Corporate Governance: Strategies, Accounting, and Failures Analysis

This report provides an in-depth analysis of corporate governance, focusing on the practices and strategies of BHP Group and Rio Tinto. It examines key indicators like director numbers, executive shareholdings, and CEO statements, comparing their approaches to corporate governance. The report then delves into the critical role of corporate governance in accounting, highlighting how accounting practices support business decisions, ensure transparency, and provide financial information to stakeholders. It further discusses the responsibilities of accountants in maintaining accountability and transparency within organizations. The report also explores the impact of regulatory bodies like ASIC and the reasons behind corporate governance failures, such as leadership experience and confusion about the role of good governance. Finally, it concludes by emphasizing the interconnectedness of accounting and corporate governance, underscoring how good governance builds customer trust and reduces capital costs, while accounting provides a clear picture of organizational activities and sets the standards for governance processes.

Running Head: Corporate Governance
Corporate Governance
Name of the Student
Name of the University
Author Note

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Corporate Governance
Table of Contents
Part A.........................................................................................................................................2
Part B..........................................................................................................................................4

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Part A
1. The two companies which have been selected are BHP Group and Rio Tinto and their
strategies, policies and practices of corporate governance are discussed below-
BHP Group-
According to BHP Group, they believe in high quality governance support for the
creation of long term value as good governance leads to good business. The approach of
BHP is to adopt the standards of governance in Australia, the United States and the
United Kingdom. The Financial Reporting Council has released the UK Corporate
Governance Code and the Guidance on the Effectiveness of Board of 2018 in July 2018.
It helps to describe the importance of demonstrating the corporate governance structure
through reporting and how it helps to achieve wider objectives by contributing in the
long-term sustainable success (Bhp.com, 2020).
Rio Tinto-
According to Rio Tinto, they produce those materials which are important for human
progress. This purpose requires them to work in remote and sensitive locations which are
owned by indigenous people. The values of Rio Tinto put emphasise on delivering
products with long lasting benefits for the owners of the company as well as for the
community in which they operate. The group has launched its first integrated sustainable
strategy in 2018. According to this strategy, the group has committed to adopt high
standards, aiming beyond the legal requirements and issuing of materials for the business
and the stakeholders. At the same time, they lead to innovate few key areas which will
strengthen their contribution in the society and sharpen their competitive advantage
(Riotinto.com, 2020).

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2. Computation of the following indicators of corporate governance collected from the
annual reports of BHP Group and Rio Tinto-
Particulars BHP Group Rio Tinto
a. Total number of
directors
15 directors 8 directors
b. Percentage of non-
executive directors
46.66 % 100 %
c. Percentage of
independent
directors
66.66 % 100 %
d. Chief Executive
Officer
Andrew Mackenzie Jean- Sebastian Jacques
Summary of CEO’s
statement
According to him, BHP is
successful when the people
start their day with a
purpose and ends with
accomplishment and they
have an inclusive and
cultured team with good
relationships between the
suppliers, customers and
communities.
According to the CEO,
Rio Tinto has a global
tailing standard since 2015
and the financial year
2018 has been another
solid year fir them as they
have declared $13.5
billion cash returns to the
shareholder. It has been
highest in the history of
Rio Tinto
e. Percentage of shares
hold by executive
2.60 % 11.8 (multiple base fee)

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directors
f. Percentage of shares
hold by block-
holders and
institutional
investors
62.43 % 68.14 %
Source: Bhp.com, 2020 and Riotinto.com, 2020
3. The practices and principles of corporate governance-
It is important for the companies listed in ASX to report about their extent of meeting
with the principles and recommendations of ASX and has to mention the reasons of the non-
compliance, if any. According to the annual report of BHP, they have applied the main
principles and complied with the provisions of the ASX Principles and UK code without any
exceptions (Bhp.com, 2020).
The strategy that Rio Tinto has adopted includes three pillars and these pillars are
operating of the business in a responsible and profitable manner, collaborating for enabling
long-terms economic benefits and pioneering materials which are important for human
progress (Riotinto.com, 2020).
Part B
The role of corporate governance in accounting
The system of rules which helps the business to direct their business decisions and
justify their business actions are pertained by the corporate governance. The corporate
governance is considered as the foundation which helps a business organization to achieve its
goals and objectives within the social and legal environment (Tricker and Tricker, 2015). The
corporate governance play an important role in accounting because the major function of

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accounting tasks is to track the financial performance of a business organization. Therefore,
these tasks accounting tasks are important to determine the role of the company to fulfil the
policies of corporate governance (Armstrong, et al., 2015).
The accounting practices are termed as an effective instrument of corporate
governance as the business organizations are responsible for making advantageous and
intelligent decisions with respect to operation and expansion of the business and the ability to
invest in a project when there is accurate accounting data in the management (Honggowati, et
al., 2017). Similarly, the public limited companies unlike the private companies have the
legal responsibility for disclosing their business practices to the external parties which are
involved in the business. Therefore, such business corporations are needed to release accurate
and honest financial statement like the income statement, balance sheet and statement of
shareholders’ equity for the external users. These information is helpful to the investors as
this will help them to take the decision about investment and at the same time this
information is useful to the government to see whether the companies disclose its operations
fully or not. Thus, the accounting practices play an important role to produce these statements
to the external parties (Kabir and Rahman, 2016).
On the other hand, it is important for the business organizations to release required
and detailed financial information to the shareholders other than the market and the
government. The decisions of the company influence the shareholders whether the
shareholders should hold their shares, buy their shares or sell their shares in the stock of the
firm. The financial statements which are prepared by the accounting department of the
business organization contains the most important and intelligent decisions of the business as
well as the shareholders. Hence, the shareholders rely on the produced financial statement to
a great extent (Larcker and Tayan, 2015).

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The quality and the accuracy of the accounting data helps the business organization to
take almost every business decisions. This data is helpful for the business organizations since
it helps to make intelligent choices like prioritising of the project and managing of assets. At
the same time, the accounting data helps the managers of the companies to show about their
income level, the source of the income and the when the managers are expected to receive the
same. The accounting data also helps the management to take decision about recruitment,
acquisition of more equipment and to take more debt or not (Armstrong, 2015).
The role of an accountant in corporate governance is wide as it ensures accountability
and transparency in the daily operations of a business organization. The responsibility of a
business organization to provide correct and true information to the shareholders as well as
the stakeholders rests on the shoulders of the accountants and therefore the accountants are
the people who help in building the trust of the stakeholders on the brand of the company.
However, in terms of corporate governance the role of the accountants is two-folded. The
first responsibility of the accountants include to report on the flow of the capital in various
departments of the organization and to monitor those activities which are undertaken for
carrying out with the capital and where the capital is getting invested. On the other hand, the
second responsibility of the accountant is concerned with the ensuring of the proper and
detailed framework of the accountability and transparency for the purpose of addressing the
interests of the stakeholders (Larcker and Tayan, 2015).
The Corporate Law Economic Reform Program is the latest proposal of the
government that has been released into the environment which is keen to see that there are
tighter control in the corporate governance. This has been issued by the federal government
on October 8, 2013 for the next stage of Corporate Law Economic Reform Program (CLERP
9). The CLERP 9 issues paper which contains the Corporate Disclosure for strengthening the
framework of financial reporting (Giofré, 2016). On the other hand, the Australian Securities

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and Investments Commission acts as a corporate regulator of Australia and it is an
independent government body of Australia. The purpose of ASIC is to regulate and enforce
the company law and the financial services law for protecting the consumers, creditors and
investors of Australia. The directors as well as the officers of the company play an important
role in the maintenance of the standard of the corporate governance of the company and the
corporate governance has been considered as the driver of the operations as well as the
performance of the business organization (Kabir and Rahman, 2016). The guidelines of ASIC
helps in assisting the entities along with the individuals to comply with the rules and
regulations of ASIC and to take proper decisions in the best interests for the investors. The
ASIC maintains relationship with the stakeholders regarding the issues related to corporate
governance with the help of external publications, speeches and events (Comino, 2015).
However, sometimes companies fail to keep pace with the corporate governance and
the reasons why they fail is discussed below-
 Experience in Leadership- There are many organizations which are having ill-trained
and poor directors and therefore they lack in their commitment. They focus mainly on
the short-term profitability, management of assets, cost-cutting initiatives over the
less-tangible challenge which helps in the enhancement of the culture of the company.
Therefore, the cultural issues of the company receive less attention and the KPIs and
goals are not in place hence it creates conflict and chaos for the stakeholders at all
levels.
 Confusion about the role of the good governance- There are many organizations
which do not understand the importance of governance and fails to admit it as a
business philosophy. As a result, there is no change in the attitude and practices of the
personnel of the organization. Mostly, the business organizations set up a compliance
department and think this will help to set up a good corporate governance but this

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actually push the business away from culture of excellence towards the culture of
compliance and the organization misses its opportunity to improve.
These organizational failure can be solved by the chief compliance officer by
developing strategies for leadership engagement. The leadership engagement strategies
should include mentoring of work force and establishing key metrics of performance for
the purpose of measuring the performance of the business organization and to
demonstrate the value of the good corporate governance (Rossouw and Styan, 2019). The
bankruptcy and the financial failures are caused due to mismanagement, poor ethical
leadership, lack of integrity, violation of corporate governance rules, corruption and fraud
and most of the corporate governance programs make things worse and creates a more
stable situation for corruption (Boda and Zsolnai, 2016).
It can be inferred from the above discussion that accounting and corporate governance
go hand in hand and one cannot function without the other. The good corporate
governance has been considered as the deciding factor which helps the business
organization to maintain a strong financial position in the market. However, when there is
a failure in the corporate governance the failure mainly occurs due to flaws and faults in
the accounting department and therefore, the accounting department has been considered
as the “gatekeeper of all the activities of corporate governance” in the business
organizations. The good corporate governance is helpful for the business as good
corporate governance helps to build faith of the customers in the business organization
and leads to lower capital costs in the investments. On the other hand, accounting also
helps in the improvement of corporate governance of an organization and it is the key
enabler of the good corporate governance. Lastly, it can be concluded that accounting
helps to provide a clear picture of the organizations after undertaking several tasks and
therefore the accountant sets the code of conduct according to which the processes of

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governance are carried out. It is also the role of the accountant to ensure that the program
of fraud management are in place and conducting of regular assessments of the risk
exposure of the organization and implementation of techniques of prevention for avoiding
fraudulent activities.

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