Assessment Task 2

Part 1: Case Study

'Directors warn the buck stops with chief executives in the latest salvo in the business culture wars between government, regulators and boards.

Australian Securities Commission chairman Greg Medcraft last week said that accusations he wants to change the law to hold directors criminally liable for wayward culture are a misunderstanding and he is not pushing for changes 'at this stage'.

Tensions between directors and ASIC have escalated following the regulator's cases against Westpac Banking Corp and ANZ Banking Group and Labor's call's for a royal commission into the banking sector which have given rise to accusations the regulator is seeking to become the culture police.

Directors including Qantas Airways' Jacqueline Hey, Australia Post chairman John Stanhope and founder and director of IBIS World Phil Ruthven told an Australian Institute of Company

Directors lunch on Wednesday that while boards can 'set the right tone', the buck stops with the CEO.

'CEOs set culture not boards,' Mr Ruthven said.

Patrick Durkin 'Directors of boards warn that buck stops with CEOs' The Australian Financial Review Thursday 14 April 2016, p.8

Required: Assume you have been engaged as a corporate governance consultant to a board of directors of a public company listed on the stock exchange. Your assignment is to prepare a report to be submitted to the Chairman of the board explaining and analysing how the company should define and delineate the separate roles, duties and responsibilities of the company's board of directors from those of the CEO. Your report should contain specific recommendations on the separate roles of directors and the CEO. The Chairman has specifically indicated that she intends to make your report available to shareholders of the company and that the document will be published on the company's web site.

Part 2: Case Study

'Since detailed data on corporate governance indicators first became widely available about 25 years ago, evidence has emerged that simple top-down strategies favoring well-run companies could yield outperformance. However, probably because this effect became known to many investors, that simple approach seems to be no longer effective. None the less, we do identify some ways in which investors can still adopt strategies that may be able to take advantage of corporate governance indicators'.

Required: Assume you have been employed as a corporate governance consultant by the Australian Institute of Company Directors (AICD). The AICD is concerned that investors do not value good corporate governance in their investment decision-making models. Your assignment is to prepare a report to be submitted to the AICD evaluating the evidence that good corporate governance is positively associated with high investor returns. In your report the AICD has asked you to make recommendations so that companies with good corporate governance practices can align these practices to maximise their investor returns.

Assessment Task 3

Part 1: Case Study

'One is a token, two is a presence, three is a voice. Sound familiar? This seems to be the effect of placing women on corporate boards. Although corporate leaders may think otherwise, academic research seems to find this effect again and again.

In Australia, women hold 14.2 per cent of board chairs, 23.6 per cent of directorships, and 15.4 percent of CEO roles. In recent months, the Australian Institute of Company Directors (AICD) and the Business Council of Australia (BCA) have called for greater gender diversity in Australian boards.

There was an attempt by senator Nick Xenophon to legislate gender diversity in Australian government boards; however, the bill was later rejected by a government-controlled Senate Committee.

The AICD has set a target of 30 percent female board members and urged S&P / ASX 200 firms to meet the target by the end of 2018'.

Required: Assume you have been employed as a corporate governance consultant by a company listed on the Australian Stock Exchange and ranked within the ASX 200. The Chairman of the company has decided to address the issue of gender diversity on the company's board to ensure the board meets the AICD target by the end of 2018. As an initial step in the process of increasing the gender diversity of the board the Chairman has employed you to prepare a report that critically analyses and assesses the evidence that gender diversity on a company board is associated with improved business performance and also provide recommendations on how the company should initiate a gender diversity policy for the board. Your report will be tabled at the next board meeting for board members to review and evaluate your recommendations.

Part 2: Case Study

'There are many examples in Australia of whistleblowers being retrenched or punished for being brave enough to reveal issues in the public interest.

It is unfortunate but not uncommon for whistleblowers to be forced to take costly actions through the courts or Fair Work Commission after losing their jobs. The move to uncover best practice in whistleblowing in the private sector is timely given the recent high-profile scandals at Target and CommInsure as well as the allegations of a broken corporate culture which was raised during Labor's call for a royal commission into financial services. Whistleblowers revealed unethical behaviour at the Westfarmers-owned discount department store Target and at the Commonwealth Bank of Australia subsidiary CommInsure. The Target case involved an unknown person in the accounts department tipping off management about the use of supplier rebates to create about $20 million in additional profits in the half year to December. Seven people have been sacked following that disclosure and former Target CEO Stuart Machin has left Westfarmers while denying all knowledge of what happened.

In the CommInsure case, chief medical officer Benjamin Koh claimed doctors were pressured to change medical reports, patient's files were deleted and claims delayed as part of a strategy to avoid policy pay-outs. Koh lost his job for breaching CBA's IT policy relating to taking client files home. But at this stage it would appear his actions have been vindicated given that CBA chief executive Ian Narev has apologised for what happened'.

Required: Assume you have been employed as a corporate governance consultant by the Australian Shareholders Association (ASA). The ASA is concerned with the risks associated with investments in corporations that do not have a 'best practice' whistleblower policy. In order to minimise this risk the ASA wants to know what are the best-practice contemporary standards for whistleblower policies. Your assignment is to prepare a report to be published on the ASA web site recommending best-practice whistleblower policy for adoption by listed companies on the Australian stock exchange.

This assignment is divided into two parts. The first part explains the manner in which the companies should separate the roles and responsibilities of the board of directors and the CEO. In this part, the company taken into account is Salvos – Salvation Army. In the second part, the importance of corporate governance is explained in order to find its impact on the investor’s returns. Corporate governance is an important function of the companies that not only mentions the duties and policies that the company needs to follow but also the impact of its implementation on the performance of the company. 

Part 1: Salvation Army: Roles and Duties of the Board of Directors and CEO

The board of directors of the Salvation Army is the ones who are responsible for making policies and ensuring its effective implementation to undertake charity work and help the community become better. It is important that the companies explain the roles and duties to the employees since once the employees and directors are aware of their duties they would work within those grounds. In Salvation Army, the following are the roles and duties of the advisory board of directors (Cronley and Kim, 2014). 

(Some parts of the solution has been blurred due to privacy protection policy)