Corporate Governance Issues in Australia: Analysis and Recommendations

Governance in a Globalizing World 1
GOVERNANCE IN A GLOBALIZING WORLD
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Governance in a Globalizing World 2
Governance in a Globalizing World
Table of Contents
Introduction......................................................................................................................................3
Issue Summary of Two Articles......................................................................................................3
Article #1......................................................................................................................................3
Article #2......................................................................................................................................4
Corporate Governance Theory........................................................................................................5
Issue Analysis and Recommendations.............................................................................................6
Issue Analysis..............................................................................................................................6
Recommendations........................................................................................................................7
Conclusions......................................................................................................................................8
References......................................................................................................................................10

Governance in a Globalizing World 3
Introduction
Corporate governance has become an impotent aspect of the current company’s success.
The latest scandals in many companies have been attributed to poor corporate governance. The
recent Commonwealth Bank’s scandal in Australia occurred because of the ineffective corporate
governance that allowed the manipulation of the bank’s financial statements. The culture of the
boards in Australia can explained as rooted in agency theory where the members of the boards
are predominantly agency-reasoning persons that want to only promote their interests at the
expense of the shareholders. The paper will investigate five articles regarding corporate
governance issues in Australia.
Issue Summary of Two Articles
Article #1
The article entitled “ASX200 boards near 30pce gender target: AICD” underscores the
need to incorporate more women as directors towards promoting corporate governance. The
article recognizes that there are an increasing percentage of women on boards in Australia’s 200
largest firms in the recent years. Statistics shows that the females in boards in Australia hit the
mark of 28.5 per cent in 2018, which was up from 25.4 per cent. There is an increase in the
number of women in senior leadership positions at ASX200 females and the increase in the
number of chief executives (Patten, 2018, pp. 1). In May this year, reports indicated that the new
directorships on ASX200 comprised 36 per cent that were mainly women; however, this figure
increased to 50 per cent between June and August this year, which was a positive trend. AICD

Governance in a Globalizing World 4
chairperson Elizabeth Proust emphasized that the progress of attaining the 30 per cent mark for
females on ASX200 boards has been steady where it was improvement from less than 10 % in
2009. In addition, the article stresses that the percentage of women of boards of the 100 largest
firms was higher at 30.5 per cent, placing Australia ahead of Britain, Canada, and the United
States, where the percentages were 28.9 %, 23.9 %, and 23.6 %. The article further highlighted
the warning by the Australian Council of Superannuation Investors to firms (including TPG
Telecom) that did not have women directors that they will vote against the re-election of
directors (Taylor, 2017, pp. 1). Finally, the author underscored the importance of smaller firms
struggling in the gender stakes at the board level.
Article #2
The article entitled “Company boards are stacked with friends of friends so how can we
expect change” explains the challenges facing the boards of different companies in Australia.
Smith (2018) explains that the corporate governance in Australia is at a crisis in that there is no
diversity or independence on the Australian company boards. The author claims that there were
only 18.1 per cent of women in board’s seats in ASX100 firms and improved in 2015 to 25.2 per
cent. In 2015, 58 per cent of the directors in the ASX100 and 49 per cent in the ASX200 were
individually connected to the firms. These connections were detrimental to the growth of the
company because it may impair the judgement of the directors, where these directors could serve
their own interests and not look at the interests of the company and its shareholders. An example
of this effect was in the Enron and HIH Australia failure in their corporate governance. In
addition, the article further claims that social identity was key criteria in the appointment of
directors and independence and diversity elements are not considered (Smith, 2018, pp. 1). This