MAF302 Corporate Finance: Appen Ltd Governance, Risk & CSR Report

This report presents an analysis of Appen Ltd's corporate governance structure, evaluating its board of directors and adherence to corporate governance principles. It examines the compensation package for the CEO and top executives, assessing its effectiveness in delivering shareholder returns. The report identifies and discusses key risk factors, including economic, social sustainability, and environmental risks, along with strategies for their management. Challenges in corporate governance, such as conflicts of interest, transparency, and ethics violations, are analyzed, alongside the board's role in risk management. Finally, the report summarizes Appen's corporate social responsibility program, focusing on its commitment to the environment, employees, customers, and other stakeholders, and evaluates the adequacy of these initiatives.

Running head: CORPORATE FINANCE
CORPORATE FINANCE
Name of the Student
Name of the University
Author’s Note:

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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Corporate Governance.................................................................................................................3
Corporate Social Responsibility..................................................................................................7
Conclusion.......................................................................................................................................9
References......................................................................................................................................10
Bibliography..................................................................................................................................11

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Executive Summary
The purpose of the report is to present an outline of the current structure of the Board of directors
of Appen Ltd with proper evaluation of such structure following recommended guidelines of
good corporate governance. Good corporate governance deals with showing the roles of the
Board, management, and shareholders, including their association with each other and other
stakeholders. In addition, compensation package for CEO of Appen and top executives has been
discussed in the report with an evaluation of its effectiveness in giving total returns to
shareholders. The Appen Company is exposed to risk elements that is specific to the operations
of its business such as economic risks, Social sustainability and Environmental risks which are
covered in the report along with strategies to manage these risks. The challenges which are faced
by Appen in terms of corporate governance such as Conflicts of interest, Transparency, and
Ethics violations are also discussed in the report, including an analysis of risk management by
the Board of directors to ensure proper implementation of risk management strategy and polices.
The summary of the corporate social responsibility program of the Company focusing on
commitment towards the environment, its employees, customers, group, and other stakeholders
have been discussed below, including adequacy of its corporate social responsibility.

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Introduction
Appen is a world-wide emerging power showing development of datasets of high-quality
for artificial intelligence and machine learning. The primary service of Appen is figuring out data
that big companies use to develop their technology. The Company is indulged in strengthening
its position in a superior expansion of the machine learning program and artificial intelligence
market. A good corporate governance deals with showing the roles of the Board, management
and shareholders including their association with each other and other stakeholders (Manurung et
al. 2017). In the report, the structure of the Board of Directors has been specified who aims to
consider the interests of all of the members of the Company including stakeholders such as
customers, employees, suppliers and the group in which the Company operates contributing in an
optimal and meaningful way to establish a value of long-term.
Discussion
Corporate Governance
An outline of the current structure of the Board of directors of Appen Ltd with proper
evaluation of such structure following recommended guidelines of good corporate
governance
The structure of Appen depicts that the minimum number of directors will be three, and
the maximum number should be seven directors. The Board includes one executive director with
six non-executive directors. The current structure of the Board of directors are as following:
 Mr. Chris Vonwiller (Chairperson), (appointed 14 August 2009)
 Mr Mark Brayan (Managing Director and CEO), (appointed 13 July 2015)
 Mr Steve Hasker (Non-executive Director), (appointed 7 April 2015)

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 Ms Robin Low (Non-executive Director), (appointed 30 October 2014)
 Mr Bill Pulver (Non-executive Director), (appointed 19 April 2010)
 Ms Deena Shiff (Non-executive Director), (appointed 15 May 2015)
 Ms Vanessa Liu (Non-executive Director), (appointed 27 March , 2020)
The responsibility for looking at the operations of the Company is undertaken by the
Board. They play an important role in supervising the management of the Company and their
business strategies to achieve their desired long-term goals (Shaukat, Qiu, and Trojanowski
2016). As per the Constitution and the Corporations Act 2001 (Cth) (Corporations Act), the
Board discharges its responsibilities through committees of the Board. Those corporate strategies
are accepted by the Board that is deliberated to construct a long-term sustainable value along
with the selection of a chief executive officer (CEO). They keep an eye on the CEO and senior
management regarding their operations, including resource allocation for establishing long-term
growth and identifying different risks and their management.
An outline of the compensation package for CEO and top executives of Appen and
examining its effectiveness in giving total returns to shareholders.
The total compensation for the CEO of the Company is A.U. $934k. There is an increase
of 8.9% during the preceding year. After the selection of companies with market caps with a
range of AU$552m to AU$2.2b, it has been found that the median CEO compensation was
marked at AU$1.5m. The less compensation of Mark Ronald Brayan shows a positive attitude
towards most of the shareholders by establishing the fact that the compensation is less than the
CEOs of most companies of similar size. It leads to saving more for shareholders but ultimately
making it necessary to indulge in the performance of the operations of the business. Taking the
picture as a whole, it depicts that this is a positive outcome for shareholders, presenting the

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companies’ improvement in upcoming years. The combination of growth of earning per share
and revenue growth would please most of the shareholders. This combination of growth results
in ensuring the fast growth of business. There has been a total return of 678% over three years,
which makes the shareholders satisfied in their own way and will be less concerned if the CEO is
paid more than the other companies of same size.
However, it appears that the Company is paying its CEO less than the other companies of
same size. It can be considerable for many, indicating that the pay is adequate since the
expansion of the business. The returns of delighted shareholders are the desirable addition, which
makes the eligibility of Mark Ronald Brayan to deserve a lift.
An identification of three major sources of risk that a company like Appen is exposed to
and an examination of some strategies to manage these risks
Appen Company is exposed to risk elements that are particular to the operations of its
business. The risks of the Company Appen are discussed below-
 Economic risks – The risk is related to the business exposure of common economic
conditions. Precisely, the existence of material risk in customer concentration prevails; on
the other hand, customers are active, including several activities all around the business
(Steffen et al. 2017).
 Social sustainability – The risk is related to gatherings and distant workers, and to
eliminate such risks, the Company has adopted practices and approaches in place
(Eizenberg and Jabareen 2017).
 Environmental risks –The Company is not experiencing any kind of material exposure to
environmental risks. Still, the Board keeps a continuous check on these risks with some

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action plans to reduce the Company’s carbon footprint at the possible extent where more
than million crowd workers are working from home utilizing internet-based tools by
conducting conferencing through phone and video to minimize the area of travel
(Dunwoody and Peters 2016).
Some recommendations can help to recognize and manage those risks, such as the Board
should have a committee or committees to identify risk. The Audit and Risk Management
Committee have the authority of understanding risks and establishing a proper risk management
system.
An analysis of the challenges that Appen faces in terms of corporate governance and risk
management as a head entity with extensive overseas operations
Challenges Appen facing in terms of corporate governance
 Conflicts of interest- To avoid conflicts of interest is essential. The conflict of interest
under the structure of corporate governance occurs when the Board or other controlling
member of the entity discovers other financial interests that give rise to a conflict with the
goals of the Company. Such conflicts of interest decline the trust of shareholders and the
public (Hermes and van Veen 2017).
 Transparency- the Company, should be transparent in its way by accurately stating their
profits and losses and make those values presentable to the investors of their Company.
More than an increase in their profits or reduced losses can impact or harm the
relationship of the Company with its stockholders. Besides, a lack of transparency can
impose a fine on the Company from regulatory agencies.

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 Ethics violations- The members of the Board of directors develop an ethical duty to
implement decisions based on the interests of the stockholders. Moreover, it is an ethical
duty of the Company to give protection to the social welfare of others, along with the
greater place in which they operate (Ologunwa, Ogunjobi and Adigun 2019).
Board of Appen is accountable to ensure the proper risk management strategy and policies
are being implemented. Board has entrusted the Audit and Risk Management Committee with
the authority of recognizing risks with the appropriate establishment of the risk management
system (Abdullah, Shukor and Rahmat 2017). Those risks which are creating an influence on the
financial and non-financial matters of the Company are taken care of by the Audit and Risk
Management Committee. The Board should review the structure of risk management once a year
to make it sound and satisfactory. In addition, it is also essential for them to disclose such review
in their each reporting period (Ishak, Nor and Naimi 2017).
In the current scenario, the company analysis and enhance the effectiveness of its risk
management employing management processes, different tools, and support provided to its
partner, which are looked upon by the Audit and Risk Management Committee (Abdullah,
Shukor and Rahmat 2017).
Corporate Social Responsibility
Summary of corporate social responsibility program of Appen focusing on commitment
towards environment, its employees, customers, group and other stakeholders including
the adequacy of its corporate social responsibility

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Company Appen has an agile Corporate Social Responsibility (CSR) program that gives
full support to those who are in need in different countries they function. There is an
encouragement of participation, including various community projects which are promoted and
commemorate through their intranet. Appen’s Corporate Social Responsibility involves
association with organizations such as Translators without Borders and the National Council of
Disability Affairs in the Philippines, Manila (appen 2020). Moreover, on particular grounds,
Appen has raised funds to support their needful employees with Appen matching all its funds
that are raised. Appen also assists in research by providing technical and semantic resources,
which can help in conducting further research and projects related to the community (Lim and
Greenwood 2017). The power is given to employees to raise their voice, creating an awareness
of need all around by approaching the committee of Corporate Social Responsibility and
requesting to place more focus on the employees around the globe (Rahman, Rodríguez-Serrano
and Lambkin 2017). There is an attempt by Appen to guarantee that crowd worker is under
feasible conditions having fair remuneration or their remuneration is above limited minimum
wage.
Appen is a world-wide emerging chief showing the development of datasets of high-
quality for artificial intelligence and machine learning. The primary service of Appen is figuring
out data that big companies use to develop their technology.
The aim of the Company is to pay its management fairly and provide an adequate amount
of incentives. The Board is particular regarding creation of employee reward structures which are
lined up with wealth of long-term shareholder (Manchiraju and Rajgopal 2017). Appen has a
thoroughly varied its employee base, including a mixture of gender, religion, nationality,
ethnicity which is considered to be best amid of all Australian enterprises. The company

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emphasis on achieving an acceptable balance of gender with their ongoing efforts and
implemented plans. There has been the active involvement of the Board in looking towards the
Company and its strategy. The combination of directors includes expertise from strategy
conceptualization, industry, finance, governance, and operations who keep continuous
supervision on the effectiveness of the Board. It helps to ensure the challenges are met of the
innovative industry in which they are operating.
Conclusion
Thus from the above discussion, it can be concluded that good corporate governance
deals with showing the roles of the Board, management, and shareholders, including their
association with each other and other stakeholders. The Appen Ltd. is exposed to risk elements
that is particular to the operations of its business such as economic risks, Social sustainability
and Environmental risks. There are some challenges the Company Appen facing in terms of
corporate governance, such as Conflicts of interest, Transparency, and Ethics violations. The
Board of the Company is accountable for ensuring the proper implementation of risk
management strategy and policies. The Board has entrusted the Audit and Risk Management
Committee, an authority of recognizing risks and establishing an adequate risk management
system. The Board should review the structure of the risk management once in a year to make it
sound and satisfactory. In addition, it is also essential for them to disclose such reviews in each
reporting period. The summary of the corporate social responsibility program of the Company
focusing on commitment towards the environment, its employees, customers, group, and other
stakeholders have been discussed above. In addition, the Company Appen has an agile Corporate
Social Responsibility (CSR) program that gives full support to those who are in need in different
countries they function.

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References
2020. Appen. pp.1-94. Available at:
<https://appen.com/wp-content/uploads/austocks/apx/2019_04_29_APX_1556508780.pdf>
[Accessed 4 April 2020].
Abdullah, M., Shukor, Z.A. and Rahmat, M.M., 2017. The influences of risk management
committee and audit committee towards voluntary risk management disclosure. Jurnal
Pengurusan (UKM Journal of Management), 50.
Dunwoody, S. and Peters, H.P., 2016. Mass media coverage of technological and environmental
risks: A survey of research in the United States and Germany. Public understanding of science.
Eizenberg, E. and Jabareen, Y., 2017. Social sustainability: A new conceptual
framework. Sustainability, 9(1), p.68.
Hermes, N. and van Veen, K., 2017. 1.8. CORPORATE GOVERNANCE IN THE
NETHERLANDS: TRENDS, CHALLENGES AND OPPORTUNITIES (2008-
2016). Alexander N. Kostyuk Udo Braendle Vincenzo Capizzi, p.140.
Ishak, S., Nor, M. and Naimi, M., 2017. The role of Board of directors in the establishment of
risk management committee. In SHS Web of Conferences (Vol. 34). EDP Sciences.
Lim, J.S. and Greenwood, C.A., 2017. Communicating corporate social responsibility (CSR):
Stakeholder responsiveness and engagement strategy to achieve CSR goals. Public Relations
Review, 43(4), pp.768-776.