Question:
Discuss about the Corporate Governance and Ethics of BHP Billiton.
BHP Billiton is a leader in the field of energy resources in the world (BHP Billiton, 2015). The company is the largest mining company in Australia and had diversified its business in petroleum resources. BHP Billiton was formed by the merger of Australian Broken Hill Proprietary Company Ltd and Anglo Dutch Billiton in the year 2001 (BHP Billiton, 2015). The organization is headquartered in Melbourne, Australia. The primary products of the organization are iron ore, uranium, coal and different gases (BHP Billiton, 2015). The organization has a diversified portfolio of products along with experienced employees to retain the leading position in the energy resource industry. The company also looks after the welfare of the employees and the environment while carrying out its different activities.
Strategic issues related to BHP Billiton
According to Carroll (2015), environmental scanning is an important procedure which helps an organization to analyze the different trends, issues, and relationships about the external factors which are related to the organization. The outcomes of the environmental scanning help an organization to take important decisions. A detailed analysis of the environmental factors helps the managers of an organization to take future steps and methods of activities.
Economic factors with respect to theories
Different activities of BHP Billiton depend on the political environment of the country. According to Dunlevie (2015), BHP Billiton mainly carries out its business in Australia, but the organization is spread throughout the world. Australia is a politically stable country, and the government of Australia supports the functioning of the organization. As stated by Floris, Grant and Cutcher, (2013), BHP Billiton has employee strength of over 3000 workers who are employed in different factories of Australia and America. The trade law introduced by the government of Australia is also helpful in the functioning of the organization. The board member of BHP Billiton represents the shareholders of the organization.
Agency Theory and Stake holder Theory
According to Grünig and Kühn, (2015), the board members added value to the functioning of the organization with the help of corporate governance. Agency theory finds out a relationship between the share holders and the agents. The board members of BHP Billiton have clearly specified the role of the different people in the organization through the Chief Executive Officer. The Group company secretary helps the chairperson of the organization to take different decisions. Agency theory is followed by the organization to maintain a close relation with the stakeholders and the top management. Stake holders often recruit agents who take decisions on their behalf. According to Mangiavacchi and Rapallini, (2014), the main objective of the organization is to create long-term strategies. Individual board directors and the chairperson of the organization may give different pieces of advice for the development of the organization. Sustainable development helps BHP Billiton to have a competitive advantage over others. The feedback from the stakeholders and shareholders also helps the activities of the organization.
Stewardship Theory
Stewardship theory is also followed in the organization. According to Floris, Grant and Cutcher, (2013), Stewardship theory looks after the maximum benefit of the shareholders and increases their wealth. The management works for the benefit of the share holders. In this theory stress is put on individualism. This theory also clearly explains the role of CEO in the organization. BHP Billiton has also implemented this theory for the benefit of both the organization and its employees.
Resource development theory
According to Niţă and Åžtefea, (2014), resource dependence theory concentrates of the role of the board of the directors and their allocation of the resources. External environment is also an important part of the theory. Representatives and different members are recruited according to resource dependence theory. On the other hand Dunlevie, (2015), the directors of the organization also consults with the suppliers and the buyers of the organization and make decisions accordingly. According to the resource development theory the directors are divided into four categories. They are business experts, support specialist, community influential and also insider specialist. Business experts are the current and former are the executive directors of the organization and they take part in decision making. Support specialists are the lawyers, bankers and insurance specialist of the organization. Community specialists are political leaders, social leaders and even the faculty members of the organization. Insiders are the former executives who give special consultants to the law and finance department of the organization.
In resource dependency theory the the directors also looks after the different resources of the organization. The directors of BHP Billiton implements monitor process so that the resourcs are implemented optimally (PivorienÄ—, 2015). Main resources of the organization are human power. The organization always looks after the benefit of the employees.
Political Theory
According to Mangiavacchi and Rapallini (2014) political theory develops the voting criteria in the organization. Decision making, cultural challenges and environmental factors are important part of political theory. Political models also have a huge impact on the activities of the organization. New laws have been implemented the government of Australia to protect the environment. Different activities of the organization affect the environment. The organization is responsible to producing large amounts of carbon dioxide which in turns results in greater generation of Greenhouse gases. On the other hand, Grünig and Kühn, (2015) believe that Greenhouse gases increase the global temperature of the world, and this is a serious issue for the organization. However, the organization has taken various measures to stop the burning of fossil fuels with the help of alternative processes. The iron ore production of the organization pollutes the land and the water of the environment highly. The organization BHP Billiton also has introduced several measures to remove harmful substances from the waste materials before they are disposed into the environment. The organization also has taken steps to prevent land pollution by engaging in planting trees and proper maintenance of ores (Ghosal, 2015).
According to Dunlevie, (2015) the board of Directors of BHP Billiton has introduced sub-committees to look after the environmental issues which are related to the organization. The presence of these committees has reduced the emission of carbon fuels into the environment. The government of Australia has also introduced several laws to prevent environmental degradation. On the other hand, Grünig and Kühn, (2015) have opined that the sub-committees set up by the organization reduced the level production of harmful gases. Stake holders also monitors on the different activities of the organization to reduce carbon emission. The Strong environmental performance of the organization has increased the Corporate Sustainability level. However, the presence of CSR level is not exactly cleared by the organization and its functional activity.
Transaction Cost Theory
According to Niţă and Åžtefea, (2014), transactional theory was an alliance of law with the organization. The theory states that different people in the organization has different views. The theory also determines the cost of production in any organization.BHP Billiton is a huge organization and different costs are involved with the company. Different activities of the people with related to cost is described in this theory.
Conclusion
BHP Billiton is an international organization which has spread its business in the various parts of the world. A thorough analysis of the organization has been done by the researcher on the corporate social responsibilities of the organization. It has been found that economic condition of the organization is quite healthy. The CEO of the organization and the board of directors take important decisions which are beneficial in the future. They always look after the well-being of the employees, stakeholder, organization and the environmental factors. The CEO and other board members are also knowledgeable about the environmental circumstance and take decisions accordingly. All these have helped BHP Billiton to emerge out as a strong ethical organization.
References
BHP Billiton,( 2015), E&MJ – Engineering & Mining Journal,vol. 216, no. 4, pp. 12.
Carroll, A. B. (2015). Corporate social responsibility.Organizational Dynamics, 44(2), 87-96. doi:10.1016/j.orgdyn.2015.02.002
Dunlevie, J. (2015), Cyclone Lam rains cause manganese spills at BHP Billiton GEMCO mine, environment watchdog says; The NT Environment Protection Authority says heavy rains from Cyclone Lam are the likely cause of four discharges of manganese from a BHP Billiton mine into the ocean, Australian Broadcasting Corporation, Sydney.
Floris, M., Grant, D. & Cutcher, L. (2013), “Mining the Discourse: Strategizing During BHP Billiton’s Attempted Acquisition of Rio Tinto”, Journal of Management Studies,vol. 50, no. 7, pp. 1185-1215.
Ghosal, V. (2015). Business strategy and firm reorganization: Role of changing environmental standards, sustainable business initiatives and global market conditions: Ghosal: Business strategy and firm reorganization. Business Strategy and the Environment,24(2), 123-144. doi:10.1002/bse.1815
Grünig, R., & Kühn, R. (2015). Global Environmental Analysis. In The Strategy Planning Process (pp. 89-96). Springer Berlin Heidelberg.
Mangiavacchi, L., & Rapallini, C. (2014). selfâ€Âreported economic condition and home production: Intraâ€Âhousehold allocation in italy. Bulletin of Economic Research, 66(3), 279-304. doi:10.1111/j.1467-8586.2012.00446.x
Niţă, C. G., & Åžtefea, P. (2014). Cost control for business sustainability. Procedia – Social and Behavioral Sciences,124, 307-311. doi:10.1016/j.sbspro.2014.02.490
PivorienÄ—, A. (2015). Flexibility valuation under uncertain economic conditions. Procedia – Social and Behavioral Sciences, 213, 436-441. doi:10.1016/j.sbspro.2015.11.563
Xia, Y., Yang, J., & Zhou, T. (2015). Revenue management under randomly evolving economic conditions: RM under randomly evolving economic conditions. Naval Research Logistics (NRL), , n/a. doi:10.1002/nav.21635
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