Corporate Governance and Ethics Shareholders Association

Question: Describe about the Corporate Governance and Ethics for Shareholders Association. Answer: Part 1 Background Gender diversity is an essential factor in recent years that all the listed companies are required to comply with as per the requirements of Corporation Law and Australian board. While most of the organizations are following the best practices on gender diversity policies by appointing women executives on corporate board, some of the companies still lack in following the required policy. According to the recent report of AICD on listed companies on ASX 200, it has been identified that around 45 companies have complied the requirements of having at least 30% of women employees on corporate board. Companies including Woolworths, Wesfarmers, Commonwealth Bank have more than 50% of women executives on their board. Discussion Problems for society or community Wesfarmers, one of the largest companies in Australia deals in retailing business of chemicals, fertilizers and coal mining with almost higher number of employees. Similarly, Woolworths, second largest company in Australia is known for its best practices in corporate governance and sustainability policies. It is important for the companies to conduct the business activities by maintaining the ethical behavior and corporate governance policies for the benefit of members and stakeholders. Business organizations are formed to provide benefits for the consumers, society and community apart from the profit-earning objective (Marinova, Plantenga and Remery 2015). Hence, in case the companies like Brickworks Ltd., Metcash Ltd. or such other listed organizations experience problems, it will affect the society and community for investment and trading activities. In case, the companies does not follow the corporate social responsibility it would disclose the unfair or fraudulent business infor mation, unhygienic production or marketing activities. Unfair business practices and recognition of business information reflects incorrect performance and position of the business activities that lead the investors to get wrong business information (Cumming, Leung and Rui 2015). AICD Target Current target of AICD i.e. The Australian Institute of Company Directors is to appoint more women directors by the big listed companies. The target of the AICD is to increase the appointment of women directors on the corporate board to 30% by the end of the financial year 2018. Considering the current appointed women directors at 20%, the board is planning to increase the female representation by 10%. The board also states the objective to the companies listed on ASX 200 on voluntary appointment of women on the corporate board instead of mandatory appointment under corporation law (Aicd.companydirectors.com.au 2016). Diversity Diversity is a term used to define the political entities with individuals and members having particular differences according to the cultural backgrounds and lifestyles. It describes the discrepancies based on gender, age, race and religion and physical abilities in various industrial environments. Gender diversity is one of the vital elements at the workplace with respect to demographic diversity followed by the organizations (Liao, Luo and Tang 2015). Gender diversity helps the organizations to navigate the business complexities that arise due to various legal, ethical and corporate reasons. It has been observed that the organizations that are have diversified range of employees like female employees, older employees, physically challenged employees, have earned maximum revenues. Originations with gender diverse workforce are able to have smooth access to the resources for optimum production, credit sources and industrial knowledge at wide range. It also helps the organizations to maintain strong and diverse customer base (Rao and Tilt 2015). It has been observed from the reports generated from ASX 200 companies, only 45 listed companies have 30% of women employees including the executive employees on board. Out of all the listed companies under ASX 200, Medibank private Limited has more than 50% of women executives in board of directors. However, there are almost 21 organizations which do not have any women employee at any level. It can be noticed that most of the companies are facing gender diversity issues like working culture, nature of job, hours of job that are not convenient for most of the women in Australia. One of the major component of gender diversity is employment if women employees in the organizations especially at corporate level. In the present competitive economy, women are outperforming men in each of the sectors despite of several social and cultural challenges. It is essential to provide women with education facilities to help them obtain higher qualification in different sectors (Kaba et al. 2016). Several boards and committees have come up with the targets to appoint the women employees on the corporate board by the big listed companies. Accordingly, it is important for females to get higher education and qualification in managing, controlling and financing sectors or any other sectors of their own choices. Group think challenges Groupthink occurs when members of group takes faulty decisions due to pressures on fair decision inefficiencies and moral judgment. It is one of the corrupted decision making steps taken by the members out of individual conflicts and irrational consensus. Many workplaces encounter the challenges of groupthink that affects the performance of business activities, decision- making to achieve the target goals (Lins, Servaes and Tamayo 2015). Therefore, it is important to avoid the groupthink in the organization by incorporating risk plan, inviting the external standpoint at different stages of the procedures. The management also includes the discussion or debate sessions to monitor the views of different members so that different perspective can be reviewed and judged for the benefit of the company (Marinova, Plantenga and Remery 2015). For instance, Woolworths Limited has conducted the policies on gender diversity and half of its board members are women. Such diversified action by the company resulted in strong consumer base, employment options, better investment opportunities along with the increased revenue income and brand value. Besides, Walmart Limited is considered as gender biased organization where working hours for women employee are more. Apart from that, promotional offers and higher pay scale offers are available for male employees. Considering the issues of groupthink, invasion of Bay of Pigs was a common issue which was designed by Eisenhower administration, crumple of Swissair that went bankrupt and the bombing case of Pearl Harbor. Recommendation In view of the significant elements of business organizations with respect to the corporate social responsibility and governance policies companies are recommended to follow the best practices. Organizations are required to safeguard the interest of environment and society by reviewing the progress towards safety measures for the society and community. Further, the management of the company and AICD official is recommended to examine the progress of Wesfarmers for employing women board members and other level employees. It is also recommended to provide necessary support and motivation in terms of knowledge, education and professional training to the aspirants and organizations as well. The management of the companies like Walmart, Goldman Sachs are recommended to modify the business operating structures for appointing as many women employees on the corporate board. In order to avoid groupthink, companies are recommended to organize meeting sessions at regular intervals in the supervision of executive, experienced and knowledgeable official. The organizational management are advised to create risk plan and structure to identify the potential effects of groupthink to take necessary steps for avoiding the major issues and improving the business performance. Conclusion Sustainable growth and performance of companies is not only dependent on monetary terms but also on management skills. Business organizations are required follow governance ethics and code of conduct to regulate the business activities transparently for the benefit of stakeholders. Organizations should conduct the beast business practices by following the sustainability policies and corporate social responsibility as a part of business management. There must be diversified members and employees in the organization that assist in growth and performance of the companies to avoid issues like groupthink or other relevant business problems. Part 2 Background The Australian Shareholders Association (ASA) is non- profit independent organization funded by the members to represent the retail investors of Australia. The organization founded in the year 1960 to protect, learn and connect the rights of the shareholders. It monitors the performance of the big listed companies of Australia to examine the positive outcome for the shareholders and retail investors (Australianshareholders.com.au 2016). The report aims at identifying the risks of the shareholders and retail investors that arise due to incorrect type of investment or investment in the wrong companies. The benefits, interests and rights of the shareholders have been the objective of ASA that is highlighted in the following report. Further, the report highlights the whistleblower policies for their protection along with the protection of public interest that is important for the organizations to comply with. The report also presents the internal and external communication required for t he organizations to transmit the relevant information. Discussion Shareholder roles of Australian Shareholders Association (ASA) The Australian Shareholders Associates (ASA) works to protect the rights and interests of the shareholders of listed companies. The organization advocates in favor of the retail investors by attending the general meetings or annual general meetings of the listed companies. It monitors, analyze and present reviews on the annual reports, financial statements including the audit reports in association with government bodies and industry bodies to safeguard the investors interest. The organization examines the companys performance remuneration structure to the employees, directors qualification and rights of the investors for protecting the investment of shareholders (Income 2015). Whistle Blower and public interest Whistle blower is an individual member or employee of the company who reveals insider knowledge of illicit or fraudulent business activities occurring within the company. Other than the employees or members who are considered to be internal whistle blowers, it can be external also like suppliers, consumers, contractors (Miyajima, Mohanty and Chan 2015). On the contrary, public interest is defined as welfare of general people of the society for the purpose of recognition, protection and promotion by the government. The public interest activities are followed by the government in state secret matters by making comparison between expected returns or gains and potential expenses or losses. Considering the relation between whistle blower and public interest, it can be said that the governing policies on whistle blowing has been formed to protect the whistle blowers which is one of the elements of public interest. Since, whistle blowing act is purposely conducted to disclose the illegal bu siness activities, it vouches for the benefit of shareholders and public interest (Srinidhi, Yan and Tayi 2015). Risk associated with investment in corporations Investment is the most common term used to finance the company for conducting the business activities. Fair and correct investment provides valuable returns to the investors either at fixed rate or at fluctuating rate. However, there are certain risks involved with investment in corporations that are stated as follows: Risk of Interest rate occurs when there is probability that the value of fixed- rate instrument of debt would decline due to increase in the rate of interests. In case of investment on securities that provide return at fixed rates, such investments exposes to the risk of fluctuating interest rate. Business risk also known as unsystematic risk that is associated with the investment in a specific security. Under this risk, there is a possibility that the issuing company may not be able to pay back the invested money along with the interest payment (Gomes 2016). Another risk that is common in investment with companies is market risk, which is called systematic risk affecting all the stocks and securities equally. It is difficult to control the systematic risk because it involves the entire industry and all types of securities like inflation or deflation in the money value of the nation. Liquidity risk, also an essential factor of investment risk in which the possibility of inability to invest by the investor occurs due to absence of sufficient funds or limited opportunities (Zsidisin et al. 2015). For instance, BHP Billition of Australia is considered one of the best companies for investment with current sales revenue of $39,498 million. Commonwealth Bank is another bank company with market value $69,230 million is one the largest companies for investment is well known for shareholders wealth maximization. Another largest company with least associated risk in investment is Rio Tinto with market value of $128,494 million. However, some of the companies that have risks in investment are Bernie Madoff, which defrauded its consumers involving money laundering and investment frauds. Washington Mutual is another company that failed due to huge loss in assets. Another largest company WorldCom failed to survive and benefit the investors involving loss of around $11 billion to the shareholders (Rauwers, Voorveld and Neijens 2016). Communication Communication is a procedure or technique to transmit the relevant information and knowledge among the individuals or entities or both. It includes internal and external form of communication. Internal communication means the transmission of relevant information within the organizations at all levels and units of the entities. Due to legal requirements as well as business requirements the members of the organization at different level needs to communicate to serve the common business purpose. Besides, external communication is a form of transmission of the information among the organization and people or other entities that are external to the companies. There are several methods to form the external communication for delivering messages through verbal communication, written forms in newspapers or magazines or media (Rout and Das 2015). Most of the large organizations have managers on internal communication that ensures the employees or members of the companies are being informed with all the necessary information. Company secretary or senior managers of the company are responsible to spread the necessary information and messages to the staffs through intranet, emails, intercom or oral forms. Similarly, directors of the company are responsible to the flow of business information to the senior managers, company secretary and managers (Zsidisin et al. 2015). Necessary business decisions on operating activities, financing activities and investment activities should be taken in consultation with the senior managers or executive employees that requires smooth flow of communication. Internal communication in the organizations also flows from internal audit division that helps the companies to establish the effectiveness of corporate governance, risk management and control. Audit division works to provide review in partner ship with organizational management, board of directors and audit committee that requires internal communication to exchange the information and relevant messages. However, external communication flows in external environment to the company that involve consumers, investors, suppliers, contractors or any other entity. The business organization incorporates various strategies to manage external communication that varies according to the recipient requirement and message channels. This method is used to create public relations, provide necessary information to the external stakeholders in order to create positive reflection of business functions. External communication is formed through several channels like personal communication, social media, newspapers, magazines or electronic Medias (Srinidhi, Yan and Tayi 2015). Recommendation Business organizations are required to maintain the interests of the shareholders along with the motive of profit maximization. It is recommended to the companies to provide true and fair information with respect to business activities and financial details. Since, the illegal activities are disclosed by whistleblowers it is advised to the companies to comply the legal frameworks. The companies are recommended to provide performance results and financial position that are accountable and reflect correct information. It is important to provide fair returns to the shareholders with respect to dividends. Further, in case there is no whistle blower, it might affect and harm the rights of investors and society. If there is no whistleblower, any illegal activity in the organization cannot be obtained that would harm the public interest. Therefore, it is recommended to regulate the best practices on whistle blower policy to protect the whistle blowers and public interest. Organizations are advised to incorporate best sustainable practices that are transparent for the accountability of the financial information for the benefit of its users. Conclusion Economic growth and industrial growth depends on the sustainability of the organizations as well as the investors wealth maximization. It is important for the companies to protect the rights and interests of their shareholders and interests. The companies should provide relevant financial information that is audited and correct to the knowledge of users. It is essential for the organizations to perform the business activities in legal manner so that the whistle blowing activities can be minimized. 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