Corporate Governance Principles - Woolworths Group Case Study

The study evaluates the corporate governance principles of Woolworths Group, a conglomerate listed in ASX300 corporations. The study analyzes the compliance of Woolworths Group with the ASX imposed principles in regards to corporate governance. The study also includes the procedure in regards to assessment of risk and the tools utilized for assessing the risk of the corporate entity.

Running head: CORPORATE GOVERNANCE PRINCIPLES
Corporate Governance Principles
Name of the Student:
Name of the University:
Author Note

1CORPORATE GOVERNANCE PRINCIPLES
Executive Summary
The principles in regards to the governance of the corporate structure can be listed as the
processes, systems and rules that a particular corporate entity utilizes for the purpose of
controlling and directing the essentialities of a particular corporate entity. The particular
structure in regards to the corporate governance involves the balancing of the interests of the
corporate entity with the interests of the different business stakeholders.
This particular study has chosen the conglomerate Woolworths Group. The Woolworths
Group has been an organization that belongs to the list of the ASX300 corporations. The
corporate governance statement of the company has been evaluated in this regards. Furthermore,
it has been found out that the management of the corporate entity of Woolworths Group has
resulted in the compliance along with the corporate governance principles.

2CORPORATE GOVERNANCE PRINCIPLES
Table of Contents
Introduction......................................................................................................................................3
ASX imposed principles in regards to corporate governance.........................................................3
The Procedure in regards to Assessment of Risk............................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

3CORPORATE GOVERNANCE PRINCIPLES
Introduction
The corporate governance principles indicate the crucial set of principles that have been
established in order to facilitate the smooth operations of business that have been carried out by
the corporate entities. Moreover, it has been found out that the controlling of the business
operations is a key contributing factor in regards to the success of the business entity. In regards
to the corporate entities it has been found out that the existence of the corporate governance
principles has led to the improvement of the essential structures of business. The body that
establishes and controls the governance principles in the business entities is the Board of
Directors. However, it should be noted here that the indirect stakeholders of business has a
restricted opinion in regards to the establishment of the essential principles.
This particular study has been aimed at focusing on the corporate governance principles
that is followed by the corporate entities in Australia and the particular corporate entity that has
been chosen for the purpose of the study is Woolworths Limited. Furthermore, for the proper
analysis of the governance structure imposed within the entity, the corporate governance
statement and the annual report of the particular business entity of Woolworths Limited has been
evaluated for the particular financial year of 2017(Beekes, Brown and Zhang 2015).
ASX imposed principles in regards to corporate governance
The governance principles that have been applied by the corporate entities in Australia is
applicable in case of all the listed entities whether or not the entities have been working within
the boundaries of Australia or outside Australia. The term corporate governance can be
described as the rules frameworks, processes and systems which facilitates the exercising of the
required degree of authority in regards to the business operations of the firm (Beekes, Brown and
Zhang 2015). The eight principles that have been utilized for the purpose of conveying the core
values of the governance principles are as follows:
 Establishment of the required foundations in regards to management and oversight – it
has been further stated by the corporate governance body in Australia that all the listed
organizations in Australia will have to establish and result in the disclosure of the
responsibilities of the Board of Directors and the management of the organization along
with the procedures that has been utilized for the purpose of monitoring and evaluating

4CORPORATE GOVERNANCE PRINCIPLES
their job and the particular activities executed by them. The corporate governance
statement for the financial year of 2017 facilitates the information that the management
of the selected corporation has resulted in the proper compliance with this principle with
the particular procedure of disclosing the particulars of the Board of Directors along with
the roles that they have to play. Furthermore, sufficient information has also been
provided in relation to the meetings that are held by the Board along with the structure of
the Board.
 Optimum focus should be put upon the Board’s structure for the purpose of adding value
– the Board’s value should be focused upon. Moreover, the composition of the Board is
also an evaluating factor. The management body of the Woolworths Group has
successfully resulted in the compliance with the particular norms that have been
established and states the composition of the Board of Directors. Furthermore, it has been
stated in the corporate governance statement of the corporate unit that the Board of
Directors of the Woolworths Limited comprises of a majority of the independent non-
executive directors along with the CEO of the organization.
 Restriction of the actions to the ethics and responsiveness – the ASX Corporate
Governance Principles state that the primary duty of a corporate listed entity is that a
listed entity should result in business operations that reflect an optimum degree of ethics
and responsiveness. This has been successfully fulfilled by the corporate entity of
Woolworths Limited.
 The financial report of a corporate entity should reflect a degree of integrity – the
financial report is a report that is prepared by all the listed entities for the purpose of
reflecting the business operations that have been carried out by the business entity and the
financial position of the organization in this regards. It must be mentioned here that the
annual report of a listed entity should facilitate the reflection of an optimum degree of
clarity and integrity in order to help the investors, stakeholders and other users of the
financial statements to obtain the required business information from such reports that
further help in the entities taking the important economic decisions. The annual report of
Woolworths Limited for the financial year of 2017 indicates the fact that the accounting
statements have been prepared in accordance to the Australian Accounting Standards
Board. This means that the financial report holds optimum degree of integrity and clarity.

5CORPORATE GOVERNANCE PRINCIPLES
 Disclosures that have been balanced and timely in nature – the disclosures that form an
essential part of the accounting statements of any corporate entity reflects the major
procedures and the effects of materiality on the value of the securities along with the
prices. This has been correctly adhered to by the Board of Directors of the particular
company of Woolworths Limited. This refers to the fact that the management of
Woolworths Limited has disclosed enough information in regards to the notes of the
financial statements that have been included in the financial report of the corporate entity.
 The security holders should be given the required degree of respect – it has been stated by
the ASX Corporate Governance principles that it is the primary duty of all the corporate
entities to respect the shareholder rights by giving them with the required financial
information that further helps them to exercise their rights successfully. It has been
further stated that the financial report should be prepared in accordance to the Australian
Accounting Standards Board. The management of the corporate unit of Woolworths has
stated in the annual report of the company that the accounting statements have been
prepared in accordance to the Australian Accounting Standards Board. Furthermore, the
auditor’s report that has included in the annual report has stated the fact that the financial
statements have been prepared in accordance to the Australia Accounting Standards
Board. Thus, automatically facilitating the providence of respect to the rights of the
shareholders of the company.
 Management and recognition of risk – it has been stated by the ASX Corporate
Governance principles that it is the primary duty of all the corporate entities to develop a
sound framework in regards to the management of risk. It can be evidently stated here
that the management of Woolworths Limited has resulted in the development of a risk
management framework that has been disclosed in the annual report of the corporate
entity as material business risks. The aspects of the risk management framework that has
been included are compliance risks, financial risks, operational risks and strategic risks.
Therefore, it can be ensured that the corporate entity of Woolworths Limited has
complied with the ASX corporate governance principles.
 Remuneration should be fair and responsible – the particular structure in regards to the
remuneration should be fair and responsible so that the executives that belong to the
highest degree of cadre can be attracted and retained in a particular organization. A good

6CORPORATE GOVERNANCE PRINCIPLES
remuneration structure should result in the providence of the required degree of
motivation to high quality senior level executives. Furthermore, a good remuneration
structure facilitates the alignment of the interests of the management of a particular
organization with the interest of its shareholders thus facilitating the welfare of the
business stakeholders. In regards to the chosen entity of Woolworths Limited the
corporate governance statement reveals the remuneration structure of the firm which
further states that the corporate entity has adhered to the ASX corporate governance
principles (Tricker and Tricker 2015).
The Procedure in regards to Assessment of Risk
 The auditor of the corporate entity has performed the risk assessment procedure
by the particular understanding of the entity. The assessment of risk is an essential
procedure as it mitigates the occurrence of issues like material misstatements in the books
of the firm. The Woolworths Group is one of the largest retail entities in Australia and
has been experiencing increased customer satisfaction for a last few years. The last
recorded percentage has been 78%. The business has been governed by the general
business and civil law. The major strategy of the corporate entity has been to focus upon
the supermarket industry in Australia. The particular aim of the corporate unit is to focus
upon good quality product at a cheaper rate(Tricker and Tricker 2015).
The tools that have been utilized for assessing the risk of the corporate entity are common
size statement and financial or significant ratios. The computations are as follows:
Common Size Income Statement
Particulars
2013 2014 2015 2016 2017
Amo
unt ($
mill)
Per
cent
age
Amo
unt ($
mill)
Per
cent
age
Amo
unt ($
mill)
Per
cent
age
Amo
unt ($
mill)
Per
cent
age
Amo
unt ($
mill)
Per
cent
age
Revenue 58674
100
% 60952
100
% 60868
100
% 58276
100
% 55669
100
%
Cost of revenue 42913
73
% 44475
73
% 44345
73
% 42677
73
% 39740
71
%
Gross profit 15762
27
% 16478
27
% 16524
27
% 15599
27
% 15929
29
%
Operating
expenses
Sales, General 11380 19 11962 20 5511 9% 12964 22 13134 24

7CORPORATE GOVERNANCE PRINCIPLES
and
administrative % % % %
Other operating
expenses 10765
18
% 11172
18
% 18567
31
% 12033
21
% 11686
21
%
Total operating
expenses 22146
38
% 23134
38
% 24078
40
% 24997
43
% 24820
45
%
Operating
income -6384
-
11
% -6656
-
11
% -7555
-
12
% -9398
-
16
% -8891
-
16
%
Interest Expense 410 1% 278 0% 255 0% 246 0% 194 0%
Other income
(expense) 10009
17
% 10449
17
% 10877
18
% 11004
19
% 11217
20
%
Income before
income taxes 3215 5% 3515 6% 3068 5% 1360 2% 2132 4%
Provision for
income taxes 960 2% 1057 2% 930 2% 520 1% 650 1%
Minority interest 5 0% 7 0% -9 0% -1113 -2% 60 0%
Other income 5 0% 7 0% -9 0% -1113 -2% 60 0%
Net income from
continuing
operations 2255 4% 2458 4% 2137 4% 840 1% 1482 3%
Net income from
discontinuing ops 10 0% 0% 0% -3188 -5% 111 0%
Other -5 0% -7 0% 9 0% 1113 2% -60 0%
Net income 2259 4% 2452 4% 2146 4% -1235 -2% 1534 3%
Net income
available to
common
shareholders 2259 4% 2452 4% 2146 4% -1235 -2% 1534 3%
Common Size Balance Sheet
Assets
2013 2014 2015 2016 2017
Amo
unt
($
mill)
Perc
enta
ge
Amou
nt ($
mill)
Perc
enta
ge
Amou
nt ($
mill)
Perc
enta
ge
Amou
nt ($
mill)
Perc
enta
ge
Amou
nt ($
mill)
Perc
enta
ge
Current
assets 6226 28% 7175 32% 7661 34% 7427 33% 6994 31%
Non-
current
assets
1602
4 72% 17030 77% 17676 79% 16075 72% 15922 72%
Total
assets
22,2
50
100
% 24,205 100
% 25,337 100
% 23,502 100
% 22,916 100
%
Liabiliti

8CORPORATE GOVERNANCE PRINCIPLES
es
Current
liabilitie
s
6,86
6 31%
7,558
34% 9,169 41% 8,993 40% 8,824 40%
Non-
current
liabilitie
s
6,08
4 27% 6,122 28% 5,036 23% 5,728 26% 4,216 19%
Total
liabilitie
s
12,9
50 58%
13,680
61%
14,205
64%
14,721
66%
13,040
59%
Stockhol
ders'
equity
9,30
0 42%
10,525
47%
11,132
50%
8,781
39%
9,876
44%
Total
liabilitie
s and
Equity
22,2
50 100
% 24,205
100
% 25,337
100
% 23,502
100
% 22,916
100
%
 The table suggests the fact that the liquidity position of the corporate unit is at stake as
the current ratio has been diminishing. The common size statement on the other hand
reflects the fact that the administrative and selling expenses has been fluctuating over the
years indicating a potential risk(Tricker and Tricker 2015).
Conclusion
The particular conclusion that can be arrived at after the discussion in the preceding
paragraphs that the particular corporate entity of Woolworths Limited has certain areas like the
liquidity position which should be focused upon by the auditor. However, the corporate entity
has strictly adhered to the ASX Corporate Governance Principles.

9CORPORATE GOVERNANCE PRINCIPLES
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Oxford University Press, USA