Corporate Governance Practices of BHP Billiton and Ausdrill Limited: A Comparative Analysis

BHP Billiton is an independent director, while Ausdrill Limited does not disclose the independence of their chairman. Part e: BHP Billiton has established several committees to oversee corporate governance, while Ausdrill Limited only has an Audit and Risk Committee. Part f: Both companies have a code of conduct for their directors and employees. BHP Billiton and Ausdrill Limited have descriptive approaches to corporate governance in annual reports. BHP Billiton has more directors and established committees, while Ausdrill Limited has more non-executive directors. Both have a code of conduct for directors and employees.

Running head: ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Accounting Theory and Corporate Governance
Name of the Student:
Name of the University:
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1ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Table of Contents
Part A:..............................................................................................................................................2
Requirement 1:.............................................................................................................................2
Requirement 2:.............................................................................................................................2
Part a:.......................................................................................................................................2
Part b:.......................................................................................................................................2
Part c:.......................................................................................................................................3
Part d:.......................................................................................................................................3
Part e:.......................................................................................................................................3
Part f:.......................................................................................................................................3
Requirement 3:.............................................................................................................................4
Part B:..............................................................................................................................................4
References:....................................................................................................................................10

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Part A:
Requirement 1:
From the annual reports of BHP Billiton and Ausdrill Limited, it could be observed that
the organisations have prepared separate sections for disclosing their policies, practices and
strategies related to corporate governance. Thus, the approaches adopted by the two
organisations are descriptive in nature so that they could effectively showcase various aspects of
corporate governance. Moreover, both organisations have disclosed information regarding all the
factors of corporate governance. In case of both BHP Billiton and Ausdrill Limited, all necessary
information regarding the factors of corporate governance is provided in this particular section to
their stakeholder groups.
Requirement 2:
Part a:
BHP Billiton has 11 directors, which is evident from its latest annual report (Bhp.com
2019). On the other hand, the number of directors in Ausdrill Limited is 7 (Ausdrill.com.au
2019).
Part b:
In case of BHP Billiton, there are 8 non-executive directors, which are 72.73% of the
total number of directors and for Ausdrill Limited, the number of non-executive directors is 6,
which is 85.71% of the total number of directors.

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Part c:
Out of 11 directors of BHP Billiton, 9 directors are found to be independent, which is
81.82% of the total directors and for Ausdrill Limited, no disclosures regarding the independence
of the directors have been made in its annual report.
Part d:
The Chairman of BHP Billiton is Ken MacKenzie and the Chief Executive Officer of the
organisation is Andrew MacKenzie. According to their reports, the organisation has improved its
framework of capital allocation, sharpened its focus on productivity and culture along with
providing solid set of financial outcomes owing to which it has recorded financial dividend of
$0.63 per share (BHP 2019).
The acting Chief Executive Officer of Ausdrill Limited is T. Mlikota and the Chairman
of the organisation is Ian Howard Cochrane. According to the report of the Chairman, the
organisation has managed to survive from the downturn of the Australian mining sector with the
help of rationalisation and business improvement activities, which have ensured better returns to
the shareholders (Ausdrill.com.au 2019).
Part e:
For BHP Billiton, the executive directors hold 32% of the shares, while the executive
directors of Ausdrill Limited own 29% of the shares of the overall shares in 2018.
Part f:
In case of both organisations, none of them have disclosed information regarding the
block holders and institutional investors.

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Requirement 3:
From the latest annual reports of BHP Billiton and Ausdrill Limited, it could be found
that both organisations have utilised a number of indicators related to corporate governance. For
BHP Billiton, the significant indicators include remedial action plan, risk management
framework, value and purpose of cultures, board committee, corporate governance policies and
stakeholders (Bhp.com 2019). On the contrary, the corporate governance indicators of Ausdrill
Limited constitute of risk committee, audit committee, ethical environment, human resource
committee, digital business and technology committee along with social and governance
committee (Ausdrill.com.au 2019). Thus, adequacy could be observed in the corporate
governance policies of BHP Billiton and Ausdrill Limited.
Part B:
Introduction:
One of the crucial aspects for ensuring success of the business organisations is corporate
governance and it could be described as the method aiding the organisations so that they could
govern their business operations effectively (Agrawal and Cooper 2017). One of the crucial
aspects of this method could be witnessed to provide the organisations with the needed guiding
doctrines in order to direct and control the overall business activities. However, in the meantime,
there have a number of corporate downfalls, which have raised concerns regarding the assistance
and effect of corporate governance policies within the business organisations (Amba 2014). It
has been observed that the higher-level managements of the organisations are engaged in
manipulating the framework of corporate governance in order to conduct accounting and
corporate scandals. Owing to all these reasons, corporate governance is deemed to be crucial for
assuring firm success. This essay intends to analyse the different corporate governance aspects.

5ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Discussion:
Before showcasing the importance of corporate governance, it is noteworthy to mention
that the absence of sound corporate governance could be deemed as a significant reason behind
the downfalls of bug corporate organisations in the past. In this context, the case of external
directors could be considered, since the unavailability of external auditors results in increased
possibility of business collapse owing to the reduction in objectivity and independence of the
internal directors (Bain and Band 2016). Besides, the controversial roles of the Chief Executive
Officers have resulted in corporate scandals, since they served the functions of the Chairpersons
as well. This mandates the need for sound corporate governance in the remuneration framework
of the organisations, since absence of the same might result in effective remuneration
distribution, which is baseless. Owing to all these reasons, there needs to be adequate mechanism
of corporate governance for minimising the corporate failure scope (Berger, Imbierowicz and
Rauch 2016).
The business organisations mainly use two kinds of corporate governance approaches,
which include either principles-based approach or rules-based approach. In accordance with the
rules-based approach, there are a number of guidelines and regulations, which would enforce an
obligation on the organisations in following the guidelines and standards of corporate
governance. Therefore, it is mandatory for the organisations in conforming to such regulations
by applying the minimum standards of corporate governance (Chan, Watson and Woodliff
2014). However, in accordance with the principles-based approach related to corporate
governance, all organisations could not follow a single group of rules, since different
organisations encounter various corporate governance issues requiring different solutions.
Therefore, the alternative of rules-based approach of corporate governance is principles-based

6ACCOUNTING THEORY AND CORPORATE GOVERNANCE
approach. This denotes that the organisations are required to establish their corporate governance
frameworks by considering a number of circumstances (Filatotchev and Nakajima 2014).
One significant need for the organisations listed in ASX is that they need to form their
own framework of corporate governance by adhering to the guidelines and principles mentioned
in Australian Securities and Investments Commission (ASIC) and Corporate Law Economic
Reform Program 9 (CLERP 9). The below discussion represents the role of CLERP 9 and ASIC
in corporate governance:
According to ASIC, one of the significant influencers of the performance of the
organisations is sound corporate governance framework. ASIC has considered various
perspectives of corporate governance and the body has developed the required guiding doctrines
and guidelines for the ASX listed organisations in order to assure adherence to the different
requirements of corporate governance (Larcker and Tayan 2015). These constitute of the
information regarding the obligations of the board of directors of the organisation and other
informational areas deemed to be valuable for its related stakeholders. Besides, for obtaining
information of the corporate governance issues in the business organisations, ASIC conducts
different engagement campaigns with the key stakeholders of the organisations and other
employees. Some of the significant areas where ASIC has generated the critical principles and
regulations include management conflict, shareholder involvement, mechanism related to risk
management, oversight on the directors along with director remuneration and others (Mallin
2018).
Adequate significance is provided to CLERP 9 in Australia, since it obliges the
organisations in revealing all crucial information related to corporate governance so that the

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financial reporting framework could be strengthened. The governing body has introduced various
new requirements associated with CLERP 9 (Marie L’Huillier 2014). In accordance with the new
reforms, it is necessary for the organisations to assure complete disclosure of the various
corporate governance dimensions, which must include any variations in auditing processes and
financial reporting. The other inclusions need to be information regarding management
discussion and disclosure of analysis and information related to licensing obligations so that the
conflict of interest could be managed effectively and detailed disclosure of the executive
remuneration (Peters and Romi 2014).
For developing sound framework of corporate governance, the organisations are required
to assure the presence of independent directors owing to the act that these directors are not
related with the organisations, which could compromise their independent judgements. The
prime responsibilities of the independent directors are fetching improvements in the credibility of
the organisations and standards of corporate governance and hence, they are considered as
vigilant observers of the organisations. Along with this, sound management of business risks is
another vital responsibility for the directors. The liability is on the directors to establish the
required committees within the organisations for ensuring sound framework of corporate
governance. Due to this, the independent directors of the organisations have to provide guidance
to the organisations so that they could safeguard various corporate governance aspects (Tricker
and Tricker 2015).
The business organisations could assure the formation of sound corporate governance
mechanisms by taking into account various ethical guidelines. The corporate governance
guidelines in the organisations could result in the possibility of preference among the higher-
level management. Due to this reason, the management is required to take into account the ethics

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for undertaking significant business decisions. At the same time, when ethical guidelines are
present, corporate governance limits the management of the organisation in applying illicit
techniques with the intent of accomplishing the organisational goals. Hence, long-term business
sustainability could be ensured with the presence of ethics.
An affirmative association could be witnessed between the frameworks of corporate
governance and integrated reporting of the business organisations owing to the fact that the main
goal behind the formation of integrated reporting is to retain the faith of the stakeholders on the
organisations. This would assist in maintaining trust between the management of the
organisation and its significant stakeholders (Watson 2015). The integrated reporting framework
is reliant on the joint rationale and its primary focus is to take into consideration the internal
processes of the organisations so that an overview could be obtained about the demands of the
significant stakeholders. Hence, the framework of corporate governance of the organisations
could be enhanced by linking both financial and non-financial information in integrated reports.
The managements of the organisations could be able to undertake sound decisions and allocate
resources effectively that would aid in creation of long-term value in the presence of integrated
reports.
It is to be borne in mind that there are various nations, which have adopted the corporate
governance frameworks and Australia is not an exception to this situation as well. The corporate
governance frameworks tend to differ from nation to nation, which depicts that the different
nations having varying corporate governance requirements. For instance, it could be observed
that the nations like USA and UK mainly concentrate on the different aspects related to corporate
governance so that the interests of the stakeholders could be met appropriately. However, in case
of nations like China and European nations, the corporate governance frameworks are framed for

9ACCOUNTING THEORY AND CORPORATE GOVERNANCE
satisfying the interests of the shareholders primarily, after which they pay attention to the
interests of the other stakeholders such as public, staffs and suppliers. However, the governments
of all these nations enforce sound corporate governance frameworks for maintaining faith and
trust among the shareholders and other significant stakeholders (Berger, Imbierowicz and Rauch
2016).
Conclusion:
From the above discussion, it is evident that the business organisations are required to
assure sound enforcement of the various corporate governance frameworks that would help in
bringing necessary transparency in their overall business operations. Moreover, it has been
analysed that the business organisations could utilise corporate governance in the form of a tool
so that incidents like corporate collapses that took place in the past could be avoided in future.
Moreover, these organisations have the alternative of choosing between either principles-based
approach or rules-based approach of corporate governance. For assuring the same, the ASX
listed organisations have to assure adherence to the principles and guidelines mentioned in
CLERP 9 and ASIC. Along with this, the business organisations are needed to combine their
framework of corporate governance along with integrated reporting, since they would assist in
ensuring effective disclosure of the crucial aspects for sound decision-making of the various
stakeholders of the organisations. Thus, the governments of the different nations enforce sound
corporate governance frameworks for maintaining faith and trust among the shareholders and
other significant stakeholders.

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