissions, the waste as well as its consumption of electricity by 50% and that of consumption of domestic water by 25% (Schanes, Giljum & Hertwich, 2016). It would do the same, by help of better energy management as well as by the repudiation of the unimportant packaging methods. Within the network of The Body Shop, it is transforming to one of the “hub-based distribution system” in order to decrease its carbon footprint comprising of the air freight. It is also to note that it is also making use of the recycled papers and plastics for the packaging purpose whenever it is necessary along with having removed about six percent of the transport packaging. Moreover, it is also to state that The Body Shop is planning about integrating sustainability into its process of product innovation by means of its initiative of “Bio-Bridges”. This initiative aims at regenerating about 75 million square meters of the forest land along with the endangered species (Somaa et al., 2017). It is to note that “Bio-Bridges” refers to the biodiversity hotspots which are formed by the plantation of local species of trees and plants in the corridors of the lands that are deforested in between the healthy rainforests (Esteves, Dean & Balzarova, 2017). The main goal of The Body Shop is not only to reinstate the forests, but it is also to recognise and make use of the ingredients from those areas like Andiroba nut. It does so in order to make a living for the local people as well as to motivate and encourage them for sustaining the locations. It is also developing a clear environmental standard which it could use for evaluating the share of the company on the values on sustainability of the company. It is continuing to grow and develop its environment friendly supply chain.

Ethics and Sustainability at The Body Shop

Conclusion 

Hence, from the above discussion it is clear that The Body Shop can be a role model for many of the organisations operating globally. It has always demonstrated the good ethics within the company. The board of Company comprise of 3 standing committees and they are Compensation Committee, the Audit Committee and the Governance Committee. It is also seen that the majority of the board members of this company are interdependent of the company as well as its management. The Audit Committee of the board has formed some practices and policies that are connected with the newly approved corporate reform laws for the independence of the auditor. However, the independent members meet without the physical presence of the management department on a regular basis. It is also to state that The Body Shop has a very well-structured and clear set of code of ethics and every employees in this company are bound to assert their taking of the code. This code of ethics comprise of the dispute of interest policy so as to make sure that the important corporate decisions are been made by the persons who not only have any kind of financial interest in the result that are different from their interest being company officials. Moreover, it is also concluded that the company is actively monitoring the compliance with the international financial policies, practices and the laws on important areas. All these areas comprise of the internal conflicts, reporting the financial accounting, safeguarding of the corporate assets as well as the fiduciary accountability. However, it is suggested that the company requires to look into the areas of further improvements as well as make its decisions wisely during the procedure of strategic planning. It needs to continue to strengthen as an organisation because there is a presence of several threats facing towards them. With the same, it also needs to consider the leadership skills and the great potentials that it have as well as continue to be driven in order to increase the achievements and the success of the compan

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