Corporate Governance and Sustainability: A Case Study of Woolworths

This article discusses the importance of corporate governance and sustainability in the success of a business through a case study of Woolworths. It explores the concept of corporate governance, the corporate governance of Woolworths, and the application of various corporate governance theories such as agency theory, stewardship theory, stakeholder theory, and resource dependency theory. The article also discusses the effectiveness of corporate governance in increasing productivity and maintaining standards.

Running head: GOVERNANCE AND SUSTAINABILITY
Governance and Sustainability
Name of Student
Name of University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Concept of corporate governance...............................................................................................2
About Woolworths.....................................................................................................................3
Corporate governance of Woolworths.......................................................................................3
Application of corporate governance theories to Woolworths..................................................4
Effectiveness of the corporate governance for increasing productivity and standard................9
Conclusion................................................................................................................................10
Reference..................................................................................................................................11

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Introduction
Corporate governance and sustainability plays an important role in the success of a
business in the modern world. According to Kraakman and Hansmann (2017), corporate
governance can help in improving the performance of an organisation and ensure that
financial condition is maintained. The importance of corporate governance theory and its
applicability in the business sectors is analysed in the research. For the purpose of the
analysis, the corporate governance adopted in Woolworths is analysed along with the
application of various theories related to the topic. The concept of corporate governance as a
whole is also provided for the better understanding of the topic.
Concept of corporate governance
Corporate governance can be considered as a mechanism and process that are used to
control corporate and governance structures. According to Stout and Blair (2017), the
Government structures help in identifying the structures and principles so that rights and
responsibilities of the organisations can be aligned with the expectations of the society.
Tricker and Tricker (2015) are of the view that with the existence of the corporate
governance, most organisations set up its objectives so that it can continue with its business
process. Therefore, it can be said that the interests of the stakeholders are also aligned with
the principles related to corporate governance.
The effectiveness of corporate governance can be analysed by the manner in which it
helps in increasing the productivity of a business organisation and at the same time and set up
high standards for maintaining the accountability of the business. In the modern world,
corporations have become a powerful institution and have reached every corner of the globe.
According to McCahery, Sautner and Starks (2016), the effectiveness of a firm with the

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application of corporate governance can be understood by taking examples of an organisation
that have tasted success in the business market. At the same time, the application of the
theories can also help in understanding its effectiveness in an organisation.
About Woolworths
Woolworths is an Australian retail company that provides grocery-shopping options
to the customers. It is a supermarket chain that is owned by Woolworths limited that sales
various other products such as beauty and health care products, DVDs, baby supplies and
stationary items. The company was founded in 1924, and along with Coles, Woolworths
accounts for about 80% of the supermarket share in the country (Woolworthsgroup.com.au
2018).. Thereby, the application of various managerial techniques can be implemented in the
company to understand its effectiveness in the market and ensure that it maintain its
dominance in the business market of the country. These techniques include providing proper
sales service, marketing, corporate governance and so on. Currently Woolworths has over
968 supermarkets with 19 convenience stores being set up to expand the reach of the store. It
also provides home shopping delivery service to the customers so that it can maintain the
modern trend in the business (Woolworthsgroup.com.au 2018).
Corporate governance of Woolworths
Corporate governance has been the central motif for the managers of Woolworths. It
is considered as an important approach towards attaining shareholder value and to ensure that
the funds of the shareholders are protected (Woolworthsgroup.com.au 2018). The company is
committed to ensure that the policies and procedures are crucial during the time of financial
reporting, remuneration and corporate governance. According to Coffee Jr and Palia (2016),
one of the strong points of the company is that it maintains the ethical value it holds and
continues its business for the betterment of the company in the market.

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The board members of the company follow charters that help in providing an analysis
of the roles and responsibilities that are present in the company. These roles and
responsibilities are addressed by the formation of committees, which consist of members that
take active participation in the betterment of the company. For example, the formation of the
people policy committee provides employees with the responsibility to interact with the
customers and promote the social responsibility undertaken by the company. Therefore, it can
be said that the role of the board members of Woolworths is to promote the responsibility of
the company and ensure that the good corporate governance is applicable keeping in mind the
laws of the business (Woolworthsgroup.com.au 2018).
Application of corporate governance theories to Woolworths
In order to understand the role of corporate governance theories in organisations and
its effectiveness, certain theories can be implemented so that the responsibilities of the people
can be determined. Some of these theories include:
Agency Theory
The agency theory is the relationship that exists between the shareholders and the
agents. According to Armstrong et al. (2015), the shareholders of a company are involved in
the hiring of the employees while the agents delegate the work that is required to be done.
These two factors help in influencing the factors that define the agency theory. One of the
advantages of the theory is that it is a simple theory that helps in the reduction of the
corporation to two participants. In the case of Woolworths, this theory can be used to ensure
that the employees and the managers remain interested in the work of the organisation. This
can help in the increase of productivity and ensure that the actions and decisions taken are
based on the interests of the shareholders.

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However, Du Plessis, Hargovan and Harris (2018) is of the opinion that the agency
theory may not be enough to make the best decisions based on the interests of the owners.
This can be a significant disadvantage for Woolworths as relevant problems cannot be
highlighted that may have a significant impact on the business of a company. In the case of
Woolworths, the agents involved with the company act on its self-interest. Therefore,
adoption of this particular theory may provide Woolworths with an advantage of continuing
with increasing the performance of the employees and improve upon the accountability of the
organisation. The fact that this theory can constitute a good governance system can help in
averting the challenges of the government (Boreiko and Murgia 2016).
Figure 1: Agency Theory
(Source: Larcker and Tayan 2015)
Stewardship Theory
The origin of this theory is from psychology and sociology and help in the protection
of the wealth of the shareholders. According to Berger, Imbierowicz and Rauch (2016), this
theory helps in increasing the utility of the shareholders with emphasis on the performance of
a firm. The application of this theory in the case of Woolworths can be attributed to the fact
that the company need to extent its reputation in the business and ensure that the shareholders
remain satisfied. The aim of the company is to ensure that the stakeholders remain satisfied

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and the role of the top management remains defined with its roles. In Woolworths, the role of
the top-level management plays an important for the motivation of the employees.
The executives of the company help in making the profits of the shareholders and
ensure that the concept of individualism does not remain in the organisations. The top
management of Woolworths ensures that the goals of the organisation align with the goals set
by the employees. This helps in promoting the motivational factors that are essential for the
success of an organisation. However, Schwartz (2017) argued that it is important to protect
the reputation of the owners as an important decision-maker in the organisations. Hence, the
impact of the performance of the firm can improve with the involvement of the owners. At
the same time, it is suggested that the roles of the CEO and chairman are unified with the
help of this theory so that greater roles can be played within the organisation and hope for its
success.
Figure 2: Stewardship Theory
(Source: Aguilera et al. 2015)
Stakeholder Theory
Tai and Chuang (2014) is of the opinion that the stakeholder theory was considered as
a management theory in its initial years and gradually evolved in increasing the

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accountability towards a broad range of stakeholders. This particular theory can be derived
from sociological and organisational perspective of the managers and help in increasing the
discipline of the employees. In the case of Woolworths this particular theory is applied in a
more formal and unified manner rather than continue with a broad research tradition that
helps in incorporating ethics and philosophies of a business. The employees of Woolworths
can be affected by the objectives of the organisation and it compels managers to undertake
challenging and multiple roles for its success.
These roles include being that of a supplier, employee and business partner. Carroll
(2015) observed that this particular theory is different from other theories related to the
corporate governance in a way that the importance of this group of managers remains the
main stakeholders of a company and ensure that the social responsibility of the company is
also accounted for. In the case of Woolworths the decision making process can be concerned
with the relationship that exists within the organisation. Despite this, Tran (2018) argued that
it focuses on the managerial decisions and ensures that the interests of the stakeholders gain
an intrinsic value over the success of the organisation. Therefore, it can be said that the
stakeholder theory addresses the needs of the stakeholders as well as the interest of the
customers.

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Figure 3: Stakeholder Theory
(Source: Suliman, Al-Khatib and Thomas 2016)
Resource Dependency Theory
The role of the directors in providing organisations with the resources required for its
growth can be attributed to the application of the resource dependency theory. According to
Grayson and Hodges (2017), this particular theory provides emphasis on the role of the board
directors and ensures that the directors of an organisation play an important role for
maintaining success in the organisation. For example, in the case of Woolworths, it is
necessary that the directors identify the needs of the employees and ensures that proper
resources are provided to them so that the manufacturing of the products are continued. The
resources can be in the form of gaining employment for the organisation or for gaining the
required materials required for the productivity.
As observed by Lins, Servaes and Tamayo (2017) the theory provides special
emphasis on the communication that takes place between the board of directors and the
executive that are directed at the better management of an organisation. It has been evidenced
that the provision related to the resources enhances the performance of an organisation.
Resources such as skills of the employees and knowledge about the competitors can bring
about competitive advantage for an organisation like Woolworths. Therefore, the role of the
directors in the company can be classified into four main categories such as insiders, business
experts, support specialist and community influencers. According to Stout and Blair (2017),
these roles provide assistance in maintaining the strategies of a company and ensure that
Woolworths can maintain a healthy political leadership and community within the
organisation.

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Effectiveness of the corporate governance for increasing productivity and standard
It has been seen that corporate governance helps in creating a balance between the
responsibilities of the stakeholders and the owners of an organisation. In the case of
Woolworths, the application of corporate governance can help in increasing the productivity
and ensure that the standard related to the products and services of the company can be
maintained. According to Coffee Jr and Palia (2016), good corporate governance can help in
building marketing confidence among the organisations and promote the growth in the
economy and the financial aspect. Woolworths have tasted major success in the growth of the
company with the help of the corporate governance measures that provide a code for the
company.
Government of Australia have provided an opportunity for Woolworths to ensure that
increase in productivity of an organisation can help in the increasing the value of the
stakeholders. In this regard, it can be said that the application of relevant theories can help in
increasing the productivity and ensure that proper standard within the organisations are
maintained. For example, Armstrong et al. (2015) stated that the productivity of an
organisation might increase with the contribution from the managers. In this regard, the
application of the resource-based theory related to corporate governance can be implemented
so that the resources can be identified and developed in a proper manner.
According to Carroll (2015), Woolworths can ensure that the role of the board of
directors is provided within the charters that define the responsibilities associated with the
employees. The closed proximity with which the major stakeholders of Woolworths are
associated provides an idea of the success of the business. An example can be provided that
highlight the success of the Asian companies. The existence of the shareholders and the close
proximity with which it monitors the firm provides for proper corporate governance and in
turn ensure that the safety and security of the firms are maintained.

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Conclusion
Therefore, it can be concluded that the existence of corporate governance can help in
the development of an organisation. Woolworths can incorporate this particular strategy and
ensure that it gains the ultimate exposure in the business market for the development and
expansion of business other than the grocery market. The applicaton of the theories related to
the corporate governance can account for the improvement of the level of production and
maintain high standards within the organisation. Productivity and standard of an organisation
can be maintained with the help of the corporate governance that provides for an ultimate
analysis of the success of a business. Therefore, Woolworths can maintain its dominance in
the business and ensure that social responsibility of the company can be improved.

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