Discuss about the Corporate Governance Statement of OZ Minerals.
The development of sound and effective corporate governance policies is very essential for the sustainable growth and success of a business entity. This is because the policies provide guidelines to all the people working within the entity about the type of business processes and practices. The directions for carrying out the business processes are provided with the help of corporate governance policies and frameworks. As such, the ASX Corporate Governance Council has developed an effective corporate governance statement on the basis of some standard principle and recommendations (Nordberg, 2010). The corporate governance statement developed by Council need to be followed by all the business entities listed on ASX. OZ Minerals, listed on ASX, also need to develop its corporate governance statement as per the Council principles and recommendations that are analyzed as follows:
The Council has stated that business entities listed on ASX need to provide an adequate disclosure about the roles and responsibilities of Board and management in its corporate governance statement. OZ Minerals, in its corporate governance statement has adequately stated about the Board and management roles (ASX Corporate Governance Council, 2014). The Board is held responsible for managing the overall strategic actions of the company. Board Charter, has provided a detailed explanation regarding the roles and responsibilities of the members and also that of Executive Management Committee (EXCO). The values, principles, belifes and orgnaistional culture are established by the Board while EXCO carries out is roles as per the guidance of Board and its committees. Board has also specifically developed a Delegated Authorities Manual for providing a disclosure regarding the scope of board and the management committee. Directors also hold the responsibility of being updated about the pertinent issues facing the company such as regulatory compliance so that it does not impact its sustainable growth and development.
As per ASX principle, the company has also disclosed the procedures adopted for reviewing the performance and management. Board develops a monthly performance report and submits it to the directors for reviewing the performance of the board members on yearly basis. The review process is led by the Chairman and is carried out in consultation with the external advisors. The performance of the management committee is reviewed by the Board on the basis of standard set out in their employment contracts. The performance review is initiated after a year and the details are disclosed in the remuneration report developed by the company. The key performance indicators and the performance assessed against each of the indicator are stated in the remuneration report to provide complete disclosure of information to the stakeholders (OZ Minerals: Corporate Governance Statement, 2017).
ASX listed entities need to develop an effective structure of Board composed of qualified team members possessing diverse range of skills and competencies. OZ Minerals corporate governance statement has provided adequate disclosure about the composition, skills, expertise and knowledge of the board members to provide an analysis of its effectiveness in creating value for the stakeholders. As provided in the corporate governance statement, the board is composed of seven directors out of which one is executive director and other six are non-executive directors. Also, the company places high emphasis on maintaining an adequate proportion of women participation in the Board to achieve genetic diversity. The board skills matrix provided in the statement has adequately listed out the skills, experience and diversity of the Board that infers that it is highly effective in achieving out its stated roles and responsibilities (Bazley, Hancock and Robinson, 2014).
The development of a strong corporate culture based on the code of ethics and values ensures that OZ Minerals as per council principles and recommendations carry out its business functions ethically and responsibly.The Code of Conduct established by the company has described the ethical standards and professional behavior of all directors, employees and contractors. The breach of the code of conduct by anyone is taken seriously and is reported to the higher management with the use of whistleblower program. The adequate knowledge of the code of ethics developed by the company is providing to all the employees during their training and development program. In addition to this, the company has also developed and maintained its Ethics and Human Rights policy and anti-bribery and corruption standards for ensuring that all employees work as per the professional standards of ethics.
The policies and principles established by the company have developed a strong governance culture within the organization. The principles are developed to support the strategic action of the company and ensure that the strategies are developed as per the ethical standards and practices. The principles help in developing a culture focusing on partnerships and delivering superior results through effective planning. The plan is developed to act with integrity and engaging with the stakeholders effectively. The company is committed to prevent the occurrence of illegal conduct such as harassment and discrimination as per the ethics and human rights policy. Therefore, the presence of such ethical policies and programs within the company ensures that it carries out its activities in an ethical and responsible manner (Plessis, McConvill, and Bagaric, 2005).
The selected company should have the presence of a structured approach in order to ensure integrity in corporate reporting. The company as per the principle of integrity in corporate reporting provided by the ASX Council has disclosed the information about its governance policies. The governance policies are developed fro ensuring that employees uphold the highest level of integrity and professional behavior in maintaining their relationship with the stakeholders. Therefore, the management people hold the highest level of responsibility for ensuring that all required and relevant information is disseminated to the shareholders. The selected policies and rules are also available on the corporate governance section on the website of the company. The code of conduct ad principles established by the company also ensures that the company prepares and discloses the financial and non-financial reports as per the principle of integrity and honesty. The financial reports are prepared as per the AASB and Corporations Act 2001 standards for ensuring that relevant and required information is provided to the shareholders. The non-financial information is provided in the sustainability report of the company and it is also prepared as per the ethical standards and principles OZ Minerals: Corporate Governance Statement, 2017).
ASX Council has also maintained that all the business companies within Australia that are listed on ASX need to disclose all the relevant information on timely basis that can impact the price of securities. OZ Minerals, as per this corporate governance principle has adopted policy of continuous disclosure as stated in the company’s governance framework. The policy is maintained for ensuring that all required and latest information reaches to the shareholders as per the Corporations Act 2001. It has developed and established a market and dividend policy as per the continuous disclosure standard that has provided the processes for providing the required information to the shareholders. The policy specifically aims to provide timely and adequate information to the shareholders and market participants. Disclosure committee holds the responsibility that company provides all the required information to the shareholders in a timely manner which is also provided on the governance section on its website.
OZ Minerals has adopted several policies for ensuring effective communication with the shareholders so that they possess the latest information about its activities. The initiatives adopted by the company for interacting effectively with the shareholders are its online website that provides an e-mail platform to the shareholders for gaining inquiry about any issue. Also, the annual report is available on its website that contains all its general purpose financial statement to provide relevant financial information toe the shareholders. Shareholders are also provided the option to gain access to the annul report as an electronic copy via mail. The company also declares its financial results on the ASX and is published on its website after ASX release. The results gained from the annual meetings and other relevant material is also provided on its website. In addition to this, the company also provides a telephonic way of communication to the shareholders to resolve their queries and issues OZ Minerals: Corporate Governance Statement, 2017).
The company as per ASX principle has also established an effective risk management framework to identify and mitigate the risk in advance. The Audit Committee is responsible for monitoring the economic and financial risk and implementing effective internal controls to prevent the occurrence of any uncertain condition (Fleckner and Hopt, 2013.). The framework has provided the respective responsibilities of the management personnel in identification, measuring and controlling the risks. The company due to its operational nature faces various types of risk that are common in the mining industry. It discloses the type of risk impacting the company activities in the Operating and Financial Review. The Audit Committee reviews the risk framework and the systems and processes for risk management on a timely basis. This helps in reviewing the risk effectiveness to address the material risks so that ant weakness in the risk management framework can be identified and mitigated in advance OZ Minerals: Corporate Governance Statement, 2017).
The total remuneration paid to the non-executive directors should not exceed a limit determined by the shareholders. The remuneration of the non-executive directors is fixed rather then being variable. The full detail of the director and executive remuneration is provided in the remuneration report. The company ahs also established Human Resources and Remuneration Committee developed for over-viewing the remuneration policies developed for deciding over the matters related to compensation of executive and non-executive directors and key management personnel OZ Minerals: Corporate Governance Statement, 2017).
The risk assessment procedures undertaken by auditors need to identify and mitigate the material risk in the financial information presented to them for review. The Auditing and Assurance Standards Board has developed an auditing standard 50 for determining the analytical procedures to be adopted by business entities listed on ASX for mitigation of the risks (Putra, 2010). The main objective of the use of risk assessment procedure is to gain an analysis of the nature of an entity and its internal control environment (O’Donnell and Perkins, 2011). In addition to this, it also helps in assessing the risk of material misstatement present within an entity and the measures adopted by it for their subsequent elimination (Auditing and Assurance Standards Board, 2009). The analytical procedure that can be applied by the OZ Minerals to identify and mitigate the audit risk can be described as follows:
OZ Minerals is a mining company of Australia that is established after the merger of Oxiana Limited and Zinifex in the year 2008. The company at present has developed strong brand recognition within Australia in mining sector. The company strong governance policies have enabled it to create value for the stakeholders by promoting trust and transparency within the business operations. The company at present is not having any dealing with the international related parties for the purpose of Taxation voluntary tax transparency code.
The company at present carries out its operations across Australia and is having a market capitalization of $2,676 million.
The company strategic aim is to become a global modern mining company of copper-ore having a multiple base of operating assets and a diverse exploration. It aims to achieve its strategic aims and objectives by delivering continuous value to its stakeholders. The company places special emphasis on simplifying its business process and systems for improving its productivity and resource efficiency (OZ Minerals 2017 Annual and Sustainability Report, 2017).
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Financial Data on OZ Minerals Group |
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Particulars |
2016 |
2017 |
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Amount in $ million |
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Net profit |
$ 108.00 |
$ 231.00 |
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Gross Profit |
$ 737.00 |
$ 881.00 |
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Revenue |
$ 823.00 |
$ 1,023.00 |
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Total Assets |
$ 2,631.00 |
$ 2,826.00 |
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Long term Debts |
$ 102.00 |
$ 83.00 |
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Shareholder’s Equity |
$ 2,354.00 |
$ 2,516.00 |
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Current Assets |
$ 944.00 |
$ 1,148.00 |
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Current Liabilities |
$ 175.00 |
$ 227.00 |
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Income Statement Ratios |
Formula |
Interpretation |
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Net Profit Ratio |
Net Profit/Revenue |
13.12% |
22.58% |
It measures the profitability position of a company by analyzing the profits earned after meeting the operating expenses. The company net profit ratio is increasing depicting its potential of positive growth |
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Gross Profit Ratio |
Gross Profit/ Revenue |
89.55% |
86.12% |
The company gross profit has decreased which is not good sign for future growth |
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Return on Assets |
Net Profit/Assets |
4.10% |
8.17% |
It is having high return on assets as indicated from the results of its return on asset ratio |
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Balance Sheet Ratios |
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Debt Equity Ratio |
Debt/Equity |
0.04 |
0.03 |
The company debt is also decreased which indicates that there is less financial risk present within the company |
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Assets Turnover |
Revenue/Total Assets |
0.31 |
0.36 |
The company is also have less operational risk as its ability to realize revenue from assets have increased |
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Current Ratio |
Current Assets/Current Liabilities |
5.39 |
5.06 |
There is a liquidity risk present within the company as its ability to meet the liabilities with its current asset base has declined (OZ Minerals 2017 Annual and Sustainability Report, 2017). |
The significant risks as analyzed from the financial review of the company that can have a material effect on the information disclosed to the auditors are identified as follows:
References
ASX Corporate Governance Council. 2014. [Online]. Available at: https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf [Accessed on: 29 April, 2018].
Auditing and Assurance Standards Board. 2009. Auditing Standard ASA 520 Analytical Procedures. [Online]. Available at: https://www.auasb.gov.au/admin/file/content102/c3/ASA_520_27-10-09.pdf [Accessed on: 29 April, 2018].
Bazley, M., Hancock, P. and Robinson, P. 2014. Contemporary Accounting PDF. Cengage Learning Australia.
Fleckner, A. and Hopt, K. 2013. Comparative Corporate Governance: A Functional and International Analysis. Cambridge University Press.
Nordberg, D. 2010. Corporate Governance: Principles and Issues. SAGE.
O’Donnell, Ed and Perkins, D. 2011. Assessing Risk with Analytical Procedures: Do Systems-Thinking Tools Help Auditors Focus on Diagnostic Patterns? Auditing; Sarasota 30 (4), pp. 273-283.
OZ Minerals 2017 Annual and Sustainability Report. 2017. [Online]. Available at: https://www.ozminerals.com/uploads/media/OZMinerals_2017_Annual_and_Sustainability_Report.pdf [Accessed on: 30 April 2018].
OZ Minerals. 2017. Corporate Governance Statement. [Online]. Available at: https://www.ozminerals.com/uploads/docs/180222_ASX_Release_Corporate_Governance_Statement.pdf [Accessed on: 30 April 2018].
Plessis, J., McConvill, J. and Bagaric, M. 2005. Principles of Contemporary Corporate Governance. Cambridge University Press.
Putra, L. 2010. The Use Of Analytical Procedures In Auditing. [Online]. Available at: https://accounting-financial-tax.com/2010/04/the-use-of-analytical-procedures-in-auditing/ [Accessed on: 29 April, 2018].
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