Corporate regulation and accountability

Corporate governance practices have become very crucial in the current financial environment as it assists companies in enhancing their organizational efficiency and reputation as well. With this report, the annual reports and corporate governance statement of Wesfarmers, Woolworths, and Bega Cheese has been evaluated to facilitate comparison betwixt them as to whether they have adopted proper principles and what differences prevail betwixt their practices.

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Corporate regulation and
accountability

Corporate governance
Executive summary
Corporate governance practices have become very crucial in the current financial
environment as it assists companies in enhancing their organizational efficiency and
reputation as well. Moreover, compliance with efficient corporate governance principles
allows a company to act in an ethical manner that in turn, assists the stakeholders in their
decision-making processes and exerting their confidence and trust upon such company. With
this report, the annual reports and corporate governance statement of Wesfarmers,
Woolworths, and Bega Cheese has been evaluated to facilitate comparison betwixt them as to
whether they have adopted proper principles and what differences prevail betwixt their
practices.
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Corporate governance
Contents
Introduction...........................................................................................................................................3
Comparison of the corporate governance statements.............................................................................4
 Woolworths Ltd.............................................................................................................................4
 Wesfarmers....................................................................................................................................5
 Bega Cheese..................................................................................................................................6
Compliance with the Corporate Governance Principles........................................................................7
 Woolworths...................................................................................................................................7
 Wesfarmers....................................................................................................................................8
 Bega Cheese Ltd............................................................................................................................9
Conclusion...........................................................................................................................................11
References...........................................................................................................................................12
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Corporate governance
Introduction
In the global scenario, compliance with effective corporate governance practice is very
crucial to survive in the environment because organizations that follow corporate governance
practices enjoy a wider recognition in the market and sustain for a better future. The annual
reports of Woolworths, Wesfarmers, and Bega Cheese have been taken into evaluation
through this report. All these companies are listed on the Australian Stock Exchange and
enjoy a mass recognition because of their corporate governance practices. Besides, these
companies operational success in their respective fields clearly highlight the significance of
corporate governance principles.
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Corporate governance
Comparison of the corporate governance statements
 Woolworths Ltd
1. Amount of detail
The corporate governance statement and annual report of the company comprise of both
financial and non-financial information. Furthermore, the corporate governance statement
reflects detailed information of its complied principles that can easily assist users in their
decision-making processes.
2. Board composition
The company has a self-sustained composition of board that comprises of CEO and other
non-executive directors (Woolworths limited, 2017). Moreover, such non-executive directors
are primarily of independent nature and who together with the CEO possess a range of skills
to assist the company in attaining its obligations.
3. Board function and responsibilities
The Board is responsible for reviewing strategic direction and approve the business or
strategic plan of the company. It is also liable for financial oversight of the company by
adopting the annual budget and capex plan. Further, it also reviews and monitors the
management procedures for integrity of financial reporting. Besides, performance evaluation
of board performance together with the directors is also conducted by the Board as its major
role (Matthew, 2015). Moreover, it also has the role of accounting for social responsibility
and remuneration planning of the company.
4. Board remuneration
In relation to remuneration, the company gained the status of Gold-Tier Employer because of
its effective remuneration approaches (Woolworths CG, 2017). All the directors of the
company are awarded fairly on the basis of their obtained targets. Nevertheless, such
remuneration process is managed by the people performance committee and there are three
other committees namely nomination committee, sustainability committee, and audit, risk
management, and compliance committee (Laux, 2014).
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Corporate governance
5. Different committees and their responsibilities
The nomination committee is liable for reviewing the composition and size of the Board and
mix of skills, expertise, and experience. It also identifies and assesses director candidates for
making recommendations. Besides, it also reviews succession plans for the Board
(Woolworths CG, 2017). The audit and risk management committee are liable for monitoring
and reviewing key processes and policies so that recommendations can be made. Further, it
reviews and oversees the quality and efficiency of external audit. In addition, it also reviews
the efficiency of risk management framework of the company. The sustainability committee
is primarily responsible for overseeing health and safety policies of the company. It also
oversees reputational influences of the company’s strategies and practices (Benabou &
Tirole, 2010). Moreover, it also ensures whether the company has proper plans for dealing
ethically and fairly with their customers, competitors, suppliers, and other stakeholders.
6. Additional detail
Woolworths has also disclosed material information regarding usage of non-IFRS financial
information for better understanding (Woolworths CG, 2017).
 Wesfarmers
1. Amount of detail
The amount of details contained in the corporate governance statement and annual report are
adequate and appropriate in nature because the company has disclosed all kinds of material
information needed for decision-making on the part of users.
2. Board composition
In relation to composition of board, the company has various directors who bring an effective
mix of expertise, diversity, skills, and experience. Furthermore, gender diversity also forms
part of such composition. It includes nine directors out of which eight are non-executive
directors (Wesfarmer CG, 2017).
3. Board function and responsibilities
Nevertheless, when it comes to roles and duties, the Board is liable to approve the strategic
direction of the company, guide, and monitor the management, and its businesses in the
attainment of strategic plans. Besides, it also oversees good corporate governance practices
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Corporate governance
by ensuring safeguard and enhancement of the shareholders’ interests while accounting for
the interests of others including customers, suppliers, employees, etc. Moreover, the Board is
also responsible for the day-to-day management of the company and its affairs. Further, it
also facilitates in talent management and development through development of various
committees.
4. Board remuneration
In relation to remuneration, the senior executives consisting of members of the leadership
team pursue a variable or ‘at risk’ segment as a part of their net remuneration package under
a long-term incentive arrangement or annual incentive (Laux, 2014). Moreover, a mix of
remuneration segments and performance measures are used in such incentive plans to
determine the remuneration of executives.
5. Different committees and their responsibilities
In relation to committees, the company has four committees namely audit and risk
committee, nomination committee, remuneration committee, and Gresham Mandate Review
Committee (Wesfarmer CG, 2017). The audit and risk committee supervise internal control
procedures and policies framed to safeguard the assets of the company and maintain the
integrity of financial reporting. On the other hand, the nomination committee facilitates in
consideration of directors who must be recommended to the shareholders for re-election
processes (Lapsley, 2012). It also considers feedback from primary shareholders during the
roadshow of Chairman. The remuneration committee reviews and makes recommendations in
regard to fixed remuneration, long-term incentives, and annual incentives (Wesfarmer CG,
2017). It also reviews the transition and succession plans for the leadership team of the
company. Further, it also supervises or reviews diversity targets and gender pay equity.
Lastly, the role of Gresham Mandate Review Committee is to review and approve
engagement terms of Gresham Partners to undertake corporate advice for the company or one
of its entities.
6. Additional detail
Wesfarmers have not addressed non-IFRS financial information in its annual report for better
understanding.
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Corporate governance
 Bega Cheese
1. Amount of detail
The amount of details in the corporate governance statement and annual report of the
company is very minimal in nature in comparison to Wesfarmers and Woolworths. The
company has not disclosed its strategies and approaches in a better way through its annual
report that can create problems for stakeholders in decision-making processes.
2. Board composition
In relation to board composition, the same consists of five supplier directors including one
external director and the executive chairman who are independent in nature and who does not
have any material relationship with the company or its associated undertaking (Bonson &
Bednarova, 2015).
3. Board function and responsibilities
Moreover, in relation to the roles and responsibilities of the Board, they are liable to oversee
the management of the company for the benefit of the shareholders and other stakeholders
(Bega Cheese CG, 2017). Further, the Board’s role is to act in accordance with its surpassing
duties to act fairly and honestly based on law so that interests of the company can be served.
It also intends to act in accordance with the obligations and duties imposed by the
Constitution of the company. Moreover, it is responsible for enhancing shareholder value,
approve budgets, monitor and approve financial reporting, accounting for risk management
approaches, determine dividend payments, etc.
4. Board remuneration
In relation to remuneration of the company, the same of senior executives is reviewed on a
yearly basis. Further, the details of remuneration of non-executive directors are also disclosed
by the company to facilitate responsible and fair remuneration (Douma & Hein, 2013).
5. Different committees and their responsibilities
In relation to committee, the board has nomination, remuneration, and human resources
committee (NRHRC) and audit and risk committee. In relation to NRHRC, the role of same
is to set remuneration strategies for the company and ascertain the remuneration of the CEO
and the executive chairman. Further, the audit and risk committee are responsible for
overseeing financial reporting processes, internal control, non-financial and financial
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Corporate governance
management of risks, and external and compliance audit (Bega Cheese CG, 2017). It also
assesses the adequacy of controls and processes to manage and identify areas of significant
risk. Such committee also monitors the company’s compliance with laws and regulations and
whether the external auditors remain independent or not.
6. Additional detail
Lastly, Bega Cheese Ltd have failed to disclose or address non-IFRS requirements into its
annual report that is a negative indicator.
Compliance with the Corporate Governance Principles
 Woolworths
1. Board composition
In relation to board composition, the company has adequately fulfilled such corporate
governance principle within its framework. The reason behind this can be attributed to the
fact that majority of its directors are independent, and the chairman is also an independent
director. Further, there is a nomination committee for overseeing the process of composition
of board. Besides, the role of CEO and the chair of the company have not been exercised by
the same individual. Nevertheless, this is altogether recommended by ASX Corporate
Governance Principles and Recommendations.
2. Board functions and responsibilities
Under ASX guidelines, it is recommended that the board must disclose its roles and
responsibilities in an effective way together with processes to evaluate the executives’
performance that can allow users in making better decisions. Furthermore, in relation to
board roles and responsibilities, the company has efficiently disclosed and established
respective roles and responsibilities of the management and the Board (Woolworths CG,
2017). Further, it has also offered relevant information for evaluating the performances of its
senior executives that is a positive indicator in relation to compliance with board roles and
responsibilities.
3. Board remuneration
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Corporate governance
In relation to board remuneration, the company has not established a remuneration committee
and it has not clearly differentiated the process of executive remuneration from that of the
non-executive directors’ remuneration. Therefore, the company must establish a
remuneration committee to oversee the fulfilment of remuneration of executives and non-
executives. Besides, disclosure of remuneration of CEO and senior executives must not be
prioritized and instead, non-executive’s remuneration must also be disclosed. Moreover, this
is recommended by the ASX principles.
4. Different committees and their responsibilities
In relation to board committees, the company has effectively complied to appointment of
several committees that assists in attainment of organizational goals. However, appointment
of remuneration committee must have been accounted for by the company to enhance
remuneration approaches respectively (Bonson & Bednarova, 2015). Overall, the company
has accurately fulfilled the requirements of efficient corporate governance principles within
its framework apart from the fact that in relation to fair and responsible remuneration, there
must be a remuneration committee that is absent in the company’s case (Woolworths CG,
2017). Besides, the company has only disclosed the remuneration of its CEO and senior
executives and has failed to offer relevant information regarding the remuneration of its non-
executive directors. Nevertheless, even though people and performance committee are
present in the company for overseeing remuneration strategies, yet a remuneration committee
must be present that can review and make proper board recommendations in regard to the
same (Woolworths CG, 2017).
5. Additional detail
It is recommended that a company must disclose both IFRS and non-IFRS details in its report
to enhance its meaningfulness and Woolworths has adequately catered to such requirement
by disclosing both types of information.
 Wesfarmers
1. Board composition
In relation to corporate governance principles of Wesfarmers, it can be seen that the company
has complied to various aspects of corporate governance to enhance its reputation in the
entire industry. When it comes to board composition, the company has a chairman who is
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Corporate governance
independent in nature. Besides, it has eight directors out of which seven are independent in
nature (Cappelleto, 2010). Furthermore, the company has also established a nomination
committee for overseeing the selection and recruitment processes of directors. Besides,
Wesfarmers have also disclosed the procedure for evaluating the performance of its
committees, board, and individual directors respectively (Wesfarmer CG, 2017). This
facilitates in fulfilling the recommendations laid down under ASX principles.
2. Board functions and responsibilities
In relation to board roles and responsibilities, Wesfarmers have adequately established
various functions that are reserved to the board and those delegated to the senior executive
directors. Furthermore, to fulfil such principle, the company has also disclosed material
information of evaluating the performance of its senior executives (Elder et. al, 2010). Hence,
the recommendations laid under ASX recommendations have been duly addressed.
3. Board remuneration
In relation to remuneration strategies, the company has established a remuneration committee
within its framework to review and make recommendations regarding such policy to the
board. Furthermore, the company has also ensured that the committee oversees the process of
disclosing the structure of remuneration of executives and has separately disclosed the
remuneration policies for non-executive directors.
4. Different committees and their responsibilities
Furthermore, based on committees, the company has various committees that allow it to
attain organizational goals but one of its non-executive director is also a member of Gresham
Mandate Review Committee that clearly implies lack of independence (Wesfarmer CG,
2017). Therefore, the company must not ensure steps wherein its non-executive directors are
also a member of its committee that highlights prevalence of material relationship that can
influence the business operations. However, the roles and responsibilities of the committees
are adequately disclosed by the company to ensure ethical and moral environment.
5. Additional details
It must also be noted that the company has failed to account for non-IFRS information in its
annual report that can degrade the principle of corporate governance of safeguarding integrity
in financial reporting. Therefore, to facilitate proper corporate governance principle into the
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Corporate governance
company’s framework, it must take steps to account for such non-IFRS details to enhance its
corporate governance practices on a whole. It must also be noted that prevalence of such
measures can allow users in making proper decisions related to investment and therefore, to
facilitate proper disclosure measures, the company must not hesitate in disclosing such
information (Caradonna, 2014).
 Bega Cheese Ltd
1. Board composition
Bega Cheese has also adhered to the corporate governance principles and recommendations
within its framework to enhance its organizational effectiveness. When it comes to
composition of board, the company has not adhered to the requirements of majority of
independent directors in the board. This is because the company has supplier directors
inclusive of the executive chairman and one independent director. Hence, it must ensure that
majority of its directors are independent directors. Furthermore, independence of the
company’s chairman is also compromised in nature because the executive role of the
chairman overlaps with the role of the CEO (Bega Cheese CG, 2017). Hence, in this regard,
the company must ensure that both chairman and the CEO are different persons performing
distinct roles. However, the company has a nomination committee that is a positive indicator
in this regard.
2. Board functions and responsibilities
Furthermore, in relation to board roles and responsibilities, the company has accurately
defined the same for the board and their committees.
3. Board remuneration
In relation to remuneration processes, the company has appointed a remuneration committee
that can assist in overseeing matters associated with the remuneration practices and policies
of the company. In addition, it has also structured its remuneration in a way that allows it to
disclose the processes of senior executives’ remuneration in one segment while disclosing the
details of remuneration of non-executive directors in different segment. Furthermore, these
non-executives are also not offered bonus payments or options.
4. Different committees and their responsibilities
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Corporate governance
When it comes to board committees, the company has committees namely audit, risk
management, remuneration, and nomination committee (Bega Cheese CG, 2017). Besides,
the roles and responsibilities of such committees are adequately disclosed by the company to
address the ASX recommendations of corporate governance.
5. Additional detail
However, in comparison to Woolworths, the company has also not accounted for non-IFRS
information in its annual report that is a negative indicator. Overall, the company has catered
to all principles and recommendations of corporate governance except a few (Ferris et.
al,2010). This is because ignorance of non-IFRS information cannot facilitate in balanced
disclosure to the users that will prevent them in proper decision-making processes. Hence, the
company must look after the same and incorporate it in its annual report.
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Corporate governance
Conclusion
All the three companies have properly complied with the requirements of corporate
governance principles and recommendations except a few. Nonetheless, out of all the
companies, Woolworths have been more efficient in addressing such principles and
recommendations as it has addressed all the matters in an appropriate way. If Wesfarmers and
Bega Cheese have disclosed non-IFRS details in their reports, and each had catered to the
ASX recommendations properly, such scenario would have been avoided. Moreover, even
though these companies are listed on the ASX, yet these must account for enhanced corporate
governance practices so that users can rely upon the same and make relevant decisions
thereafter. Besides, this report has also highlighted the significance of non-IFRS information
that can facilitate in balanced disclosure, thereby establishing a moral or ethical corporate
environment. Overall, all companies have not been reluctant in following effective corporate
governance practices within their frameworks.
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Corporate governance
References
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Caradonna, J. L. (2014). Sustainability: A History. Oxford University Press
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Corporate governance
Wesfarmer CG. (2017) Wesfarmer corporate governance 2017[online]. Available from:
http://www.wesfarmers.com.au/docs/default-source/corporate-governance/2017-corporate-
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%202017%20-%20Corporate%20Governance%20Statement.pdf [Accessed 4 May 2018]
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