Ethics and Governance in South32 Limited

This report discusses the ethics and governance framework of South32 Limited, a successful mining organization in Australia. It explores the corporate governance practices, board orientation, and company communication strategies. The report also highlights the importance of ethics and sustainability in the organization's business model.

Running Head: ETHICS AND GOVERNANCE
ETHICS AND GOVERNANCE
Name of the Student:
Name of University:
Author Note:

1ETHICS AND GOVERNANCE
Executive summary
South32 Limited is one of the successful business organisation that actively doing business in
Australia. The organisation is belonged to the mining industry and effectively expands its
business in international market such as South America and Africa. However, there are specific
elements that are considered to be played major role for embolden the organisational exposure of
South32 Limited. The corporate governance, incorporation of the shareholders and the company
communication are the important facets on which the report discusses ethics and governance
framework of South32 Limited.

2ETHICS AND GOVERNANCE
Table of Contents
Introduction......................................................................................................................................2
Company history..........................................................................................................................2
Corporate governance..................................................................................................................3
Board orientation.........................................................................................................................5
Premium rate of environment..................................................................................................5
Business model........................................................................................................................6
Collaboration, culture and value..............................................................................................7
Performance.............................................................................................................................7
Outlook....................................................................................................................................8
Company communication using legitimacy theory.....................................................................8
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11

3ETHICS AND GOVERNANCE
Introduction
South32 is a globally reputed diversified mining and metals company operates in
Australia, Southern Africa and South America. The company was a child organisation of the
mining giant BHP Billion but started independent operation since 2015 (asx.com.au, 2019).
Listed in the Australian Securities Exchange, currently South32 is doing business successfully in
Australia. The mission statement of the organisation reveals the focus on improving people’s live
and ensure the best use of natural resources for the next generation. Putting emphasis on the
partners and the owners is also a unique feature of South32 to make a sustainable business
orientation. Based on this understanding, this report aims to evaluate the corporate governance,
board orientation and the communication of the organisation in reference to the annual plan of
the organisation.
Company history
South32 is doing good business in Australia with the help of focusing on corporate
governance and the practice of establishing sustainable business practice across the world.
Ethical business practice is one of the major aspect on which South32 is started putting focus
(south32.net, 2018). In respect to this, it can be stated that the purpose of the company is related
to the benevolent practice of safeguarding the nature and the next generation. A sustainable
approach is followed by South32 as a strategic approach that makes the organisation more
acceptable to the global market and foster strategic advantage. The market capitalisation of the
organisation is healthy and effective in respect to its business orientation. In the Arizona Mining
plant, the organisation encapsulates 83% of the mining field with the Hermosa project
(asx.com.au, 2019). Moreover, strategic alliance with North Queensland and Resources also

4ETHICS AND GOVERNANCE
considers to be an important aspect for the organisation to establish a good business practice in
both regional and international field.
Recently in 2018, the organisation expanded its business to South Africa for coal mining
and got a standalone business that is helping South32 to establish a strong and effective business
practice. The ongoing sustainability framework is also an important part for the organisation in
order to bring more efficacy and market capitalisation in the international market. Currently,
South32 is contributes 40% of bauxite, Aluminium and Alumina, 12% in Energy coal, 31% in
manganese extraction (south32.net, 2018). This range of products helps the organisation to
establish an effective business practice in association with corporate governance framework.
There are more than 14,000 people currently employed in South32 in all over 7 countries. 95%
of the employees are permanent and only 5% are recruited as temporary or fixed term basis
(south32.net, 2019). Moreover, the organisation does not believe in gender discrimination and it
can be seen in the organisational structure of South32 where 33% of the Board members are
women and the senior leadership encompasses a percentage of 31. Moreover, for prohibiting any
kind of threat from racism the organisation intends to employ more African people in its
operations in South Africa. In the total employee strength 81% are comprised with the African
nationality which has grown since the financial year of 2016 and 2017 (south32.net, 2018).
Therefore, it can be stated that the organisation pledge to do business in association with
effective and strong organisational values and social responsibilities.
Corporate governance
As far as the corporate governance is concerned, South32 practices a clear vision of
commitment to transparency in the dealings with the stakeholders based on the 8 points
organisational principles. Based on this understanding, it is essential to evaluate the

5ETHICS AND GOVERNANCE
organisational structure for making a clear version of the corporate governance initiative by the
organisation (Alonso‐Almeida, Fernández de Navarrete,, 2015). Graham Kerr is the Managing
Director and the CEO of the company who has profound knowledge in the business activities of
South32. Apart from that the governing body of South32is also comprised of seven non-
executive directors and one chair. David Crawford is the head of the Board of Directors who has
enough experience in risk management and organising the business (south32.net, 2019). The
advisory body of South32 is primarily focused on several key aspects like improving the
premium rate environment, establishing culture and values. However, there is no such measure
mentioned in the context of environment protection. It should be the organisation’s core
corporate governance strategies to take adequate measures in order to set up effective
environmental practice. However, the governing body is failed to identify the environmental
issues that are most of the important factors in global business. Therefore, it is a pertinent
measure that the South32 Board of Directors should consider as a threat for the international
image of the organisation. Moreover the annual report of the organisation reveals that in
Australia, there was a growing trend of environmental protection and the business organisations
came to install measures for safeguarding the environment properly. Therefore, it is important
for South32 also to formulate effective measures for protecting ecology.
In the remuneration report of South32, it was found that the organisation tries to develop
an effective and fair remuneration process for the organisation. In this regard, the organisation
emphasis on the governance and culture of the remuneration process. In the governance, the
CEO of South32 enjoys the responsibility to implement an effective company remuneration
policy and also finds out the flaws within the system so that those issues can be resolved as soon
as possible. Moreover, there is also a people committee that is also played a major role in

6ETHICS AND GOVERNANCE
shaping an effective remuneration practice in South32 (south32.net, 2018). The committee is
comprised of the key management personnel of the organisations such as the non-executive
directors of the board. On the other hand, the organisation follows a remuneration culture that
will formulate a philosophy of treating the employees on the basis of their performance.
Therefore, competitive rewards are given to the employees to attract high calibre and also link
the executive rewards to shareholder value. It can be argued that the organisation puts huge
importance to extract more efficacy into the organisational practice of the employees and for this
there are both the short term and long term remuneration system has been implemented in order
to bring more efficacy into the organisational performance (Kelchner, 2017). From the annual
report of the company, it can be seen that there is a sharp increase in the remuneration weightage
and volume of South32. For instance, in 2018, the projected shareholders return was estimated at
53%. It is essential for the South32 to increase the shareholders return to a great extent so that it
will satisfy the shareholders. However, there is an improvement of 15% can be found in the
remuneration practice that will provide a boost for the employees and management to perform
extensively (south32.net, 2018). It proves the aggressive and fair reward system of the
organisation. However, lack of highlighting the basic criteria for rewarding with remuneration
provides a serious problem for the organisation and it is important for the business organisation
to resolve this issue by stating a clear projection of the reward criteria for both the executives and
the employees.
Board orientation
In course of discussing, the board orientation of South32 it can be stated that the board of
directors illuminates a number of important factors such as the premium rate environment, focus
on the business model, collaboration, culture and values, outlook and the performance.

7ETHICS AND GOVERNANCE
Premium rate of environment
The premium rate of environment means the South32 is willing to put focus on its
stakeholders to a great extent. It is, in fact, mentioned within the organisational mission and
vision where the company illustrates that it is their primary concern to set a better business by
putting emphasis on the interest of the clients. Moreover, it can be argued that South32 shares
grave concern for the shareholders and the stakeholders (south32.net, 2019). There is a reason
for prioritising the shareholders and clients on top because the organisation knows that the clients
and the shareholders are the key elements to foster sustainability in its business (Teo, T. S.,
Nishant & Koh,, 2016). Most of the shareholders are independent and ventilate their interests
through investment. It is of course an important aspect for the company to run its business
properly. The operating division is entitled to look after the interests of the investors and clients.
Besides this, employees are also considered to be played a major role in procuring a healthy
environment within the organisation. Therefore, the Board intends to set up a business model in
order to value the clients, partners, employees and shareholders. It brings confidence to the
organisational activities and identified as a key component for the development of the
organisation.
Business model
Building an effective and profitable business model is another important facet on which
the board tries to fix its gaze. The business model is resembled with the practice of developing
better strategy and purpose for future stability in business. Henceforth, using shared value will
get benefit for South32. The Board of the company also believes in such practice so that create a
value in all over the operational activities. According to Sharfman (2017) the business model
guides the organisation towards achieving high rate of profitability. In the intense competitive

8ETHICS AND GOVERNANCE
market of insurance in Australia it seems effective for the financial enterprises like South32 to
use its stakeholders as a driving factor for elevating the marketing capitalisation more effectively
and prosperously. The product and service offering is also a part of strategic value setting for
South32 where the board members are directly emphasizes on the upgradation of the service
delivery. With the growing change in the consumer behaviour, pursuing for new technology and
training of the employees are referred as the crucial part South32 to consider (south32.net, 2018).
The Board shares its intention to train the leaders and re-evaluate the underwriting agreements so
that the company will get a fresh start to revamp its success.
Collaboration, culture and value
For an efficient business practice, South32 tries to develop a strong cultural backbone
with the help of effective policy making. In this regard, the Board of Directors are directly
involved into the practice of facilitating an effective practice by emphasizing on all the
employees and managers (Hummel, & Schlick, 2016). The board shared a vision of collaboration
among all the key players who are contributing for the growth and progress of the organisation.
The cultural values in South32 is associated with the practice of delivering an in-depth focus on
the environment and social leadership approach. As a member of the International Council on
Mining and Metals the organisation is always highly concerned about the social, economic and
environmental conditions. Therefore, putting great deal of emphasis on the United Nations
Sustainability Development Goals is a strategic approach for the organisation to establish healthy
business practice across the international market (south32.net, 2019). Furthermore, a close
introspection on the employees is also pivotal for setting good organisational practice.
Henceforth, an inclusive workplace practice with demonstrating the values of the organisation
through employing right people in right roles. As a matter of fact, ensuring the interests of the

9ETHICS AND GOVERNANCE
employees and empowered them through reward reflects the significance of the organisation for
safeguarding its employees.
Performance
Performance is identified as one of the leading factor that facilitates better practices for
the business organisations to establish and develop effective workplace culture. The vitality of
performance is based on two clear facts. First of all it can be argued that high demand in the
international market for energy consumption makes it more relevant for South32 to keep an eye
on the performance of the employees (Heskett, 2017). Apart from that Globalisation also plays a
pivotal role in terms of influencing the significance of performance in South32. Due to the
globalisation, competition in the Australian mining and coal industry has been increased to a
rapid pace and it leaves an impact on the performance of the performance of the mining
companies in Australia. (Zhang & Moffat, 2015). Fluctuation in the rate of energy prices is not
only interrupts business practice of the corporate enterprises but also symbolises the urge for the
companies to incorporate new ideas and innovation as a part of the performance. Therefore,
putting great deal of emphasis on the performance development is an important concern for the
CEO in South32.
Outlook
Performance is not enough to encapsulate the market effectively. It requires an image or
outlook for the organisation to attract the clients and investors as more as it can. Therefore, the
board tries to point out two inter-related points that will bring more efficacies into the
organisational practice. For instance, performance is obviously the first choice for South32 to
expand its market and foster a steady growth in business orientation. Apart from that discipline is
also pertinent for the company so that a healthy business practice and cooperation among the

10ETHICS AND GOVERNANCE
clients, investors, employees and management can be harnessed properly (south32.net, 2018). It
is also coupled with the aspiration to procure a long term growth that will generate sustainable
progress for South32. Based on the perception of the Board, it can be stated that growth and
development are part and parcel of the motive of the senior management. Therefore, a code of
conduct and the proper channels of communication can render an optimistic outlook for South32.
It will also enhance the confidence of the clients and shareholders to invest money and seeks
services from the company.
Company communication using legitimacy theory
As far as the Legitimacy theory is concerned, it is closely associated with the corporate
governance practice of an organisation. In other words, the legitimacy theory reveals the
behaviour of the organisation in implementing and developing voluntary social and
environmental disclosure of information for fulfilling the social contract of recognising the
objectives of the organisation (Deephouse et al., 2017). In this regard, it is important to
understand that the social contract does not cope with the clients only. It is also relevant in the
context of managing the employees as well. From that point of view, it is essential for South32 to
follow a better communication policy that will connect both the employees and the clients. In
this regard, the purpose of South32 is related to the timely, balanced and comprehensive
information of the company providing to the shareholders and promote the active participation of
the shareholders and the employees for active participation in the general meeting.
Based on this understanding, South32 also sets some strategies that can bring an effective
communication with the shareholders and creates a healthy relationship between the shareholders
and the employees. Information sharing is a crucial part of the communication. In fact, it is also
signifies the relevance with legitimacy theory (south32.net, 2018). Updating the website and

11ETHICS AND GOVERNANCE
ensure sharing of information through effective communication are the key concept of the
organisation. Moreover, the organisation encourages its employees to become proactive and feed
the shareholders with up to date results and information of the organisation. As a result of that an
ethical business practice can be restored and the communication with the shareholders can also
be made. In fact, for procuring more transparency in the communication, South32 follows some
written policies including the Continuous Disclosure policy under the ASX listing rules. It will
help the organisation to set better practice of corporate governance throughout the levels of
organisational structure.
Conclusion
The above discussion intends to correlate between the corporate governance of the
organisation and the role of the board of directors in order to facilitate a strong communication in
external and internal aspect. The policy making for better business practice can lead the
management towards making effective measures. Nonetheless, there are some problems in terms
of the lack of ecological development and absence of integrated remuneration strategy that will
bring major concern for South32. Therefore, it can be concluded that the report tries to highlight
both the loss and the gain of South32 and propose some solution in order to bring efficacy of the
company in global context.

12ETHICS AND GOVERNANCE
Reference
Alonso‐Almeida, M. D. M., Fernández de Navarrete, F. C., & Rodriguez‐Pomeda, J. (2015).
Corporate social responsibility perception in business students as future managers: a
multifactorial analysis. Business Ethics: A European Review, 24(1), 1-17.
asx.com.au. (2019). SOUTH32 LIMITED. Retrieved from https://www.asx.com.au/asx/share-
price-research/company/S32/details
Deephouse, D. L., Bundy, J., Tost, L. P., & Suchman, M. C. (2017). Organizational legitimacy:
Six key questions. The SAGE handbook of organizational institutionalism, 27-54.
Heskett, J. (2017). Should Management Be Primarily Responsible to Shareholders?. Working
Knowledge: Business Research for Business Leaders.
Hummel, K., & Schlick, C. (2016). The relationship between sustainability performance and
sustainability disclosure–Reconciling voluntary disclosure theory and legitimacy
theory. Journal of Accounting and Public Policy, 35(5), 455-476.
Kelchner, L. (2017). The importance of ethics in organizations. Accessed May, 10, 2017.
Sharfman, B. S. (2017). The Importance of the Business Judgment Rule. NYUJL & Bus., 14, 27.
south32.net. (2018). Annual report-2018. Retrieved from https://www.south32.net/docs/default-
source/exchange-releases/annual-report-2018.pdf?sfvrsn=624522bf_6
south32.net. (2019). Our People. Retrieved from https://www.south32.net/sustainability/our-
people

13ETHICS AND GOVERNANCE
Teo, T. S., Nishant, R., & Koh, P. B. (2016). Do shareholders favor business analytics
announcements?. The Journal of Strategic Information Systems, 25(4), 259-276.
Zhang, A., & Moffat, K. (2015). A balancing act: The role of benefits, impacts and confidence in
governance in predicting acceptance of mining in Australia. Resources Policy, 44, 25-34.