Corporate Governance and Ethics

This report highlights the orientation of the board of directors for SKY Network Television Limited Australia. It critically analyses the specific portions of the annual report with particular reference board structure, disclosures and corporate governance.

Corporate Governance and Ethics
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Task 1: Board Orientation
The company selected for this task is SKY Network Television Limited Australia and the
annual report considered for the task pertains to FY2018. The objective of this report is to
highlight the orientation of the board of the directors for the chosen company. In this regards,
it is imperative to consider various factors including the composition of board, the underlying
focus along with the key communication techniques that the board deploys. With different
orientation of the board, there would be a difference that would be expected in regards to the
above factors and therefore it is imperative to critically analyse the specific portions of the
annual report with particular reference board structure, disclosures and corporate governance.
Composition of the Board
With reference to the corporate governance policy, it is pivotal to note that the company can
have maximum of ten directors on the board but the company has six directors on the board
of directors in FY2018. Out of the six directors on board of the company, only one of the
directors is executive director who also happens to be the CEO of the company. The other
five directors present on the board are independent and non-executive directors. This is
apparent from their profiles whereby it is apparent that these directors tend to serve in
executive positions in different companies. Further, a noteworthy aspect of the board
composition is that it is headed by a non-executive and independent director. This implies
that the CEO is not the chairman of the board (Sky, 2018b). The board composition
highlights the agency perspective with regards to board as the independent director
dominated board would be sensitive to the objectives set by the shareholders and would tend
to safeguard the interests of the minority shareholders.
Focus of the Board
The focus of the board tends to be driven by the underlying orientation of the board. This is
also apparent in case of the given company whereby the remuneration of the directors
contains of both a fixed component coupled with a variable component. In accordance with
the corporate governance statement of the company, the focus of the board ought to be on
increasing the profits and value of the company since it is used as a key benchmark with
regards to determining the variable pay for the executives (Sky, 2018a). Further, in regards to
dividends also, the company has been providing decent dividend growth barring the current
year i.e. FY2018 where there has been a decline in the dividends paid (Yahoo Finance, 2018).

Even though the orientation of the board seems inclined towards growth, but the stock price
in the recent times has been underperforming and infact has delivered significant negative
returns to the shareholders. Also, the company is not reporting any growth in the earnings and
infact has lost right to broadcast the 2019 Rugby World Cup in New Zealand which does not
auger well for the performance of the stock (Mickleboro, 2017). In wake of the actual stock
and profitability performance, it makes sense for the board to be more proactive with regards
to taking measures for fulfilling the agency orientation by providing more returns to
shareholders. It seems as though the current stock price is higher undervalued particularly
considering the high dividend yield currently available on the stock which is primarily
because the stock is trading at a value lower than intrinsic value (Hurd, 2018).
Key Communication
Another crucial aspect is the major communication techniques that the board deploys to make
disclosure to the users of the company. The key tools in this regards are expected to be
remuneration report along with income statement and balance sheet. These are required in
line with the agency orientation which would focus on making higher disclosures to the
shareholders so that transparency can be maintained.
The company has successfully managed to communicate all the above to the shareholders on
a regular basis. The financial statements of the company include income statement, balance
sheet, cash flow statement along with statement of equity. Further, while the relevant
remuneration related discussion is not carried at length in the annual report, the company has
provided corporate governance disclosures on the website which communicate that the
remuneration of the management is decided by the remuneration committee and also the
break-up of the fixed and the variable pay is offered. Also, the composition of the committee
was also highlighted in the corporate governance statement of the company (Sky, 2018a).
Thus, it is apparent that the company makes the relevant disclosures with regards to the
financial performance and how the remuneration drawn by the key executives is linked to the
alignment with the interest of the shareholders.
Conclusion
On the basis of the above discussion with regards to SKY Network Television Limited
Australia, it has come to light that the orientation of the board seems to be agency. This
implies that the board of the company is considerate towards the shareholders and tends to be

driven by the objectives of profit, growth and dividends. While the company has performed
well in terms of dividends, growth seems to be a concern especially going forward. This has
led to the fall in the stock price which in turn has led to increased dividend yield. Disclosures
made by the board also are in line with the agency orientation of the board. However, going
forward, it is necessary that the company needs to take measures promoting growth so that
higher value can be generated for the shareholders of the company.

References
Hurd, K. (2018) Is It Too Late To Buy SKY Network Television Limited (NZE:SKT)?,
Retrieved from https://simplywall.st/stocks/nz/media/nzx-skt/sky-network-television-
shares/news/is-it-too-late-to-buy-sky-network-television-limited-nzeskt/
Mickleboro, J. (2017) Why the Sky Network Television Ltd share price has fallen 12% today,
Retrieved from https://www.fool.com.au/2017/02/23/why-the-sky-network-television-
ltd-share-price-has-fallen-12-today/
SKY (2018a) Corporate Governance Statement, Retrieved from
https://skynz.akamaized.net/documents/24003/7389961/CorporateGovernanceStateme
nt_ReworkCFGJune2018_050918.pdf/e8d4c234-544a-faa1-2dc4-612c768ff1f5
Sky (2018b) Annual Report FY2018¸ Retrieved from
https://skynz.akamaized.net/documents/24003/7464775/MK_InvestorRelations_Finan
cialReports_AnnualReport2018_1.pdf/59f94889-17cd-bf22-c560-3cdeed53a14e
Yahoo Finance (2018) Sky Television Network Limited, Retrieved from
https://au.finance.yahoo.com/quote/SKT.AX/