Corporate Ethics and Governance of Stockland Corporation

This study explores the corporate ethics and governance practices of Stockland Corporation, a major player in the real estate industry. It examines their board composition, sustainability disclosure, workplace ethics, and more.

CORPORATE ETHICS AND GOVERNANCE OF STOCKLAND CORPORATION
Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................2
Stockland Corporate Governance....................................................................................................3
Board Orientation............................................................................................................................5
Accounting Theory and Corporate Governance..........................................................................5
Orientation Board composition Focus Key communications..........................................................5
Shareholders.................................................................................................................................5
Stockland’s sustainability disclosure...............................................................................................6
Corporate Social Responsibility......................................................................................................6
Workplace Ethics.............................................................................................................................7
Stockland Communications Using Legitimacy Theory...................................................................7
Conclusion.......................................................................................................................................9
References........................................................................................................................................9

Executive Summary
Sound Corporate governance is a necessity for efficient management of organizations in today's
business environment. Stockland, the case study company is one of the major investors in the
real estate industry. This study exploits the various corporate governance structures that
stockland company has exploited to remain competitive in the industry. Moreover, the company
board of directors and the management teams’ reports show the company commitment to
corporate disclosures. Corporate disclosures aim to enhance the shareholders and well as the
other stakeholder’s interest in the corporate activities of the company. This paper will also
address the various theories aimed at supporting the need for corporate disclosers in both
financial and non-financial aspects. The theories in accounting discussed as important tenets for
corporate disclosures include stakeholder theory, agency theory and legitimacy theory. This case
study discussed the usefulness of corporate disclosure both to the shareholders and the
stakeholders of the company using the theory stated above. The conclusion of the research on the
ethics and corporate governance of Stockland reveals that the company board of directors led by
the chairman is specifically concern with the shareholder's welfare. The various communication
in the disclosure ranging from remunerations, management fees, finance income, climate change,
and work ethics shows the commitment of the company towards safeguarding the interest of the
shareholders.
Introduction
Stockland is an Australian based company in the industry of real estate. It was Founded in 1952
to help create prosperous communities with dynamic town centers for residential purposes,
shopping and working space. The company deals with the regulation and development of real
estate properties in Australia, United Kingdom, and New Zealand. The reports of the company
revealed that its net worth of real estate assets is $18.2 billion becoming a robust real estate
group in Australia with a diversified portfolio. Stockland holds various real estate properties both
in the public sector as well as private assets ranging from retail town centers, industrial assets,
workplace and logistics assets, residential communities, and retirement villages.
Stockland annual reports considers the company to be among the leading real-estate developers
in the retail and shopping malls. Stockland is engaged in building and developing premium
retails malls in Australia. In the residential real estate sector, Stockland is considered the leading
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residential developer as it focuses on unveiling a wide range of master plan in housing
communities and retirement townships in Australia. The company management is fully engaged
in the planning and undertaking all it diversified portfolios in the real estate industry. This is
possible since the company also offers property trust management services to other companies.
The company’s group vision is to develop a meaningful long-term development of cities and the
country. This vision has placed the company in a good history of infrastructure development as
well as stakeholder’s maximization of wealth.
The primary company objective in safeguarding the stakeholder’s interest is delivering growth in
the earnings per share (Wang & Sarkis, 2017). This is possible through the company’s
commitment to creating quality communities and real estate assets and also exceeding the
customers’ expectations in the service delivery. To increase the value of the shares in the
securities market trading index, the company combined the trust unit of Stockland and the
Stockland corporation shares and traded as one security on the Australian securities exchange.
Furthermore, the Stockland Board engage in good corporate governance through where the board
is responsible for their decision-making strategies (Vafeas & Vlittis, 2016). The board also have
a balance of experience and skills to oversee the high standard of corporate governance,
integrity, and accountability required of a professional and ethical organization.
Stockland Corporate Governance
According to the chairman of the board of directors, governance of corporate behavior is an
integral part of the business. The expectations from the board members by the various
stakeholders of the company are high. Therefore, the board must remain focused together with
the leadership team in promoting an influential culture of transparency in the company (Urde &
Greyser, 2016). Moreover, just like any other industry in today’s business environment, the
building and construction industry is facing intense competition, globalization issues, and other
market risk factors. More broadly, sound governance in the building and construction industry is
essential in the societal development of housing for business and residential purposes. This is
because recognition of safety regulations and corporate social responsibilities in the construction
industry is more stringent in promoting safe houses.
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The Essentials to good corporate governance in an established company is the board of directors
led by the chairman of the board and its independent and executive directors (Tricker & Tricker,
2015). The shareholders of the company appoint the board of directors in order to safeguard the
interest of the shareholders of the company. The board of directors must satisfy the required
experience, statutory and legal issues before being appointed by the company.
Stockland board of directors consists of eight directors. This is the best size for sound corporate
governance. Since the size of the board is large enough, it provides a vast experience and skills
in dynamic interaction and participation for better performance. The ratio of independent
directors and executive directors is 7:1. This is another issue in corporate governance that
determines the level of independence of the board of directors. Non-executive directors who are
independent plays an essential role in balancing the executive director powers and making sure
no individual is dominant in decision making of the company(Rao & Tilt, 2016). Stockland
recognizes the vital role that independent directors play in securing the shareholders’ interests.
The board of directors of Stockland company has resolved to have a ratio of 7: 1 director a
majority being the non-executive directors. Furthermore, the company has resolved that the
chairman of the board and the managing director should be separate individuals. All these checks
and balances increase the independence of the board in acting at the best interest of the
shareholders.
Stockland chairman Tom Pockett, of the board, is an independent director and does not have any
managerial duty in the company. The chairman is a Non-executive director with high ethical
standards and acts with integrity and probity. The chairman message reiterates the commitment
of the board to enhance transparency and sustainability of their reporting to the stakeholders. For
instance, the company disclosed its climate-related risks in their financial reporting.
The managing director and CEO, Mark Steinert statement on the status of the company reveal a
strong balance sheet that positions the firm to take advantage of the many opportunities arising in
the changing business environment. The CEO is further committed to repositioning the company
to take advantage of the growing population and demographic trends experienced in Australia.
Stockland company have a remuneration policy that attracts and retain highly experienced and
committed directors to work as members of the board (Qu, Percy, Stewart, & Hu, 2018). The
directors are remunerated according to their performance to the firm overall goals. The chief
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executive officer and the chairman of the board remuneration is different from the other board
members since they receive additional payment as committee members of the board. The total
remuneration available to Non-Executive Directors is approved by security holders and is
currently $2,500,000 (including superannuation payments) as approved at the 2007 Annual
General Meeting.
Board Orientation
Accounting Theory and Corporate Governance
Accounting theory and practices are closely related. The company uses them in making
disclosures and to report on the various requirement and for instance sustainability reporting,
financial disclosure, and corporate social responsibility. Accounting theories are developed
through observation, analysis, evaluation, and scrutiny of various accounting practices. Daily
practices are performed by application of successful theories and principles which are prone to
change with changes in social beliefs and socio-economy changes (Owusu & Weir, 2018).
Reporting format changes with change in any accounting practices.
Firms are required to disclose activities related to social responsibility, corporate sustainability,
and environmental sustainability. Sustainability aims to disclose non-financial information on the
company’s performance to external parties(Martínez‐Ferrero, Garcia‐Sanchez, & Cuadrado‐
Ballesteros, 2015). The non-financial disclosure comprises of information that relates to
activities which impact the society, economic performance, and company environment.
Management accounting is used in the regulation of internal decision and for creating new
policies.
Orientation Board composition Focus Key communications
Shareholders
Most corporate governance is concerned with public companies whose securities are traded in
the capital markets recognized because many shareholders income can be compromised or
enhanced by senior management decision. Shareholders take investment decisions using
historical and subjective information; this leads to trusting in management in order to achieve
more returns and reduce risk. It is upon the management to use relevant control systems in place
to give accurate and timely information for proper risk management. Agency problems arise
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when companies fail. These failures may be as a result of management behaviors(Larcker &
Tayan, 2015).
Shareholder right-Corporate frameworks should help in facilitating shareholder rights and the
company rights, therefore, the management should make investment returns for shareholders.
Equal treatment of shareholders: They should all be treated fairly and should not be oppressed
by the majority regardless of their origin or level.
Stakeholders-should is recognized by the legal rights to improve their cooperation to create
employment and other opportunities.
Transparency and Disclosure- firms should give timely information on what affects management,
business ownership, and financial information. Board of directors- They set and monitor the
company’s direction to achieve objectives.
Pérez‐López, Moreno‐Romero, and Barkemeyer (2015) focus on ethics and sustainability ton
determine stakeholder pressure on CSR quality. They have used many theories to explain
sustainability. Agency theory requires firms to have a compensation plan so to give voluntary
disclosure to reduce agency cost. Firms are then required to be more accountable to improve its
reputation (Martínez‐Ferrero et al., 2015)
Stockland’s sustainability disclosure
The company believes in developing a sustainable community good, enjoyable, and in shape for
the future generation (Sustainability Review, 2013). GRI guides on how to make sustainability
report presentation, which helps in preparation of meaningful reports and promotes high
reporting standards. Sustainability of the disclosures of the company is a good indicator of the
status of the company’s commitment towards the security holder’s welfare. Disclosure such as
finance income and management fees by the company is an indicator of communicating the
stability of the business of the company.
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Corporate Social Responsibility
This is a corporate social regulation integrated into various business models. Stockland is
committed to implement their social responsibility through evaluation of their non-financial and
financial disclosures of the firms operations (Hong, Li, & Minor, 2016).
The firm has kept a healthy balance to improve its credit rating. It has an excellent management
policy to reduce its overhead cost by 10%. In 2013 the company’s customer satisfaction
increased to 71% because the management has put in place measures to help understand
customer needs. Product value, innovation, and convenience are examples of measures taken to
bring this satisfaction. It has also improved various developments and resources management to
become a competent core company.
Corporate social responsibility is more significant than accountability. This is because
accountability is a part of this CSR and is composed of auditing, accounting, and reporting.
Global reporting initiatives (GRI) advocates for excellence in the reporting of the company’s
activities to the stakeholders through provision of guidelines for public reporting and various
frameworks at international level (Owusu & Weir, 2018). Various international level processes
approved by Stockland for their reporting requirement has been in line with GRI regulation
framework (Annual Report, 2013).
Workplace Ethics
Stockland values employees more than stakeholders. Thus, its ethics and behavior are essential
for corporate social responsibility, which is good for the company’s profitability. This helps in
attaining a high moral and workers teamwork(Doorley & Garcia, 2015). The company is
accountable to report various ethics established in the work environment to enhance good morals
and acceptable code of conducts in the company. stockland company values the human resources
that enables the company to be one of the best real-estate developers in Australia more than its
security holders. The company through its policies on work ethics encourages an established
code of conducts within the organization that drives the team spirit as well motivate the
employees. Moreover, work ethics is a crucial component of corporate social responsibility,
potential employees outside the organization observes the corporate strategies in place by the
organization to encourage them to be potential employees to the organization. Stockland
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disclosure of employee work ethics is essential in maintaining a credible work ethics that
supports the workers. (Crowther & Seifi, 2018).
Stockland Communications Using Legitimacy Theory
The legitimacy theory is commonly used in the interpretation of the corporate social
responsibility disclosure in different institutional contexts. According to (Ching & Gerab,
2017)Legitimacy theory has been adopted by different companies to earn social approval by
disclosing their CSR activities to the different stakeholders of the firm. To be legitimate,
companies, including banks, would strive to provide information that affects their stakeholders
and society’s perception of the company(Hummel & Schlick, 2016). The demand for CSR
disclosures has been driven by the need to communicate to the stakeholders the critical approach
of institutional work on the society. This theory is supported by stakeholder theory, which was
first coined by Freeman in the year 1984, where he defined stakeholders as any group or
individuals who have an interest in the activities that the company engage in.
Stockland committed to the theory of legitimacy is portrayed in the process at which the
company communicates to its shareholders and stakeholders. The company disclosure of the
management strategies and the goals of the company in increasing its market share in the real
estate industry is an accurate measure of discloser to the stakeholders. Under the climate
discloser of the firm, the company executives recognize the role of climate change on damaging
its huge assets base as well as disrupting environmental operations and the health of the
customers. The company is thus committed to improving opportunities for creating resilient
climate assets that operate without much disruptions to the customers and the community.
The disclosures of the company on climate change related to the operations of the company is
consistent with the requirement of this disclosures useful for investors, lenders, and insurance
underwrites in understanding material risks (Pérez‐López et al., 2015).
On the related party disclosure, the company reveals a loan outstanding from Stockland trust,
which is repayable to the year 2023. The interest on the loan is payable in monthly arrears at
interest rates specified by the company. Therefore, the disclosures of the company on related
parties shows the role of legitimacy theory.
According to Milne and Patten (2002)Explored the role of environmental disclosures in
informing the stakeholders of their processes and thereby legitimizing the chemical industry
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activities. The study determined that theoretical bases for the process of organizational
legitimation imposing significant liabilities on chemical firms. The research found that
affirmative disclosures of the firm can restore organizational legitimacy.
According to Deegan, Rankin, and Tobin (2002), understanding motivations for disclosure by
the corporates is an area of great attraction for research. Legitimacy theory explains the
managerial decisions in undertaking their corporate disclose in the financial and non-financial
areas.
Conclusion
In conclusion, stockland corporate governance structures is aimed at increasing the shareholders
confidence in the operations of the company. Stockland corporate governance disclosure in the
industry of real estate sector is well furnished for their stakeholders. The company, through an
active board of directors and management, have ensured excellent governance strategies and
investment strategies that serve the interest of its stakeholders. Moreover, in examining the
financial and non-financial disclosures of stockland company, the company’s financial reports
and the various theories used in the preparation of final reports reveal all the material disclosures.
The company reporting structures is also consistent with the required set standards by the various
regulating bodies. Under the stakeholder theory and the legitimacy theory, the company has been
at the forefront to safeguard the interest of its stakeholders in the industry. Moreover, being in a
quite complicated industry with demanding environment protection, shareholder protection, and
community social responsibility, we can conclude that the corporate disclosures of the company
are robust.
References
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