Corporate Governance of Webjet Limited

This study explores the corporate governance practices of Webjet Limited and its impact on shareholder and stakeholder interests. It discusses the board composition, remuneration policy, and key management transactions. The study also examines the theories of stakeholder, agency, and stewardship to understand the importance of corporate disclosures. Overall, the study highlights the company's dedication to transparency and safeguarding the interests of shareholders.

CORPORATE GOVERNANCE OF WEBJET LIMITED
Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................2
Webjet Limited Corporate Governance...........................................................................................3
WebJet Limited Board Composition...........................................................................................3
Chairman and Chief Executive Officer Message........................................................................4
Webjet Limited Remuneration Policy.........................................................................................4
Board Orientation............................................................................................................................5
a. Accounting Theory...................................................................................................................5
b. Stakeholder Theory..................................................................................................................5
Orientation Board Focus..................................................................................................................6
a. Shareholders.........................................................................................................................6
i. Market disclosure and communications with shareholders..............................................6
ii. Disclosure of shareholding................................................................................................6
iii. Hedging of Webjet shares and options..........................................................................6
iv. Key Personnel Management Transactions........................................................................6
v. Economic, business and social sustainability risks...........................................................7
vi. Environmental & sustainability risks................................................................................7
Webjet Communications Using Legitimacy Theory.......................................................................8
Conclusion.......................................................................................................................................9

EXECUTIVE SUMMARY
Sound corporate governance is a necessity for efficient management of organizations in a
cutting-edge business environment. Webjet limited, the case study company is one of the
fundamental investors in the provision of online travel booking. This study exploits the
numerous corporate governance systems that Webjet Limited has exploited to remain aggressive
within travel agency industry. Moreover, the company board of directors and the management
teams’ reports show the corporation dedication to company disclosures. Corporate disclosures
purposes to enhance the shareholders and stakeholder’s interest within the company through
communication by the company financial reports. This paper will also deal with the numerous
theories aimed at supporting the need for corporate disclosers in both financial and non-financial
elements. The theories in accounting discussed as critical tenets for company disclosures include
the stakeholder concept, agency principle, and legitimacy theory. This situation examines
mentioned the usefulness of corporate disclosure both to the shareholders, and the stakeholders
of the company using the theory said above. The conclusion of the studies on the ethics and
corporate governance of Webjet exhibits that the organization’s board of directors led by the
chairman is specifically concern with the shareholder's welfare. The diverse communication
within the disclosure starting from remunerations, management fees, share options of key
management personnel, and work ethics indicates the dedication of the company toward
safeguarding the interest of the shareholders.
INTRODUCTION
Webjet Limited is an online travel booking company that was incorporated in 1998. The
company main on-line travel agency (OTA) in Australia and New Zealand are the main leading
on-line travel tools and technology supporting the company growth. The company attention has
mainly be to offer a comfortable and best choice travelling advise for customers. Webjet’s
achieve this through customer involvement in the choice and evaluation of the travel flight deals
both for domestic and international flights. Apart from providing travel booking and scheduling
of flights it connects its customers to travel insurances, various hotels and resorts, holiday deals
and tour guide vehicle lease. Webjet is a first adopter in technology especially for online services
especially in world service travel and a leader in blockchain innovation. During May 2016
Webjet ltd acquired On-line Republic to leverage Webjet’s core competences into attractive
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complementary travel segments. On-line Republic is a market leading global e-commerce group
based in New Zealand specializing in online bookings of rental cars, motorhomes and cruises.
In the year 2013, Webjet established its B2B travel business called WebBeds. The worldwide
B2B market is estimated to generate total Transaction value (TTV) of more than $50 billion and
includes the success of hotel bookings for various tour vendors which include travel agents,
brokers, tour operators and OTAs. The WebBeds included plenty of hotels Americas, middle
East & Africa (AMEA) Sunhotels (Europe), fitRuums (Asia) and JacTravel. WebBeds affords a
simplified business-to-business solution that target to offer the widest range of services at the
lowest fees. Webjet ltd performs a unique multi-supply aggregation method that allows them to
source hotel rooms from a variety of suppliers. In addition to directly contracting room
allocations with key hotels, the company use a wide variety of third-party providers. This method
permits them to provide the best breadth and intensity of hotel room services to their clients.
Webjet low cost structure is a key feature for its strong brand portfolio useful for the expansion
of the company in different markets.
Webjet Limited Corporate Governance
Consistent with the chairman of the board of directors, governance of corporate behavior is a
critical part of the commercial enterprise. The expectancies from the board participants through
the diverse stakeholders of the corporation are high. Therefore, the board should remain focused
together with the management group in promoting an influential tradition of transparency in the
organization (Urde & Greyser, 2016). Moreover, just like some other industry in a nowadays
business environment, the airline transportation industry and travel agencies is dealing with
excessive competition, globalization issues, and other market threat elements. More widely, sound
governance within the airline travel and agency is essential in the expansion and creation of a
sustainable business model.
WebJet Limited Board Composition
The necessities to good corporate governance in an established business enterprise are the board
of directors led by the chairman of the board and its independent and executive directors (Hernik
& Vera, 2017).The shareholders of the enterprise hire the board of directors in protecting the
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interest of the shareholders of the business enterprise. The board of directors should satisfy the
specified experience, statutory and legal issues before being appointed by the company.
Webjet board of directors consists of 6 directors. This is the satisfactory size for sound company
governance. Because the size of the board is quite enough, it offers an excellent combination in
skills, dynamic interaction and participation for higher performance. The ratio of independent
directors and executive directors is 5:1. Non-executive directors who are independent plays a
critical position in balancing the executive director powers and ensuring no person is dominant in
decision making of the organization (Rao & Tilt, 2016). Webjet limited acknowledges the
critical function that independent directors play in securing the shareholders’ interests. The board
of directors of Webjet company has resolved to have a ratio of 5:1, a majority being the non-
executive directors. Moreover, the corporation has resolved that the chairman of the board and
the managing director must be separate individuals. Some of these checks and balances increase
the independence of the board in acting at the best interest of the shareholders.
Chairman and Chief Executive Officer Message
Webjet limited Roger Sharp chairman of the board, is an independent director and does no longer
have any managerial duty within the organization. The chairman is a Non-executive director with
high moral standards and acts with integrity and probity. The chairman message reiterates the
dedication of the board to enhance transparency and sustainability of their reporting to the
stakeholders. For example, the organization disclosed the implementation of a new Corporate
Social Responsibility Statement during the year available for investors in the company website.
The managing director and CEO, John Guscic announcement at the popularity of the
organization, reveal a robust balance sheet that positions the company to take advantage of the
numerous possibilities arising in the changing business surroundings. The CEO is also devoted to
repositioning the organization to take advantage of the growing demand in the airline travel
agency solutions in Australia.
Webjet Limited Remuneration Policy
Webjet limited have a remuneration policy that attracts and preserve notably skilled and
dedicated directors to work as individuals of the board(Qu, Percy, Stewart, & Hu, 2018) .The
directors are remunerated according to their overall performance to the firm common goals. The
chief executive officer and the chairman of the board remuneration are not like the other board
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members since they obtain extra fee as committee participants of the board. The remuneration
reports of the company is prepared in relation to the corporation Act 2001 section 300A. this
article outline the company rewards strategy which details the remuneration policy of the key
management personnel. The company remuneration policy is based on the key management
personnel as set by the remuneration committee responsible of setting equitable and fair
remunerations for the board and other key management personnel.
Board Orientation
The discussion of the various financial and non-financial disclosures of the company will be
based on the following theories;
a. Stakeholder Theory
Stakeholder theory extends the conventional view of stakeholders to encompass groups and
people such as environmentalists, customer advocates, media, governments, and global
competition(Jones, Wicks, & Freeman, 2017). Stakeholder theory suggests that a principal role
of management is to evaluate the significance of assembling stakeholder needs to acquire the
strategic objectives of the organization (Hummel & Schlick, 2016). Publicly disclosed records,
together with corporate social responsibility disclosures is considered as a part of a method to
negotiate stakeholder relationships Ching and Gerab (2017); Crowther and Seifi (2018). In short,
corporate social duty reporting is undertaken as a part of a stakeholder management method.
b. Agency Theory and Stewardship theory
Agency theory is the foundation of corporate governance as assessed on its fundamental
importance in policy and practice (Bosse & Phillips, 2016). This theory influences the corporate
codes of practice that advocates for shareholders interest in the management of the company.
Agency problem between the managers and the shareholders of the company can be solved by
robust financial reporting and disclosures. The remuneration scheme of the managers can help
reduce the agency problem through monitoring and ensuring a fair remuneration plan by the
remuneration committee. Thus, the agency theory provides a framework that guides the
management in decision of accounting choices and various disclosures decisions (Adams, Potter,
Singh, & York, 2016). The corporation is tasked to address the needs of the shareholders by
maximizing their benefits and engaging in prudent decision making. Furthermore, the board of
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directors is well informed to engage in decision making that favors the shareholders and other
stakeholders of the company. The board of directors ensures that stakeholders benefit the most
from the company’s business activities. Alternatively, Stewardship theory suggest that managers
are answerable to the shareholders who owns the business (O'Connell, 2007). Thus, the
management should protect the assets of the company on behalf of the shareholders. Stewardship
theory assist in aligning the management motives towards the goals of the shareholders.
Therefore, the management acts in discretionary measures that safeguard the investment of the
shareholders in the company.
Orientation Board Focus
a. Shareholders
Corporate governance is tasked with public companies whose securities are traded in the capital
markets. Shareholders take investment decisions using historical and subjective information,
leading to trust in management in order to achieve more returns. (Larcker & Tayan, 2015).
Pérez‐López, Moreno‐Romero, and Barkemeyer (2015) focus on ethics and sustainability to
determine stakeholder pressure on CSR quality. Agency theory requires firms to have a
compensation plan to give voluntary disclosure. Firms are then required to be more accountable
to improve its reputation(Martínez‐Ferrero et al., 2015). The following are the disclosures of
Webjet limited;
i. Market disclosure and communications with shareholders
Webjet limited is concern with the need to keep current shareholders, potential shareholders, and
other business stakeholders updated with the business activities in the firm. Disclosures
requirement for the company has been adopted by the company reporting system to increase the
value of the securities of the company and hence increase the shareholders confidence in the firm
trading’s. Webjet disclosure requirements is informed by the Australian regulation and
guidelines ASX. Thus, in order to enhance effective dissemination of information and increase
directors and management accountability, Webjet has adopted a market Disclosure and
Communications policy.
ii. Disclosure of shareholding
The company is committed to disclosing the shareholding of the board of directors of the
company. The company highlights the numbers of ordinary shares and options held by individual
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key management personnel, including any member of their families. This ensures the protection
of the shareholder's interest by ensuring the non-dominance of some directors.
iii. Hedging of Webjet shares and options
The key executive management personnel of the company are not allowed to protect the value of
an unvested equity as allocated or use as a collateral in any financial transaction. Other forms of
collateral include hedging and loan margin arrangement, this disclosure is important to protect
the shareholders interest in the company. Therefore, the chairman of the board is required to
authorize the transactions.
iv. Key Personnel Management Transactions
Webjet has no outstanding loan obligation from any key management personnel except those
indicated in the remuneration policy disclosure report. The loan by the company to the managing
director at a commercial interest rate has since changed from 5.6% to 5.0 % in 2017. The
disclosure reveals that the loan is secured by the shares held by the managing director of the
company.
v. Economic, business and social sustainability risks
Webjet is operating in a business environment which is prone to a range of risks. Therefore, to
safeguard the interest of the stakeholders and increase their confidence in their investments, the
company engages in various disclosures on the risks exposed to the business. Some of the
example of risks is include economic, business, and social sustainability risks. The details of the
disclosures include risks associated with Economic conditions, Increased competition, Financial
transactions, Technology changes, Market risk and On-line bookings. Thus, the company
disclose all this risk components and the strategies the company has taken to mitigate them to
allow decision making by the shareholders and potential investors.
Webjet has a risk committee which constantly analyze the business risks facing the operations of
the company and disclose the approaches that the company can adopt to minimize the risk
therein. The company is also faced with major risks in their diversification into B2B and B2C
business. Risks such as climatic, economic and other related dangers affect the business in the
global markets. In conclusion, the disclosure of the company reveals its commitment to mitigate
any material exposures through an integrated risk management framework.
vi. Environmental and sustainability risks
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Webjet operations of business in local and global markets demands the company accountability
and sustainability of the environment. The stakeholders of the company are concern with the
company response to the environment and measures to achieve a sustainable business
environment. The key decisions of the company to respond to the environmental issues such as
pollution, energy efficiency and waste reduction is important to the company’s clients,
employees, shareholders and other community members. Webjet is concern in promoting
opportunities and products which decrease the carbon footprint to its customers. The company is
also aware of the climate related financial risks especially for travelling products that Webjet is
providing their travelers. Webjet’s financial overall performance thus far has no longer been
materially affected by climate-related dangers, the Webjet Board is cognizant of the want, in
spite of the constrained effect so far on Webjet’s strategic, business and financial planning, to
often evaluation those risks and, wherein appropriate, take action to deal with these risks and to
report to the market.
Webjet Communications Using Legitimacy Theory
Legitimacy hypothesis proposes that the connection between an organization and society as a
group of individuals related together in a social context. The inferred implicit understanding
provides that as long as the exercises of an organization are predictable with society's values, the
organization's legitimacy and its existence in business is assured. The legitimacy of an
organization controversial when the desires for society do not coordinate corporate conduct. This
difference makes dangers to corporate legitimacy, alluded to as legitimacy gaps. Some of the
corporate activities such as financial scandals, environmental pollutions, social and
environmental impacts contravene the legitimacy theory.
When the corporate activities as contrary to the legitimacy theory, the managers often take
initiatives to solve the impending problems because the society could react by imposing
sanctions on the company products.
Organizations have different channels of communication to bridge the legitimacy gap. This is
possible through the various ways needed to communicate the information to the society. Such
forms of communication as direct communication create direct attention on the legitimacy gap
and increase the perceived management commitment to enhancing social contract. One of the
finest channels of communication is the financial reports, where companies disclose their non-
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financial and financial disclosures to the shareholders and the various stakeholders of the
company. The disclosure is deemed to be voluntary with either positive or negative news in
response to the societal problems or issues.
Milne and Patten (2002) Explored how disclosures of environmental issues could affect the
stakeholders of the company and thereby legitimize the chemical industry 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.
Webjet 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 travel industry is an
accurate measure of discloser to the stakeholders. 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 economic and sustainability issues related to the operations of
the company are consistent with the requirement of these 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 Webjet 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.
Conclusion
In conclusion, Webjet corporate governance structures is aimed at growing the shareholder's
confidence within the operations of the organization. Webjet corporate governance disclosure in
the industry of actual property area is adequately furnished for their stakeholders. The
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corporation, through an active board of directors and control, has ensured great governance
strategies and investment techniques that serve the hobby of its stakeholders. Furthermore, in
analyzing the financial and non-financial disclosures of Webjet corporation, the organization’s
financial reports and the numerous theories used in the preparation of final reports reveal all the
material disclosures. The corporation reporting structures is likewise steady with the specified set
requirements through the various regulating our bodies. Below the stakeholder principle and the
legitimacy theory, the organization has been at the forefront to shield the interest of its
stakeholders inside the enterprise. Moreover, being in a quite complex enterprise with worrying
surroundings safety, shareholder protection, and community social responsibility, we will
conclude that the corporate disclosures of the organization are sturdy.
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