Flexigroup - Corporate Governance

This report analyzes the corporate governance framework of Flexigroup, a leading financial services company in Australia and NZ. It explores the board composition, chairperson and CEO report, remuneration policies, and board orientation. The report also discusses the implementation of theories such as agency theory and stewardship theory in the company's governance practices.

Ethics and Governance
System

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Executive summary
Flexigroup limited is one of the biggest organization operates in Australia and NZ. The
company provides finance solution across many countries. This report will cover the notion of
Ethics and governance.
In addition, the scope of the report provides a review of the corporate governance with
the case study of Flexi group. The reason for the report is to understand how Flexigroup operate
its corporate governance with the implementation of the theory. The outcome of the report is
why an organization has to follow social guidelines and provide disclosures to society and
maintain the ethical framework in order to sustain for the long term.

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Contents
Introduction.................................................................................................................................................3
Summarization of the Flexigroup............................................................................................................3
Corporate governance of Flexigroup.......................................................................................................5
Board composition and ratio if the independence and non-independence directors.............................5
Report of the chairperson and CEO.....................................................................................................5
Remuneration report............................................................................................................................6
Board orientation.....................................................................................................................................7
Flexigroup’s communication policy and Legitimacy theory..................................................................11
Conclusion.................................................................................................................................................13
Bibliography..............................................................................................................................................14

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Introduction
Ethics and governance is an important aspect for any organization and ethical framework
of any organization decides that how an organization serves itself amongst the society and
operates with legal obligations or not (Kumar, 2016). Every organization has to maintain and
ensure that its leaders or directors act with the company’s obligations and plays rolls and
responsibility ethically. These two are different components yet assumed to be the same.
The structure of corporate administration indicates that the others partaking in the
association, for example, the board administrators, top managerial staff, investors and different
partners must be furnished with certain rights and duties. Corporate administration enables the
association to accomplish the objectives and targets of an association in an ideal way (Ferrell,
2016).
Summarization of the Flexigroup
In the 1988 David Berkman and Andrew Abercrombie started a business with simple
least products and offered through office equipment products. Later in 1995 Harvey trialed
expands all of Flexirent nationally. The group introduced its consumer lease products and makes
a new business relationship with Apple and Noel Leeming in New Zealand in 1997 (Flexigroup,
2019).
In 2003 experienced CEO employed the professional management team to support the
business and make it ready for the public listing and as a result in 2006 the company listed in
ASX. At that time its chairman was Margaret Jackson. Currently, the company is providing
financial products to its clients and through the retail and partners network. The company
basically operates in financial services. The financial industry basically incorporates a wide area

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if a business such as manage money, credit card unions, banks credit card companies, insurance
companies (Beasley, 2000).
Currently, the company provides seamless payment solutions such as vendor finance
program, leasing interest-free cards, and other installment plans. Flexigroup is the market leader
as it works with the 4000 merchants such as Harvey Norman, Flight center Escape, King living,
Nick Scali, Australian Outdoor Living, AGL Solar, The Good Guys Kitchens, Noel Leeming,
Husqvarna, Solahart, Fujitsu, Toro, and many other companies (Flexigroup, 2018).
Flexigroup’s aim is to satisfy its customers so that they can take dream holiday overseas
and acquire a laptop for educational purposes or furnish their new home. Maintain better
relationship its merchants so that they can support and enable the business to meet the
expectation of the business (Bloomberg, 2018).
Overall the purpose of the report is to analyze the framework of Flexigroup and how the
organization serves its operations with its corporate governance framework and meets the social
norms and obligations so that organization sustains for long-term into this competitive
environment. In order to cover the notion, this report will also assess the underlying theories
such as shareholders theories, stakeholder’s theory, and legitimacy theory. The outcomes of the
report it can be understood what ethics and corporate governance are, and why an organization
has to follow these. The research has been done through the secondary research method which
includes websites of the company, books and journal article.

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Corporate governance of Flexigroup
Board composition and ratio if the independence and non-independence directors
The board composition is the committees which are constituted by the directors of the board
which direct the board by determine the individuals qualify to be the member of the board also
develops the guidelines on the corporate governance of the company (Harris, 2019).
With the board composition of the Flexigroup, the company must have at least 3 board members
and they should be nonexecutive and independent also. The board of the directors has to be
appointed by the board only and their membership reviewed by the company’s board within the
year. The chair company also has to be appointed by the board but that should not be the
chairperson of the company (Flexigroup, 2018).
The chairman Andrew Abercrombie is non-executive and non-independent and board member.
The chairman is working in the company since 1991 and most experienced employee of the
company (Flexigroup , 2018).
Flexigroup board members have the majority of independent and non-executive directors as
Christine Christian, Rajeev Dhawan, Jodie Leonard, and Carole Campbell is the independent and
non-executive directors yet its chairman is not a non-independent director of the company
(Flexigroup , 2018).
Report of the chairperson and CEO
In the annual report of FY 2018, they stated that the year 2018 was a great year of the
company as it serves strong performance. The company builds digital solutions that supported to
make efficient performance and, improve the relationship with the buyers and sellers. In the year

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2018 its customer’s growth was 5% and has 1bn customers now. The company also states the
growth of the retailers which was around 8 %( 46000) from the diverse industries.
Its NPAT of FY 2018 was around 88.2$mn which include the 2.5$mn restructuring costs.
Its receivables grew by 10% become 2.838bn. Its initiatives for 2019 are the risk and
management committee will focus on analyzing the past issues and will amend the issues and
sort them out. The company introduces the cost management program which has generated 8mn
within the annual run rate savings from the many implementations of the new cost management
system. The company also exploits the effectiveness of funding structures and delivered the
improvement in all the function with the increment of size and lower margins. The company
adopts the accounting standards AASB9 on 1 July which will help the company with its doubtful
debts and other accounting operations.
They also stated that some of the employees such as chief executive Symon resigned and
replaced by Rebecca James on 2 Oct. she have experience in the financial services sector and
CRM. Christina was also new to the board and she was appointed as Deputy Chair of the board.
The board of the company trusts that the Group is better in many services such as Certegy, Cards
with its Irish business also AU commercial’s contribution has grown in 2019.
Overall the company is focusing on its business in Australia and NZ as well as in Ireland
the company continues to build its business (Flexigroup , 2018).
Remuneration report
Flexigroup’s remuneration committee manages the process of remuneration and rewards
and suggests the board with remuneration matters. The committee also reviews the performance
and past policies and provides a recommendation to the board about remuneration strategies.

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The company provides rewards to all the employees such as
• Total fixed remuneration
• Short term incentives
• Long-term incentives
Here table showing the structure of the remuneration program of Flexigroup
(Flexigroup , 2018)
Board orientation
Board orientation is the procedures of allocating the roles and responsibilities and
proving all the information about the company’s corporate governance also providing disclosure
of what company is doing in within the guidelines and social norms and also ensures that its

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employee is maintained well or not (MACDONALD, 2018).. Board orientation of any company
can be assessed by many theories such as shareholder’s agency theory and stewardship theory
and Stakeholder’s managerial or with ethical theory. These theories state that what board
members working for.
Agency theory evaluates the standards and operator's relationship, interestingly with the
stewardship theory, officials of the organization secure the enthusiasm of organization's
proprietor and different investors take a few obligations, likewise settle on some choice for their
benefit. In an agency relationship, two social occasions exist – the administrator and principal,
whereby the past shows and takes decisions to support the last referenced. With the agency
theory it can be implemented on Felxigroup as its board members are independent and have
interest in the company by being shareholders. In contrast with stewardship the board members
works for the company’s shareholders, and provide all the information to them with the key
communication of chairperson’s report, balance sheet and cash flows.
The speculation turns around the association between the two and the issues that may
surface as a result of their different risk perspectives and business goals (Hussain, 2018). While
stewardship theory primary reason for existing is to support a fruitful organization and its needs
are the objectives of the association. With regards to likenesses with organization and
stewardship both spotlight on the organization's investors commitment while basic leadership.
They will probably deal with all the investor's desires by giving a revelation of all the data
identified with the money related strength of the organization (Bauweraerts, 2017). This is the
area where both theories can be implemented well with the Flexigroup as according to Principle
6 stated in its corporate governance, all the board members are responsible to maintain
communication with the powerful stakeholders.

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Giving exposure to all the data of the organization is the basic angle and rule of corporate
governance. Flexigroup’s board members of the company have to keep the market fully informed
to the company’s operations and activities. The company has disclosure policies to ensure
compliance with ASX rules and the Corporation Act 2001 (Flexigroup , 2006). As its most of
board members are independent, non- executive and independent directors, therefore, Agency
theory would be the best to implement. And According to company corporate governance
statement’s principle 6, the board members have to respect all rights of its stakeholders and they
have to be fully informed about the developments and activities.
Aside from the Agency and Stewardship, there are two different speculations of
partner's managerial and Ethical theory. Company’s managerial board presumably attempts to
fulfill the powerful shareholders of the organization. These partners can be diverse for various
organizations on various occasions. With Ethical branch hypothesis partners there are likewise,
for the most part, autonomous executives; duplicate the decent variety of every single incredible
partner. The administrative board centers on estimating the necessities of incredible partners. The
data given by the board to these amazing partners can differ as per their advantage. Be that as it
may, the board needs to make a system to oversee such clashes and issues. Accordingly, the
administrative board mostly works for the shareholders and partners of the company (Hussain,
2018).
The ethical board centers on the administration of all the partner of the organization.
Using the ethical piece of accomplice theory, we see the venture and its board as an arranging
vehicle for the interests of its accomplices. The board and its organization have an obligation to
all accomplices and not just too financial specialists. Where beyond reconciliation circumstances
develop among accomplices or accomplice social affairs, the board needs to regulate and modify

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its duties for more notes the commendable advantage of the accomplices. In any case, the board
furthermore sees that it has a commitment to give acceptable and sensible exposures to all
accomplices (deontology), paying little heed to whether that information is used or not.
Flexigroup works for its powerful shareholders, rather than all the stakeholders therefore this
theory cannot be implemented appropriately, yet the key communication are same while
comparing Ethical theory with the board of the Flexigroup.
Finally, with the Resource hypothesis, this isn't essential to have an equivalent proportion
of autonomous and non-free board executives. Be that as it may, the thing which is significant
that there is ought to be all sort of gifted individuals who can deal with the asset streams into the
organization and deal with the tasks so as to make the association's progress. The asset streams
contain both inward and outer progression of the asset. Board additionally deals with the capital
of the organization gives the expected asset to the next staff. This theory is differing from the
company’s board as they do not have the mix of independent and non-independent directors also
they do not manage the resource flow. They manage the financial and operational performance
of the company.
Agency theory is one of the best theories to implement with the board where the majority
of board directors are independent directors. Hence in order to understand the board orientation
of Flexigroup, this theory should be implemented as apart from the chairperson of the company
all are independent directors and with the principle 6, their priority is to work for company’s
shareholder. Directors of the board have to provide an annual report to the shareholders and all
the relevant information. Also, they have to publish the entire document such as Annual report
and code of conduct on the company’s websites. The board is responsible to inform external
auditors to be available in the AGM and give clarification of all the questions of the shareholders

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related to the financial statement of the company. The board of the company is also responsible
to update the company’s websites and its annual report, interim reports, announcements, and
financial shareholders information. The overall majority of the board members are non-
executive independent directors and their priority are to share all the information to company’s
stakeholders about growth, dividends the yearly Net Revenue through the remuneration report,
balance sheet and income statement. And all these have to update in the annual report of the
company.
Flexigroup’s communication policy and Legitimacy theory
This is essential for any ASX listed company to provide sustain ethical framework and
control environment with its corporate governance and provide disclosure to the society and with
shareholders. And providing disclosure helps a company to satisfy the most powerful
shareholder of the company, manage the entire stakeholder’s interest and to be legitimate with
society and this help create productivity of the company and increase its market performance
(Milne, 2002).
Legitimacy theory is the theory which determines how a company is being legitimate to
society and earns profit in return with society (Deegan, 2002). With the implementation of this
theory on Flexigroup group, the company successfully meets the requirement of being legitimate
and provides has many policies in order to maintain ethical framework with the guidelines listed
in ASX rules.
Legitimacy theory also states that an organization has to ensure that they working for their
stakeholders. Flexigroup also serves commitment to disclosure and communication as every

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board member has to comply with the yearly disclosure. There are several committees such as
Audit committee, Risk and compliance committee, Remuneration committee which audits and
review the performance of stakeholders and their interest, also manage the operation so that the
company meets the stakeholder’s expectation (Flexigroup, 2018). They responsible to ensure that
their disclosure is delivered in a balanced way and the entire shareholder can easily access to the
information. By following these company fulfill the requirements of ASX rules. According to its
code of conduct, Flexigroup works with integrity, better relationship, flexibility, courage, and
accountability. These values help the company work in the boundaries of guidelines and serve a
better environment to work. There are some policies which workforce and board member of the
company has to follow such as conflict of interest, Confidentiality and Privacy and many others.
There is a policy Whistleblower, with which company empowers its staff members to share or
report about any illegal behavior. Every employee motivated to share the issues and anything
they found illegal or inappropriate. These guidelines and principles mentioned in its annual
disclosure.
As legitimacy theory states that providing disclosure is essential for the company and society as
well. that Flexigroup serves disclosure to society a shareholder through its Audit committee
charter, board charter, Code of conduct, Constitution, Corporate governance report, Disclosure
and communication policies, Remuneration committee, Nomination committee, Risk and
compliance committee and trading policy. Flexigroup successfully meets the requirement of
being legitimate to the society, stakeholders, its shareholder and partners (Flexigroup, 2006).

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Conclusion
It can be concluded that Flexigroup is the largest financial service provider in Australia.
It also operates effectively in NZ and Ireland. The company works with the guidelines and rules
which is listed in ASX. The company has 6 board directors and the majority of them are non-
executive independent directors. However, the company’s chairman is the non-executive and
non-independent director of the board. All the board members are responsible for the code of
conduct and corporate governance of the company. With the remuneration policy, the company
provides many rewards with the long term and short term incentives and Remuneration
committee handles, review and provides a recommendation to board regarding better strategies.
And in order to understand the company board orientation concept Agency theory can be
analyzed as there are most of the members are independent and all works to satisfy the need of
shareholders. The company also provides its business services by being legitimate and earns
legitimacy from society. With the disclosure policy, the company provides all the financial
information through its websites and annual report.

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