Detailed Analysis of Corporate Governance at Commonwealth Bank 2017

This report provides an analysis of the corporate governance of Commonwealth Bank (CBA), focusing on its adherence to the eight principles outlined by the Australian Stock Exchange (ASX) Corporate Governance Council. The report examines CBA's financial reports and corporate governance disclosures for the year ending June 30, 2017, to assess its compliance with these principles. It details the bank's shareholder engagement, board of directors' roles and responsibilities, board committees, employment terms of key managerial personnel, risk management practices, ethical practices, and diversity initiatives. The analysis concludes that CBA fully complies with the ASX principles and provides reasons for this compliance, along with recommendations to maintain its internal control systems. The report references CBA's official website and annual reports to support its findings and conclusions, highlighting the importance of corporate governance in the bank's long-term sustainability.

1

EXECUTIVE SUMMARY
Corporate governance plays a vital role in the smooth functioning of the company. As the title of
the report is Analysis of Corporate Governance of Commonwealth Bank, the main aim of the
report is to analyze the financial report of the company with reference to the eight principles of
the corporate governance issued by the Australian Stock Exchange Corporate Governance
Council committee. The second aim is to analyze whether the company is complying with these
corporate governance principles or not and what are the reasons if there has been the non
compliance of the principles. With these aims the report has been prepared and divided into
different sections.
2

Contents
EXECUTIVE SUMMARY.................................................................................................................................2
INTRODUCTION...........................................................................................................................................4
CORPORATE GOVERNANCE DISCLOSURES...................................................................................................4
COMPLIANCE WITH THE CORPORATE GOVERNANCE PRINCIPLES...............................................................6
REASON FOR COMPLIANCE OR NON COMPLIANCE WITH THE CORPORATE GOVERNANCE PRINCIPLES.....7
RECOMMENDATION AND CONCLUSION.....................................................................................................8
REFERENCES................................................................................................................................................8
3

INTRODUCTION
The company that has been selected for the purpose of the analysis is – Commonwealth Bank.
The Commonwealth Bank is the Australian based company and has been founded by the
government of Australia itself in the year of 1911. Since then it has been regarded as one of big
four banks operating in Australia and as of now it has been regarded as the first largest banking
company which is providing an integrated financial services to their customers. In the year of
1991, it has been listed on the Australian Stock Exchange and in the year of 1996 it has been
privatized by the government. The company is providing various products to their customers
including funds management service, insurance investment service, business banking and other
share broking products and services. The company has expanded its operations across the globe
including Asia, Europe, New Zealand and North America. The major aim of the company is to
work for the survival of the company and the best services to the customers. The report has been
prepared with reference to the Corporate Governance of the company as mentioned in the
Annual Report for the year ending 30th of June 2017. (Commonwealth Bank official website,
2017)
CORPORATE GOVERNANCE DISCLOSURES
In the beginning of the Corporate Governance Statement for the year ending 30th June 2017, it
has been mentioned that the company has been and is committed to high standards of the good
corporate governance and has the framework which details that the company in actual is working
4

for long term sustainability and performance which can in turn enhance the value of the
shareholder and other stakeholders of the company.
The company has disclosed the following as per the ASX corporate governance disclosure
requirements:
- The first disclosure that has been made is regarding the shareholder engagement. The
company treats the shareholder as the owner of the company and it gives values to any
information that is communicated to the shareholder. It is because of this the company
has facilitated the two way communication where the shareholder also has the right to
share their views in the separate meetings held with them. It has been disclosed that the
company has been arranging the meeting on the regular basis as annual general meeting.
- Second disclosure is regarding the role and responsibilities of the board of directors have
been made. The first responsibility is to define the strategy and approve the same. Second
responsibility is to monitor the risk framework that has been developed by the company.
Third objective is to approve the financial statements of the company on the quarterly and
half yearly and yearly basis and ensures that the company has maintained the integrity of
the financial information delivered to the shareholders of the company. The other
responsibilities that have been disclosed is the approving initiatives which exceeds the
authority limits as delegated to the Chief Executive Officer of the company, appointment
and selection of the chief executive officer of the company, planning for the remuneration
to be paid to the chief executive officer of the company and the succession planning for
the major key managerial personnel.
- Next disclosure that has been made is the information about the board committees. The
list of the members with their designation in the various statutory committees has been
5

disclosed like in Nomination Committee, Audit committee, Risk Committee and the
Remuneration committee.
- The next disclosure has been employment terms that has been set out in the employment
agreements entered into with the key managerial personnel.
- The next major disclosure that the company has made is ways to manage the risk
identified in the business and the assurance thereof.
- Thereafter, the ethical practices adopted by the company have been detailed.
- The last disclosure has been given in relation to the diversity that has been the integral
part of the organization. The diversity includes the diversity in leadership and their
recognition.
COMPLIANCE WITH THE CORPORATE GOVERNANCE PRINCIPLES
ASX Corporate Governance has prescribed the eight essential principles that are required to be
followed and duly complied by the listed companies. As per the Corporate Governance
Statement of the company for the year ending 30th June 2017, the companies has followed all the
below listed eight principles.
- Governance Structure
- Structure of the Board and the other committees
- Appointment procedures of the Directors
- The duties of the Directors, Remuneration and Performance
- Governance of Risk and Internal Control
- Integrity reporting
- Audit
6

- Relationship with the Stakeholders including the shareholders (Council, A.C.G., 2007,
Dyck, 2001, Iu, and Batten, 2001 and Tricker and Tricker, 2015)
REASON FOR COMPLIANCE OR NON COMPLIANCE WITH THE
CORPORATE GOVERNANCE PRINCIPLES
The company has fully complied with the eight principles of the corporate governance. The
reason for the said statement if mentioned below:
- The company has defined the structure of the governance including the board of directors
and the key managerial personnel in the corporate governance statement. It has been
mentioned that the Board of directors consists of the majorly independent directors.
- The structure of the board has also been defined with the names and the composition of
different committees. It includes Nomination Committee, Audit committee, Risk
Committee and the Remuneration committee.
- The company has disclosed the procedure for the appointment of the director and its
election. It has been mentioned that Director appointed at the must stand for election in
the general meeting of the company and shall again stand for re election at every three
year of the general meeting of the company.
- The company has disclosed the duties and role and responsibilities of the directors along
with the plan for the payment of the remuneration to the directors of the company.
- The company has mentioned that the board of directors is required to evaluate the
financial performance of the company on regular intervals so as to corroborate that the
company provides the financial information with integrity.
- The company has mentioned and detailed the procedure as to how the company will
manage the risk and assure that the risk will be mitigated for future years.
7

- The statement contain the statement that defines the relationship of the company with the
stakeholders of the company and also the company has mentioned in the beginning of the
statement that the company’s central focus is to maximize the shareholder value in long
term. It indicates that the company has clearly defined the relationship (Commonwealth
bank official website, 2017).
RECOMMENDATION AND CONCLUSION
As the annual report of the company and the corporate governance statement details that the
company has strictly followed the principles throughout the year, it is recommended that the
company shall maintain its internal control system as it is so that the company’s competitor like
Wesfarmers Limited will not find it place.
To conclude, the corporate governance plays important role in the survival of the company.
REFERENCES
Council, A.C.G., 2007. Corporate governance principles and recommendations.
Dyck, A., 2001. Privatization and corporate governance: Principles, evidence, and future
challenges. The World Bank Research Observer, 16(1), pp.59-84.
Farrar, J., 2008. Corporate governance: Theories, principles and practice. Oxford University
Press.
Iu, J. and Batten, J., 2001. The implementation of OECD corporate governance principles in
post-crisis Asia. Journal of Corporate Citizenship, 4(Winter), pp.47-62.
8

Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices.
Oxford University Press, USA.
Commonwealth Bank official website, “Annual Report 2017” available on
https://www.commbank.com.au/investors accessed on 05/09/2017.
Commonwealth Bank official website, “Corporate Governance Statement 2017” available on
https://www.commbank.com.au/investors accessed on 05/09/2017.
9