Corporate Governance and Ethics at Diversified United Investment Limited (DUI)

This report provides insight into the ethical basis and corporate governance posture of Diversified United Investment Limited (DUI). It explores the company's approach to corporate governance, including the composition of the board and its accountability. The report also focuses on the ethical aspects of the company's relationship with stakeholders. DUI has aligned itself with good corporate governance guidelines and earned legitimacy in the eyes of society.

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Introduction
This report is meant to give insight into the ethical basis and corporate governance posture of
Diversified United Investment Limited (DUI).The report dissects through the various ways through
which the company has managed to achieve good corporate governance. By looking at the
Company Annual Report 2018 we are able to visualize the relationship between stakeholders and
the company as well as the approach taken by the board to ensure it meets the good corporate
governance principles as set by the relevant authority and general good practices that are not
necessarily included within the policy framework.
This research is meant to shade light on if and how the company, Diversified United Investment
Limited (DUI), has managed to align itself with the principles of good corporate governance. The
research looks into the company’s approach in corporate governance by exploring how the board of
directors is constituted and how the board runs the company while ensuring the interests of all the
stakeholders are taken into account. This report also focuses on the ethical aspects of the company
by looking at the relationship between the company and all its stakeholders and gauging if the
relationship meets the expectations of the stakeholders.
The findings from this research show that DUI has managed to align itself with the guidelines of
good corporate governance and ethics and by extension earned legitimacy in the eyes of society.
DUI plays fair with all the stakeholders in that it tries to meet expectations of owners as well as
other entities in a balanced way. The report outlines the composition of the board, its accountability
and responsibility as well as terms of appointment, remuneration and performance of directors.
Diversified United Investment Limited (DUI): A brief introduction
Diversified United Investment Limited (DUI) is an investment company based in Australia. The
company invests the money collected from investors into financial securities with the aim of
making profit which is to be shared proportionately in relation to how much one has invested and
how the company has performed within a financial year. The company deals in Australian equities
as well as international equities and listed property trusts. DUI is listed on the Australian Securities

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Exchange in 1991 and principally follows the guidelines of good corporate governance as outlined
by the Good Governance Council (Visser et al.,2017).
The main focus of the company is Australian equities but investment in international equities has
also increased taking 14.5% of the portfolio. DUI seeks to continue awarding dividends to its
shareholders in the long term while managing the risks within acceptable limits. The dividend has
always been increased or remained the same from each previous year since the company listing and
this shows that the company is on the right track (Visser, McIntosh & Middleton, 2017). The
company is projected to grow as it broadens its scope of investment.
Corporate Governance at DUI
The company’s constitution provides for a minimum of 3 directors and a maximum of 6. Currently
there are 4 directors sitting in the board. Two of the directors are independent whereas the
remaining two are non independent including the chairman. This means that the two non
independent directors have material interest within the company whereas the two independent are
only entitled to the approved remuneration as stipulated in the appointment letter. The ratio of
independent verses non independent directors is 1:1 which shows that there is a balance between
taking care of interests of the owners of the company as well as the interests of those involved in the
running of the company. The Company Secretary is the sole employee and executive of the
company and is responsible for channeling information relevant to the operations of the company.
The board comprises of two independent directors and two non-independent directors (Sugarman,
2015). Appointment of directors involves the Nomination and Remuneration Committee selecting
the best available candidate basing on qualifications and experience in fields relevant to the interests
of the company.
The board has two committees, one being an Audit and Risk Management Committee and the other
one being a Nomination and Remuneration Committees. Each committee has a charter that uniquely
defines its role. The board reviews these charters yearly. Policies have been put in place in line with
the Australian Securities Exchange Listing rule disclosure requirements (Soltani & Maupetit, 2015).

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DUI has various channels through which it communicates with the shareholders and this includes
the company’s annual report, the half year report and the company’s website. Also during the
annual general meetings, the chairman addresses the shareholders and the shareholders are given
chance to pose their questions. Communication can also be established via phone through the
company secretary’s office. Email is also used to communicate to the shareholders for instance by
posting a copy of the annual report to shareholders (Rhodes, 2016). DUI demands its directors to
uphold high ethical standards and to exempt themselves from engaging in discussions or decision
making on matters with conflict of interest (Soltani & Maupetit, 2015).
The chairman’s report highlights the DUI’s long term goal which is to be consistent in awarding
dividends to the shareholders and ensure capital appreciation while operating within acceptable risk
levels. Areas of strength and weakness are pointed out in the chairman’s report and this can be used
to layout strategies that will utilize available opportunities and ensure DUI’s growth and stability
even in such a competitive environment. The report goes ahead to outline the performance of the
company while drawing comparisons to the previous years hence one can visualize the trends,
project the future that lies ahead and even lay out strategies that put the company in advantageous
positions compared to other competitors.
From the annual report and the website, DUI has met the requirement of reporting and information
disclosure in line with good corporate governance principles. The stakeholders can get information
they need conveniently which can be crucial to their decision making process and they can also
follow up on issues affecting the company.
Board Orientation
The Board at DUI is well balanced and focused on the interests of all the stakeholders. We have two
independent directors and two non-independent directors. Having an equal number of independent
and non-independent directors shows that at least two theoretical models of corporate governance
can be applied simultaneously and the board orientation is more balanced. The agency theory can be
used in that the independent directors will likely push for interests of the shareholders. They are

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more inclined on growth of the company, profit and dividends. From the kind of reporting we can
also link this board to agency theory as the annual report includes a balance sheet, remuneration
report and income statement. However, the board has two non-independent directors, equal in
number to the independent directors. This shows that there is an element of shareholder
stewardship. All directors are elected by the shareholders. The non-independent directors are more
likely to focus on growth strategy and capital management. This shows that the shareholders have a
say in how the board runs the company as they are the ones that elect the directors into the board.
By electing directors, the shareholders give authority to the directors to act on their behalf. Hence
the interests of the shareholders is the focus of a board that is entirely elected by the shareholders.
At DUI, this can be attributed by the availability of the chairman’s report, balance sheet, and cash
flow. We can also point out the stakeholder management branch DUI with the independent directors
more likely to safeguard the interest of the most powerful stakeholders, the shareholders. The
availability of voluntary disclosures in key communications of the company is an good indicator of
the stakeholder management branch orientation.
The fee of the directors is reviewed annually and the remuneration report outlines the fee as well as
superannuation entitlements for each of the four directors for both 2017 and 2018. It also shows
how the company has performed within a span of years in terms of profit and other indicators so
that we can be able to compare and also relate the company’s performance and the remunerations of
the directors. Other perks that the directors are entitled to like insurance cover are well defined
within the company policy framework and there is no chance that directors can award themselves
perks or incentives at the expense of other stakeholders. From the annual report and the website,
DUI has met the requirement of reporting and information disclosure in line with good corporate
governance principles. The stakeholders can get information they need conveniently which can be
crucial to their decision making process and they can also follow up on issues affecting the
company.

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The board is also resource oriented in that as much as there is a balance in the number of
independent and non-independent directors, the board is keen to bring in skills relevant to the
company and also resourceful connections. The directors at DUI are well experienced in the areas
of interests and some hold vital positions in other big corporations and hence can use their influence
to help DUI secure vital resource flows into the company.
The directors are nominated by the board and then elected by shareholders during the annual
general meeting (Moon & Knudsen, 2018). Therefore, the shareholders are the most powerful
stakeholders in this scenario in that they are the ones who elect the directors from those nominated
by the board. The board then oversees the running of the company on behalf of the shareholders by
monitoring and providing direction to management. We can see that the board is keen on tending to
the interests of the most powerful stakeholders who are the majority shareholders in this particular
case. Therefore we can say that stakeholder managerial branch theory is more applicable in
explaining the relationship between the stakeholders of this company (Knudsen, Moon & Slager,
2015). The company has employed the strategy of disclosing information with various channels put
in place to facilitate the flow of vital information. The annual report includes information that
clearly shows the financial standpoint of the company. The remuneration report shows the fee and
superannuation awarded to the directors for the years 2017 and 2018. We can also see the income
statement, balance sheet as well as the cashflow statement. With this kind of disclosures,
stakeholders have at their disposal crucial information which they can use to enable them make
informed decisions that give direction on how the company is supposed to be run effectively and
with the aim of achieving success in terms of growth and profit. In this case stakeholder managerial
branch theory is more applicable in explaining the relationship between the stakeholders of this
company (Knudsen, Moon & Slager, 2015).
The fee of the directors is reviewed annually and the remuneration report outlines the fee as well as
superannuation entitlements for each of the four directors for both 2017 and 2018. It also shows
how the company has performed within a span of years in terms of profit and other indicators so

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that we can be able to compare and also relate the company’s performance and the remunerations of
the directors. The directors entitlements are based on how the company has perfomed in the
financial year under rewiew. With a clear remuneration policy in place the directors would be more
motivated to push for the companys growth and profit making and they will strive to bring more
success in the company so as to get more in entitlements. Otherwise failure or poor perfomance of
the company will significantly also reduce the directors benefits. Other perks that the directors are
entitled to like insurance cover are well defined within the company policy framework and there is
no chance that directors can award themselves perks or incentives at the expense of other
stakeholders.
Company Communications: Analysis based on Legitimacy theory
DUI has maintained constant communication with the stakeholders through various reliable means
and by that ensuring stakeholders get crucial information promptly which can in turn facilitate
making of accurate and informed decisions. Annual reports which include financial statements and
remuneration reports are availed to stakeholders through their emails or the company website
(Delmas, 2015). Within the report we find executive and directors remuneration disclosure. The
annual report is also meant to give a clear picture on the company’s performance. More information
related to the company can always be found on the website. The company has also established
procedures to facilitate dissemination of information of information such as monthly disclosure of
the Company’s net tangible asset backing per share (Horng, Hsu & Tsai, 2019). This kind of
disclosure subjects the information to verification and hence the company will always make sure
that the integrity of such information is not compromised. This kind of engagement breeds
confidence among the stakeholders as they are kept aware of what is going on in the company in a
way that is transparent. In the process of appointing directors or the company secretary, gender
neutrality has been observed and appointments are made strictly based on qualifications and free
from gender bias thereby giving women equal opportunity as men (Frederickson, 2016). At the time
of conducting this research the board is entirely made of men but we can expect in the near future

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women to come up and occupy a place in the board as long as they meet the qualification
requirements. This puts the company in the good books within the society especially with the
proponents of gender equality.
Conclusion
DUI has managed to operate within the framework of good corporate governance in various ways
as well as ethical standards in line with the expectations of the company’s stakeholders. This it has
achieved through its policy that enforces accountability and responsibility and ensures that running
of the company is done in a transparent manner. The company has demonstrated transparency
through disclosure of information and this has ensured that interests of all stakeholders are taken
care of in a fair and balanced manner and that all stakeholders are satisfied. DUI has put in place
mechanisms and procedures that promote accountability and responsibility with an added element
of transparency. The company requires that its directors operate with high standards of ethics. With
the adherence to ethical standards as prescribed by relevant authorities, the company portrays a
good image in the public eye hence enhancing its legitimacy within the environment it operates.
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