Analysis of Annual Report on Corporate Governance Practices

This report analyzes the annual reports of three ASX listed banks - NAB, Commonwealth Bank, and Suncorp Bank - to assess their corporate governance practices. It examines the disclosures made by each bank and evaluates the adequacy of these disclosures. The report also compares the banks' practices to theories of good corporate governance and identifies areas of strength and weaknesses. Additionally, it discusses the need for more mandatory corporate governance disclosures.

Running head: ADVANCE FINANCIAL ACCOUNTING
Advance financial accounting
Name of the student
Name of the university
Report date
Student ID
Author note

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Table of Contents
1. Introduction for topic statement................................................................................................2
Answer (a) precise topic of the report..........................................................................................2
2. Analysis of annual report..........................................................................................................2
Answer (a) summary of disclosures.............................................................................................2
Answer (b) Adequacy of disclosures............................................................................................4
3. Strength and weaknesses...........................................................................................................4
Answer (a) Assessment for level of good corporate governance.................................................4
Answer (b) comparison to good corporate governance theory....................................................5
4. Other information......................................................................................................................6
Answer (a) level of good corporate governance...........................................................................6
Answer (b) Comparison to theories of good corporate governance.............................................6
5. Assessment of disclosures.........................................................................................................7
Answer (a) adequate disclosures..................................................................................................7
Answer (b) need of more mandatory corporate governance........................................................7
6. Conclusion.................................................................................................................................7
7. References.................................................................................................................................8

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1. Introduction for topic statement
Answer (a) precise topic of the report
For the purpose of the report 3 ASX listed banks are selected, namely, National
Australian Bank, Commonwealth bank and Suncorp Bank. NAB is the public company that
generates majority of the income from regional and National commercial banks in the Australian
industry. The company provides the business solutions including the investment, superannuation
and the insurance. Further, the NAB wealth has the network of the financial advisors that
operates under MLC, JBWere, NAB Asset Management, JANA and Plum brands. This company
has been selected for this report as has been ranked at number 8 out of top 2000 entities from
Australia (Nab.com.au 2019). Commonwealth bank has been selected as it is the leading provider
of the integrated financial services. Retail banking sector of the entity provides services related to
home loan, retail products related to deposits and consumer finance. Further, the private and
business banking sector of the company provides the banking services to the relationship
managed businesses and the customers of agribusiness (Commbank.com.au 2019). Suncorp bank
has been selected as it is the 5th largest bank in Australia. The company provides financial
solutions and services and assists the customers in making better and informed choice and taking
positive actions for improving the financial wellbeing. Marketplace of the experiences, services
and products are designed for making it easier for the customers in meeting the financial
requirements. Further t brings together the strong banking portfolio and wealth as well as
insurance solutions for many brands including AAMI, Shannons, GIO, Apia and Suncorp
(Suncorp 2019).
2. Analysis of annual report
Answer (a) summary of disclosures
NAB – corporate governance practice of the entity enables and empowers the operations of the
entity. It provides clarity on scope of the authorities, support compliances and encourages
transparency. As per the company, good governance ensures timely flow of the information to
board for supporting it in fulfilling the responsibilities, accountabilities and roles. However, the

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entity publishes separate statement for corporate governance (Nab.com.au 2019). Corporate
governance statement of the company disclosed various topics including -
 Focus on the customers, accountability and culture
 Responsibilities and functions of board
 Performance, composition and diversity of the board
 Board committees
 Assurance and control
 Codes of the conduct
 Inclusion and diversity (Nab.com.au 2019).
Commonwealth bank – the board of Commonwealth Bank acknowledged the governance
shortcomings those are recognized by ARPA prudential inquiry. Further, it is committed in
making changes required for more accountable and the customer focused culture and the
enhanced management of risk. Focused areas for the board were culture and risk managements.
Further, the corporate governance statements of the entity describes key elements of governance
framework and highlights the key actions taken by it during financial year for enhancing the
framework (Commbank.com.au 2019). However, the entity publishes separate statement for
corporate governance. Corporate governance statement of the company disclosed various topics
including –
 Culture
 Stakeholder engagement
 Risk management
 Board performance, committees and composition.
The entity follows the practices and arrangements followed by the recommendations
provided in 3rd edition of ASX Corporate governance principle and recommendations issued by
ASX Corporate governance council (Commbank.com.au 2019).
Suncorp Bank – Corporate governance statement for Suncorp Group Limited reports regarding
the framework of corporate governance, practices and policies of the entity and subsidiaries of
the company and mentioned where the governance related documents and other associated
information are kept on the website of the entity. Governance of the entity has continuous focus

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on the board. Recently the review of the board regarding the governance model and the charter
has been undertaken by the entity. For performing this, the review was undertaken in context of
expectation of the regulators and shift in the community associated with the way in which the
boards and the senior management conduct itself and the way in which the public disclosures are
framed. The entity publishes separate statement for corporate governance (Suncorp 2019).
Corporate governance statement of the company disclosed various topics including –
 Board as well as board delegations of the entity
 Details regarding company’s senior executives
 Remuneration strategy and framework
 Risk management strategies
 Governance and culture of the entity
 Diversity, flexibility and inclusion
 Market disclosures and the communications with the customers and security holders
 Corporate and financial reporting (Suncorp 2019).
Answer (b) Adequacy of disclosures
As all the entities are providing separate statement regarding their corporate governance
and the statements include adequate information regarding their corporate governance as can be
observed from the above, it can be stated that the disclosures are adequate to the reader in
assessing the corporate governance.
3. Strength and weaknesses
Answer (a) Assessment for level of good corporate governance
Fundamental theories of corporate governance start with agency theory and are expanded
to the stewardship theory, stewardship theory and are evolved around dependency theory,
political theory, ethics related theory and transactional cost theory. Agency theory represents the
relationship among the principles like shareholders and agents like managers and company
executives (Wealth and Finance International 2016). Under agency theory the shareholders
expect that the agent shall act in principle’s interest. As per the stewardship theory the steward
protects as well as maximizes the wealth of the shareholders through performance of the entity.
On the other hand, the stakeholder theory is defined as the individual or group who can get

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affected by the achievements of the entity’s objectives. From the corporate governance statement
of all the three entities it is clear that the entities are focused on fulfilling the interests of the
shareholders (Tricker 2015).
NAB stated that they value timely, transparent and open communication with all its
stakeholders. They are engaged with the investors and shareholders in different ways including –
 Electronic and written communication including open publications and letters from the
CEO and chairman regarding key development matters
 Periodic updates of trading, financial reports and results, ASX media releases and
announcements, briefing and investors presentations (Nab.com.au 2019).
At Suncorp, the investor’s relation team coordinates the active investor’s relation
programme for maintaining dialogue with the retail investors, institutional investors and the sell
side analysts through conducting presentations, meetings and other ad-hoc events. Further, the
material information released to ASX prior to discussing with the analysts or shareholders are
made available wherever possible. At commonwealth bank the entity is committed to provide
better outcomes for the stakeholders through earning back the trust of the communities,
rewarding the people responsibly and providing ling term and sustainable value to the
shareholders (Appuhami and Bhuyan 2015). Hence, it can be stated that the annual reports of the
entities are based on the good corporate governance
Answer (b) comparison to good corporate governance theory
As per the good corporate governance theory, the management of the entity shall perform
their activities in the interest of the stakeholder. Further, the good corporate governance includes
the following characteristics –
 Effective risk management
 Clear strategy for organization
 Fairness to the customers and employees
 Commitments and discipline
 Information sharing and transparency
 Corporate social responsibility
 Regular self evaluation (Salim, Arjomandi and Seufert 2016.)

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As the entities are following all the above mentioned requirements, it can be stated that it
is following the good corporate governance theory.
4. Other information
Answer (a) level of good corporate governance
Media news –
Regrading NAB it is released by media that the CEO of the company was grilled about a
fraud case amounting to $ 40 million went undetected for past several years until one of the bank
staff members blew whistle regrading this. However, nowhere in the annual report of the entity
they disclosed the same (Nab.com.au 2019). Commonwealth bank was accused by Royal
commission for number of misconducts including opening fake bank accounts in the name of
clients, forging signature of the client including the deceased ones, breaching the anti-hawking
laws. Further they failed to refund the fees charged from the victims of the frauds. However,
nothing regarding these misconducts has been mentioned in the annual report of the entity
(Commbank.com.au 2019). As per the media release by Banking Royal Commission, Suncorp
admitted that it failed to complete the review of small standards business contracts with regard to
compliance of new unfair contract laws irrespective of the request from corporate regulator since
2016. However, the entity did not mention it anywhere in their annual report (Suncorp 2019).
Answer (b) Comparison to theories of good corporate governance
As the companies did not followed the requirements of good corporate governance theory
it is not following the disclosing requirement in their annual report. For instance, not disclosing
the fraud case by NAB, misconducts by Commonwealth bank and failure to compliance of new
unfair contract laws irrespective of the request from corporate regulator by Suncorp, the
requirement of fairness to the customers and employees and information sharing and
transparency aspects have been violated. Hence, the entities failed to comply with theories of
good corporate governance (Asx.com.au 2019)

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5. Assessment of disclosures
Answer (a) adequate disclosures
Though all the requirements of corporate governance are presented in the annual reports
of the company and in the statements of corporate governance, some of the failures and
misconducts are not disclosed by the entities. Hence, to get the complete view of the entities the
disclosures are not sufficient (Du Plessis, Hargovan and Harris 2018)
Answer (b) need of more mandatory corporate governance
Yes, there is a need of more mandatory corporate governance. The companies are not
disclosing their weaknesses in the annual reports. However, these weaknesses can have big
impact on the users of financial statements in taking their decisions. Hence, these disclosures
shall be made mandatory.
6. Conclusion
Based on the above findings it can be concluded that all the above mentioned entities are
issuing separate statements for corporate governance followed by them. It is found that they are
following all the requirements of corporate governance. However, they are not disclosing the
failures and misconducts carried out by them. Hence, to get the complete view of the entities the
disclosures are not sufficient and it is violating the requirement of fairness to the customers and
employees and information sharing and transparency aspects. Hence, these disclosures shall be
made mandatory.

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7. References
Appuhami, R. and Bhuyan, M., 2015. Examining the influence of corporate governance on
intellectual capital efficiency: Evidence from top service firms in Australia. Managerial Auditing
Journal, 30(4/5), pp.347-372.
Asx.com.au., 2019. [online] Available at:
https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-
edn.pdf [Accessed 29 Apr. 2019].
Commbank.com.au., 2019. CBA Newsroom - Media releases, speeches. [online] Available at:
https://www.commbank.com.au/personal/newsroom.html [Accessed 29 Apr. 2019].
Commbank.com.au., 2019. Personal banking including accounts, credit cards and home loans -
CommBank. [online] Available at: https://www.commbank.com.au/ [Accessed 29 Apr. 2019].
Du Plessis, J.J., Hargovan, A. and Harris, J., 2018. Principles of contemporary corporate
governance. Cambridge University Press.
Nab.com.au., 2019. Personal. [online] Available at: https://www.nab.com.au/ [Accessed 29 Apr.
2019].
News.nab.com.au., 2019. Media Release | NAB News. [online] Available at:
https://news.nab.com.au/tag/media-release/ [Accessed 29 Apr. 2019].
Salim, R., Arjomandi, A. and Seufert, J.H., 2016. Does corporate governance affect Australian
banks' performance?. Journal of International Financial Markets, Institutions and Money, 43,
pp.113-125.
Suncorp., 2019. Banking. [online] Available at: https://www.suncorp.com.au/banking/ [Accessed
29 Apr. 2019].
Suncorp., 2019. News & Media. [online] Available at:
https://www.suncorp.com.au/about-us/news.html [Accessed 29 Apr. 2019].

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Tricker, B., 2015. Corporate governance: Principles, policies, and practices. Oxford University
Press, USA.
Wealth and Finance International., 2016. Defining good Corporate Governance - Wealth and
Finance International. [online] Available at: https://www.wealthandfinance-news.com/good-
corporate-governance/ [Accessed 29 Apr. 2019].