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Accounting and Corporate Governance

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Added on  2020-03-16

Accounting and Corporate Governance

   Added on 2020-03-16

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Running head: ACCOUNTING AND CORPORATE GOVERNANCEAccounting and Corporate GovernanceStudent’s Name:University Name:Author Note
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1ACCOUNTING AND CORPORATE GOVERNANCEThe IssuesThe issue presented in the case study is that the company named Bellamy’s hasperformed very poorly in the current financial year therefore the key reasons as to why such acondition had occurred and the specific areas where the loopholes lie that have led to such adownfall has to be identified. Whether the company has adhered to the corporate governanceprinciples laid down by the Australian Securities Exchange has also to be judged and thenrelevant solutions are to be provided. Therefore in this study a brief understanding of thecorporate governance principles can be achieved along with its practical applications.BackgroundThe major issue that led to the downfall of Bellamy’s is a range of expenses thatformed a greater part of the revenue earned by the company in the financial year of 2016.Marketing and promotion costs contributed to a 4.5% of revenue. This particular expense inrelation to marketing was not at all effective. An unprecedented increase in the cost ofoverhead also contributed to the critical condition faced by the company. In order to improveand come out of the problem the company decided to reconstruct its composition of theBoard of Directors. Moreover the composition of the previously formed Board of Directorswas only partially compliant with the ASX Recommendations (Bellamy’s Annual Report, pg– 22). As a result the composition of the Board of directors was changed due to the decisiontaken in the general meeting held in the date of 28 February 2017 (Tricker & Tricker, 2015).The composition of the Board was changed on the belief that the new composition will makethe Board more efficient in nature and will result in more business opportunities. The newcomposition will make the Board more effective in monitoring the activities of themanagement along with the implementation of the organizational plans that aim at increasingthe revenue of the firm.
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2ACCOUNTING AND CORPORATE GOVERNANCEThe management of Bellamy’s after the change in the composition of the Board ofDirectors stated that the newly created Board of Directors complied with the 3rd edition of theASX Governance Principles and Recommendations. The new Board came out with anoptimistic approach and claimed that the Board was constructed in such a way that it wouldbe able to guide and look out for the management of the company and help it in effectivedecision making that would enable the business to get a hold of the long term opportunities ofthe market. But there have been certain recommendations that restricted the Board fromexercising its fullest potential. (Van den Berghe, 2012).A major issue is that as mentioned in the disclosure, half of the Directors areindependent Non-executive Directors (Bellamy’s Annual Report, pg – 22). This evidentlydoes not comply with the recommendations of the ASX, as according to therecommendations the majority of the members of the Board should be independent. Thebelief of the board that non executive directors bring into the company new perspectives andviewpoints is not totally accurate. Though it is acceptable that the non executive directors areexperienced as because they have worked in different domains of the same industry andclimbed the ladder to such a high position in the hierarchy of authority, non executivedirectors do not really have detailed information about the happenings or tips and tricks of theorganization which is very easily available to an executive director (Kathy Rao, Tilt, &Lester, 2012). This fact is proven from the information published in the disclosure of thecompany that the company having majority of independent non-executive directors is not avery practical idea because of the size of the Board and the current conditions in which thecompany operates (Bellamy’s Annual Report, pg – 23). Moreover the non executive directorshaving independence may prove to be more fatal for the company as the entire power is givento the members who do not belong to the company intrinsically and work due to performanceremunerations (Ahmed & Henry, 2012).
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