Corporate Governance Structure and Principles of Medibank Pty Ltd

This report discusses the corporate governance structure, principle of corporate governance structure and strategies of corporate governance structure of Medibank Pty Ltd. It also includes the company background, ASX Corporate Governance Council Recommendations, and the theories that enable to make opinion on corporate governance.

Running head: REPORT 0
CORPORATE LAW
SEPTEMBER 5, 2018
STUDENT DETAILS:

REPORT 1
Introduction-
The corporate governance structure is most important feature of any business affairs as it
helps in identifying issues, challenges, and problems. It also permits the company to repay to
the all the shareholders of the corporation and the communities. The corporate responsibility,
ethics, corporate governance structure and corporate governance principles not only help
sustaining a great faithful customer foundation, but are also significant for long term
development, future progress and attainment. These activities support the within relationships
with the workers of company.
The good corporate governance is not only restricted to the proper environmental practices,
but it develops to arrange overall values of corporation with the objects of clients, workers,
investors, dealers, supervisor and the common people. In this report, various aspects of the
corporate governance structure, principle of corporate governance structure and strategies of
corporate governance structure of Medibank Pvt Ltd. is discussed and critically examined.
Company background-
In Australia, Medibank Pty Ltd is a top private health insurer. The main business of
Medibank Pty Ltd is Health Insurance. It underwrites and allocates poliies of private health
insurance in respect of two brands, Medibank and ahm. Medibank has a group of related
businesses, which is called as Medibank Health. Previously, it was considered as
complementary Services. Medibank Health leverages experience of Medibank and capability
to render and organize services related to health, and sustain the business of Health Insurance.
As Medibank Pty Ltd keeps assets to assure its regulatory reserves, it may also produce
important asset income from its collection of investment assets1.
1 Neubauer F, and Lank A, The family business: Its governance for sustainability (Springer 2017)

REPORT 2
The corporate Governance Principles and Recommendations for Medibank-
Principle 1: According to first principle, the structure of the company must be deigned to
make able the board of company to render strategic directions for corporation and the
management. The framework of company should make sure the balance of authority2.
Principle 2: According to this principle, the company must have board of proper composition
and size. It is recommended that the majority of board of company should contain
independent directors. There should not be same person for the post of CEO and chair. The
nomination committee should be established by board of company3.
Principle 3: As per this principle, the corporations must encourage ethical decision-making
and responsible decision-making. It is recommended to make code of conduct. The company
should reveal the codes to develop faith in the integrity of company and to enforce the
responsibility of individual for making report and evaluating report of immoral practices. It is
also recommended that company should make the policies related to diversity. It is also
required by the company to disclose the proposition of women in annual report.
Principle 4: It is stated by this principle that the framework of the company should justify and
secure the integrity of financial reporting. The board should establish audit committee. There
should be formal charter of audit committee.
Principle 5: According to this principle, the corporation should promote the disclosure on the
time. The company should make written policies to make sure the compliance with
requirements of ASX principles. The written policies should ensure responsibility at level of
senior executive for that compliance4.
2 Jacoby S, The embedded corporation: Corporate governance and employment relations in Japan and the
United States (Princeton University Press 2018)
3 Meagher G, and Goodwin S, About the contributors and end pages (Sydney University Press 2017)
4 Claudio F, de Rijke K, and Page A, ‘The CSG arena: a critical review of unconventional gas developments and
best-practice health impact assessment in Queensland, Australia’ [2018] Impact assessment and project
appraisal 105

REPORT 3
Principle 6: This principle states that the corporation should respect the shareholder’s rights.
The company should exercise these rights properly. It is recommended to the company to
develop the communication policy for encouraging proper communication with shareholders.
The company should encourage the involvement in the general meetings of company.
Principle 7: this principle states that the company should develop the sound system of risk
oversight, administration, and internal control. It is recommended that the board of company
should disclose the management has reported to it as to effectiveness of management of
company of major business risk5.
Principle 8: the company should make sure that the level and arrangement of remuneration is
proper and sufficient to establish the clear relationship. It is recommended to a company to
establish remuneration committee. The remuneration committee should be framed by
majority of independent directors. It should be chaired by independent chair. It is also
recommended to the company to make differences between remuneration of executive
directors and remuneration of non-executive directors6.
Medibank is committed to report ASX corporate governance principles and best practice
recommendations. During year 2017, Medibank continued to comply with ASX guidelines.
However, principle 5 ‘make ASX listing rules disclosures timely’ is not applicable to unlisted
GBE such as Medibank Pvt Ltd. In according with Board policy, MD and CEO give a self-
assessment sign-off in respect of the controls and actions of corporation. This procedure
supports the written certification of MD and CEO to the board under ASX Guideline
Recommendations7.
5 McKay R., Kaur M., Vickers B, Lavranos E, and Liggins J, ‘combined symposium abstracts’ [2018]
Australian & New Zealand 52.
6 Canaway R, Bismark M, Dunt D, and Kelaher M, ‘Medical directors’ perspectives on strengthening hospital
quality and safety’ [2017] Journal of health organization and management 696.
7 Du Plessis J, Hargovan A, and Harris J, 2Principles of contemporary corporate governance (Cambridge
University Press 2018)

REPORT 4
Corporate Governance Statement of Medibank-
The board is devoted to increasing experience of customers, enhancing performance in
business, creating values of shareholders and satisfying the development of Medibank. For
achieving the objects of business affairs, board pursues to make sure that Medibank is
appropriately managed to secure and increase the interests of shareholders. The corporate
governance statement involves accepting processes of risk management, policies related to
corporate governance and ethical conduct8.
ASX Corporate Governance Council Recommendations
The corporate governance practices of Medibank Pty Ltd for the year ended 30 June 2017 are
state in the Corporate Governance Statement 2017. During year 2017, Medibank Pty Ltd had
in place policies and procedures, which conform to recommendations in third edition of ASX
Corporate Governance Council Corporate Governance Principles and Recommendations.
Medibank Pty Ltd also meets the governance standards related to industry issued by
Australian Prudential Regulation Authority (APRA)9. The main practices of corporate
governance are made at Medibank. They are defined in this statement and the main policies
of corporate governance are available on website of Medibank Pvt Ltd10.
Independence of the directors of company
It is always expected from the directors to make an independent decision to bear on
judgement of Board. The director is regarded as independent director if a director is a non-
executive director who is not management’s members, and is free of the business or other
relation, which can significantly obstruct with the execution of imaginative and independent
8 Berger A, Imbierowicz B, and Rauch C,’The roles of corporate governance in bank failures during the recent
financial crisis’ [2016] Journal of Money, Credit and Banking 729.
9 Muller R, Project governance (Routledge 2017)
10 Kraakman R, and Hansmann H. ‘The end of history for corporate law’ [2017] In Corporate Governance 49.

REPORT 5
decision or can rationally be supposed to do same. Every director gives timely updates of
their comfort, position, and relations11.
The Royal Commission into Misconduct in Medibank Pty Ltd. –
The Royal Commission offers the individuals or companies to make public submission by the
online form. This is required by those, who want more help by the email or telephone. The
object of submission was to recognise reasons of unproven misconduct, factors that led to
occurrence of misconduct and actions to be taken to solve the matters. In this way, Royal
Commission conducts an inquiry in the relevant method. After the inquiry, it makes a report
on the misconduct in banking and financial industry. The Royal Commission has rights to
induce witness and recommend the charges related to crime. The enquiry of Royal
Commission significantly affects the employment of managers in bank12.
The Royal Commission makes focus on getting truth whether there is any breach of the laws
related to financial services and other governing laws. The submission enables the Royal
Commission to collect the information quickly in compare of the long procedure of
convincing witness to act and produce documents. The intentional disclosure of secret or
advantaged details to the Royal Commission can mean that there is an indirect disclaimer of
secrecy or legal privilege in respect of the information in following lawsuit. Medibank Pty
Ltd supports the Royal Commission in the banking sector or finance sector. It is very
significant that victims of scandals related to Medibank Pty Ltd are afforded a chance to
make submissions and if suitable, provide evidence before the royal commission.
Meaning and Importance for corporate governance principles for company-
11 Ginena K, Shari ‘ah risk and corporate governance of Islamic banks’ [2014] Corporate Governance 86.
12 Webb D, ‘Office innovation helps employees “Find 30 in 9 to 5” to counteract sedentary health risks’ [2014]
Copyright Warning 1.

REPORT 6
The corporate governance means the manner in which corporations work. It also includes
non-profit organisation. The corporate governance contains the rules, regulations, policies,
and procedures, which are in place to guide and control the function of all corporations and
the organisations. In regarding good corporate governance, a balance requires to be hit
between the requirements and objects of all shareholders involving the shareholders inside
and outside a corporation or an organisation13.
Depending on the type of entity concerned, the shareholders can involve a various group of
concerned parties involving stakeholders, staffs, workers, organisation, consumers or
customers, associations, which give subsidy like banks or other financial institutions, the
governance system and even the wider group or public. The Good corporate governance is
very important feature of representing the good corporate nationality. There are many
principles of good corporate governance such as appreciation of the directors, qualified
individuals in board, better healthy communication and good internal risk management
strategies, and part of board. The good corporate governance plays very important role in the
proper management of any corporation organisation14.
The theories that enable to make opinion on corporate governance-
The corporate governance is defined as the system to direct and control the companies. There
are various theories on the corporate governance such as shareholders theory, stakeholders
theory, ultitarian theory, transaction theory, agency theory and contract theory. The most
significant theories are shareholders theory and the stakeholders theory.
The stakeholders theory is most important theory to make views on the corporate governance.
In 1970, the Stakeholder theory was inserted in the management discipline. It is developed by
13 Aguilera R, Desender K, Bednar M, and Lee J, ‘Connecting the dots: Bringing external corporate governance
into the corporate governance puzzle’ [2015] The Academy of Management Annals 843.
14 Shehata N, ‘Development of corporate governance codes in the GCC: an overview’ [2015] Corporate
Governance 315.

REPORT 7
Freeman integrating corporate responsibility to a broad range of stakeholders. It is argued by
various theorists that stakeholder theory is resulted from an arrangement of the sociological
and administrative disciplines15. The stakeholder theory is less of a formal combined theory
and more of an extensive research tradition, integrating attitude, political theory, economics,
law, ethics, and structural science. The stakeholder theory involves all group such as
investors, clients, staff, governance system, and community. It promotes ethics of cares,
concept of fiduciary relationship, and the theory of property rights.
The stakeholder theory can be described as any person or community who can influence or is
influenced by the accomplishment of the objects of company. Contrasting the agency theory
in which the managers are performing and helping for the stakeholders, it is suggested by
stakeholder theorists that managers in corporation have a linkage of relationships to serve this
include dealers, workers and partners of business. It was argued that this group of network is
significant other than owner-manager-staff relationship as defined in agency theory. The
stakeholder theory addresses the group of stakeholder deserving and necessitating the
attention of management. It is also suggested by theorists that the firm is a system, where the
object of the company is to create wealth for the company’s stakeholders.
The shareholder theory is considered as the important manner of conducting business with
corporations realising that there are drawbacks to focus only on the interest of the
shareholders. An attention on short-term strategy and bigger risk compelling are just two of
the intrinsic risks included. The part of shareholder theory may be considered in the demise
of companies, where uninterrupted pressure on managers to enhance the returns to
shareholders led them to influence the accounts of company.
15 Berger A, Imbierowicz B, and Rauch C,’The roles of corporate governance in bank failures during the recent
financial crisis’ [2016] Journal of Money, Credit and Banking 729.

REPORT 8
Further, the stakeholder theory specifies that a corporation owes an accountability to a
broader group of stakeholder, in the place of just shareholders. The stakeholder is defined as
any person or group, which may influence or be influenced by the activities of a business. It
involves workers, clients, dealers, creditors and broader community and participants. These
theories resolve the extrinsic requirements16.
The stakeholder theory is described as an important element of corporate social
responsibility. This concept recognises the responsibilities of companies in the current time,
whether they can be economic, legal, moral, or generous. In these days, the largest companies
of the world claim to have corporate social responsibility at the core of their strategies related
to corporation. Whereas there are several sincere cases of corporations with a morality, many
others exploit corporate social responsibility as a good means of PR to advance their image
but eventually flop to put their arguments in the action.
Consequences of poor corporate governance-
A good corporate governance may have a positive effect on confidence of shareholder by
encouraging them that the company is making smart decisions related to business and is well
managed within. Self-assured shareholders are likely to invest huge amounts in regulated
company because a positive return on the investment. It may lead to improved market
confidence in the corporation, which may serve to increase complete value of stock. When
the value of stock of a company rises, so does its complete value.
An organisation with poor corporate governance approaches may have a bad impact on the
business market and the great economy. The deficiency of good corporate governance at the
administrative and managing level may lead to poor business decisions, which can decrease
16 Wu S, Straub D, and Liang T, ‘How information technology governance mechanisms and strategic alignment
influence organizational performance: Insights from a matched survey of business and IT manager’ [2015] Mis
Quarterly 497.

REPORT 9
the complete value of the corporation and make it more complex for the business to meet its
financial responsibilities. This was considered during the year 2009, when poor corporate
decisions lead to cascading failures in the markets, which in turn caused slow economy.
Further, poor corporate governance of the company may lead poor political connection.
Furthermore, poor corporate governance enhanced the penalties for abolishing, changing, or
constructing records in central inquiries or for trying to deceive shareholders of company. It
also enhanced the responsibility of audit firms to remain impartial and sovereign of their
clients17.
Conclusion-
As per the above discussion, it can be concluded that the corporate governance is significant
aspect of success of company or an organisation. It develops the management responsibility,
proper investment to the management, security of investors, promotion of long-term
investment and the stakeholders activism. On the other hand, the poor corporate governance
ripples the Australian markets. The issues related to corporate governance should be resolved
for proper valuation of organisation.
17 Galpin T, Whitttington J, and Bell G, ‘Is your sustainability strategy sustainable? Creating a culture of
sustainability’ [2015] Corporate Governance 1.

REPORT 10
Bibliography
Secondary Sources
Books
Du Plessis J, Hargovan A, and Harris J, 2Principles of contemporary corporate governance
(Cambridge University Press 2018)
Jacoby S, The embedded corporation: Corporate governance and employment relations in
Japan and the United States (Princeton University Press 2018)
Meagher G, and Goodwin S, About the contributors and end pages (Sydney University Press
2017)
Muller R, Project governance (Routledge 2017)

REPORT 11
Neubauer F, and Lank A, The family business: Its governance for sustainability (Springer
2017)
Journal Articles
Aguilera R, Desender K, Bednar M, and Lee J, ‘Connecting the dots: Bringing external
corporate governance into the corporate governance puzzle’ [2015] The Academy of
Management Annals 843.
Berger A, Imbierowicz B, and Rauch C,’The roles of corporate governance in bank failures
during the recent financial crisis’ [2016] Journal of Money, Credit and Banking 729.
Canaway R, Bismark M, Dunt D, and Kelaher M, ‘Medical directors’ perspectives on
strengthening hospital quality and safety’ [2017] Journal of health organization and
management 696.
Claudio F, de Rijke K, and Page A, ‘The CSG arena: a critical review of unconventional gas
developments and best-practice health impact assessment in Queensland, Australia’
[2018] Impact assessment and project appraisal 105.
Eisenberg M, ‘Legal models of management structure in the modern corporation: Officers,
directors, and accountants’ [2017] In Corporate Governance 103.
Galpin T, Whitttington J, and Bell G, ‘Is your sustainability strategy sustainable? Creating a
culture of sustainability’ [2015] Corporate Governance 1.
Ginena K, Shari ‘ah risk and corporate governance of Islamic banks’ [2014] Corporate
Governance 86.
Kraakman R, and Hansmann H. ‘The end of history for corporate law’ [2017] In Corporate
Governance 49.

REPORT 12
McKay R., Kaur M., Vickers B, Lavranos E, and Liggins J, ‘combined symposium abstracts’
[2018] Australian & New Zealand 52.
Paolucci F, Sequeira A, Fouda A, and Matthews A, ‘Health Plan Payment in Australia’
[2018] In Risk Adjustment, Risk Sharing and Premium Regulation in Health Insurance
Markets 181.
Shehata N, ‘Development of corporate governance codes in the GCC: an overview’ [2015]
Corporate Governance 315.
Webb D, ‘Office innovation helps employees “Find 30 in 9 to 5” to counteract sedentary
health risks’ [2014] Copyright Warning 1.
Wu S, Straub D, and Liang T, ‘ How information technology governance mechanisms and
strategic alignment influence organizational performance: Insights from a matched survey of
business and IT manager’ [2015] Mis Quarterly 497.