Corporate Governance Report: Commonwealth Bank Analysis

This report provides a comprehensive analysis of corporate governance, focusing on the Commonwealth Bank. It begins with an overview of the bank's background and then delves into the meaning and concept of good corporate governance, highlighting the importance of transparency and stakeholder management. The report examines the ASX's corporate governance principles and recommendations for the bank, including board responsibilities, ethical decision-making, financial reporting integrity, and shareholder rights. The Royal Commission into Misconduct is discussed in the context of the bank's corporate governance. The report also explores key corporate governance theories, such as shareholder and stakeholder theories, and their implications. Finally, it assesses the consequences of poor corporate governance, emphasizing its impact on market confidence and economic stability. The report concludes by summarizing the key findings and implications of the analysis.

Running head: REPORT 1
CORPORATE LAW
STUDENT DETAILS:
9/12/2018

REPORT 2
Contents
Background of company-............................................................................................................................3
Meaning and concept of good corporate governance-.................................................................................4
The corporate Governance Principles and Recommendations for Commonwealth bank-...........................4
The Royal Commission into Misconduct in Commonwealth bank –...........................................................7
Important theories of corporate governance of company-...........................................................................8
Consequences of poor corporate governance.............................................................................................10
Impacts of good corporate governance of company-.................................................................................11
Conclusion.................................................................................................................................................11
References.................................................................................................................................................13

REPORT 3
The corporate governance is important element for company’s success. The corporate
governance recognises complexities or difficulties in conducting business affairs. The corporate
responsibility, ethics, corporate governance structure, and corporate governance principles create
the trustworthy customer base. The good corporate governance of company helps in making
long-term development and achievements. It is very helpful for the growth of employees of
company. The good corporate governance is not only limited to the adequate environmental
practices, but it develops to arrange overall values of an organisation to achieve objects of
clients, staff, investors, dealer, administrator and the public.
In this report, meaning, and concept of corporate governance structure, principles of
corporate governance, corporate governance theories, and consequences of poor corporate
governance structure of common wealth bank is discussed and critically evaluated.
Background of company-
The company or bank preferred for the evaluation is Commonwealth Bank.
Commonwealth Bank is multinational bank in Australia. The commonwealth bank runs business
across the world such as United States, New Zealand, Asia and UK. Commonwealth Bank
provide the financial services including banking services. This bank is listed on Australian
security exchange. It includes various trademarks namely Commonwealth insurance and
Commonwealth securities. The major object of this report is to evaluate the theories, principles,
consequences and impacts of corporate governance of Commonwealth Bank in effective manner.

REPORT 4
Meaning and concept of good corporate governance-
The good corporate governance refers the procedures of discovery and transparency are
monitored so as to render managers and stakeholders as well as the people with exact and correct
data about the economic, operational and other elements of the corporation. The corporate
governance covers the policies and processes to make sure that an organization is managed in
such manner that it attains its objects. In profit oriented companies, these objects will be to
increase shareholders returns. Though, conflicting interest of other shareholders is identified. In
addition, the company has to work in its environmental directions and limits that involve acting
in a moral way and in compliance with law, rules and regulations. BOD have duties for the
governance of their organizations. The functions of stakeholders are to employ and to satisfy
themselves that proper corporate governance structure is in the place (Neubauer & Lank, 2017).
The corporate Governance Principles and Recommendations for Commonwealth bank-
ASX has established many approaches and polices to sustain its commitment to running
the business affairs of the company ethically and in proper manner which is open and responsible
to the shareholders and the clients in marketplace (Katamba, et. al, 2012). These principles
encouraged effectiveness of board of company. Following principles and recommendations are
suggested for Commonwealth bank-
Principle 1: Identify and define duties of board and management of company-
This principle says that the framework of the company should be framed to enable the board of
company to give strategic guidelines for board and the management of company. The structure
of company should ensure the balance of authority. It is suggested to board to accept a formal

REPORT 5
statement of issues that details the duties of board. Other substitution is the official statement of
delegated authority to board.
Principle 2: framing board for additional value-
According to it, a proper structured board is one that enables the effective liberation of
responsibilities enforced by law on directors and inserts value in respect of circumstances of
corporation. It is recommended to assess the independence and disclosure of independence of
directors of the company.
Principle 3: Encourage moral and accountable decision-making-
According to this principle, an organisation must encourage ethical decision-making. It is
recommended to form code of conduct. The company should disclose the codes to establish
confidence in the honesty of company and to implement the duties of individual for making
report and examining report of immoral practices. Further, it is recommended that corporation
should develop the policies related to diversity. It is also required by the company to explore the
proposition of women employees in annual report.
Principle 4: Secure integrity in financial reporting-
It is stated by this principle that it requires the corporation to put in place a framework of
evaluation and permission framed to make the honest presentation of financial position of
corporation. The framework will include evaluation and deliberation of the accounts by audit
committee and a procedure to make sure the independence and capability of the external auditors
of company (Moon, 2014).
Principle 5: Make balanced disclosure at the time-

REPORT 6
In accordance with this principle, an organisation should promote the disclosure on the time. An
organisation should make written policies to ensure the compliance with needs of ASX
principles. The written policies should make sure the duties of senior executive for that
compliance.
Principle 6: Give respect to the rights of shareholders-
It is stated by this principle that corporation must respect powers of stakeholders. The company
should use the rights in effective manner. It is recommended to the company to establish the
policies for better communication with shareholders. The company should promote the
involvement in the company’s general meetings.
Principle 7: Identify and handle risks of company-
According to this principle, the company is required to make the sound system to manage the
risks. It is recommended that the board should disclose the management has reported to it as to
efficiency of management of huge business risk
Principle 8: Promote enhanced performance of business-
This principle says that the company is required to make sure proper remuneration. It should be
proper to develop clear relationship. It is recommended to a company to develop remuneration
committee. The remuneration committee is required be structured by majority of independent
directors. It is also recommended to company to make differences between executive director’s
compensation and non-executive director’s compensation (Muller, 2017). The degree to which
Commonwealth bank notices fundamental principles of good corporate governance is a

REPORT 7
significantly essential factor for the decisions related to investment. International flows of capital
make able banks to access funding from the greater pool of depositors (Bottomley, 2016).
For an example, the scandal of Commonwealth Bank raises various questions about corporate
governance or about the implementation of financial regulation, and about the internal system of
the Commonwealth Bank. Thus, it is required to consider the implications for ongoing debate
about income discrimination.
The Royal Commission into Misconduct in Commonwealth bank –
The Royal Commission proposes the persons or companies to make public submission
via online modes. This is required by those, who want more help by the mail or phones. The
purpose of submission was to identify reasons of unconfirmed wrongdoing, factors that led to
occurrence of misbehaviour and actions to be taken to resolve the issues. Thus, the Royal
Commission conducts an inquiry in the proper method. After the inquiry, it makes a report on the
misconduct in banking industry and financial industry. The Royal Commission has powers to
make witness and mention the charges related to crime. The enquiry of Royal Commission
affects the employment of officers in the bank (Morrison, 2015).
The Royal Commission focuses on getting truth whether there is any violation of the law
related to financial services and more relevant laws. This submission makes able the Royal
Commission to gather the details rapidly in comparison of the long process of substantial witness
to perform and produce documents. The planned disclosure of secret or privileged details to the
Royal Commission may mean that there is an indirect disassociation of privacy or legal honour
regarding the information in following lawsuit. The Commonwealth bank agrees with the Royal
Commission in banks or finance sector. It is very important that sufferers of scandals related to

REPORT 8
Commonwealth bank are afforded an opportunity to make submissions and if proper, render
proofs to the royal commission (Tricker & Tricker, 2015).
Important theories of corporate governance of company-
The corporate governance is described as system to direct and manage the companies.
There are many theories on the corporate governance such as shareholders theory, stakeholders
theory, ultitarian theory, agency theory, transaction theory and contract theory (Schwartz, 2011).
The most important theories are shareholders theory and the stakeholders theory. These theories
are defined as below-
The shareholder theory relies on the facts that only object of corporate governance is to
help a listed company to increase the value of shareholders. In so doing it ignores corporate
governance realities in various markets everywhere, where many kinds of insider systems of
governance present in the corporation concerted ownership (Tricker, 2015). This insider system
is thought to be more delegated of continental corporate jurisdictions. In a relative corporate
governance outlook, the dominant economic theory consequently fails to take into account
various presenting frameworks of ownership. This unstable capital structure has a major
influence on corporate governance problems. It may result in conflicts of interests of the various
types (Meagher & Goodwin, 2017).
The shareholder theory emphasizes that corporate boards have a major duty to increase
the financial interest of shareholders. However, in the stakeholder theory, managers should
balance the interest of all the stakeholders, that include not only shareholders, but also clients
and workers, and in some descriptions of the theory, the group, the atmosphere and even
creditors and competitor. The shareholder theory is significant for running the business with

REPORT 9
companies realising that there are limitations to point only on interest of the shareholders. The
part of shareholder theory can be considered in the companies, where endless burden on
administrators to increase shareholders returns (De Haan & Vlahu, 2016).
Further, the stakeholder theory of the corporate governance focuses on influence of
activities of corporate on the recognised stakeholders if the companies. This theory states that the
officers and directors should take in consideration that interest of shareholders in the procedure
of the governance system. It involves taking actions to decrease or diminish the interest conflicts
of shareholders (Cranston, 2018). The stakeholders are divided into two categories such as
internal shareholders and external shareholders. The internal stakeholders involve directors and
workers who are generally included in the procedure of corporate governance. On the other hand,
the external stakeholders include the auditors, clients, dealers, agencies and other groups at large
scale (Zientara, 2017).
The stakeholder theory is defined as significant factor of CSR. This theory identifies the
company’s duties in the present time, whether they may be financial, legal, ethical, or generous.
In these days, the big companies of the world claim to have at the core of their strategies related
to company. Whereas there are many cases of companies with an ethic, many others abuse CSR
as a good means of PR to develop their image but ultimately fail to put their points in the act
(Chan, et. al, 2014).
Consequences of poor corporate governance-
A good corporate governance can have positive influences on the faith of shareholders by
motivating them that an organisation is taking good decisions in respect of the business affairs
and is well managed within. The confident shareholders are likely to make investment of huge

REPORT 10
amounts in the self-governed corporation due to the good return on investment. It may lead to
enhanced market confidence in company that can serve to enhance total value of stock, when the
stock value of corporation rises, so does its total value (Meagher & Goodwin, 2017).
A company with poor corporate governance approaches may have bad influence on
business market and economy (Kraakman & Hansmann, 2017). The lack of good corporate
governance at the executive level may lead to bad decision that may reduce total value of
company and make it complex for the business to fulfil duties. It was considered in year 2009,
when bad corporate decisions lead to dropping disasters in the marketplaces, which in turn
caused slow economy. Further, poor corporate governance of the company may lead poor
political connection (Anginer, et. al, 2016). Furthermore, Poor corporate governance weakens the
legal framework of the company. The bad corporate governance increased the fines for
eliminating, varying, or creating records in the central questions or for trying to mislead
stakeholders of the corporations. It also increased the duty of audit firms to remain unbiased and
self-governing of their customers (Du Plessis, Hargovan & Harris, 2018).
Impacts of good corporate governance of company-
The good corporate governance motivates the investors to hold the shares in
organizations for the long period as corporations often advantages from having stakeholders who
have interests in the long-term predictions (Klettner, Clarke & Boersma, 2014). The existence of
good and proper corporate governance in corporation and through the economy as a complete,
helps to render a degree of self-reliance which is required for adequate working of economy. The
corporate governance has a proper connection to progress and development of country (Jacoby,
2018).

REPORT 11
Conclusion
As per the above discussion, it can be concluded that the corporate governance is
significant aspect of success of company. As per the discussion it is found that companies should
have social responsibilities. Corporate governance of company is the heart and soul of company.
The corporate governance is utilized as shorthand for contribution to future progress. Good
corporate governance has an important role to run business. Various problems related to
development such as health, and poverty are integrated around corporate governance in
company. The companies having social responsibilities make more profits. In this way, the
corporate governance should not be considered as an act on the behalf of large companies but it
is required to be treated as ethical duties on their behalf. According to corporate social
responsibility policy of Commonwealth Bank, it is found that good corporate governance helps
in keeping name of brand everywhere. On the other hand, the poor corporate governance ripples
markets of Australia. The issues related to corporate governance should be resolved for effective
evaluation of the company.

REPORT 12
References
Anginer, D., Demirguc-Kunt, A., Huizinga, H., & Ma, K. (2016). Corporate governance and
bank capitalization strategies. Journal of Financial Intermediation, 26, 1-27.
Bottomley, S. (2016). The constitutional corporation: Rethinking corporate governance. New
York: Routledge.
Chan, M. C., Watson, J., & Woodliff, D. (2014). Corporate governance quality and CSR
disclosures. Journal of Business Ethics, 125(1), 59-73.
Cranston, R. (2018). Principles of banking law. Oxford: Oxford University Press.
De Haan, J., & Vlahu, R. (2016). Corporate governance of banks: A survey. Journal of
Economic Surveys, 30(2), 228-277.
Du Plessis, J., Hargovan, A., & Harris, J. (2018). 2Principles of contemporary corporate
governance. Cambridge: Cambridge University Press.
Jacoby, S. (2018). The embedded corporation: Corporate governance and employment relations
in Japan and the United States. United States: Princeton University Press.

REPORT 13
Katamba, D., Zipfel, C., Haag, D., & Kazooba, C. T. (2012). Principles of Corporate Social
Responsibility (CSR): A Guide for students and practicing managers in developing and
emerging countries. Houston: Strategic Book Publishing and Rights Co.
Klettner, A., Clarke, T., & Boersma, M. (2014). The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics, 122(1), 145-165.
Kraakman, R., & Hansmann, H. (2017). The end of history for corporate law. In Corporate
Governance, 39(5), 49-78.
Meagher G., & Goodwin, S. (2017) About the contributors and end pages. Australia: Sydney
University Press.
Moon, J. (2014). Corporate Social Responsibility: A Very Short Introduction. New York: Oxford
University Press.
Morrison, J. (2015). Business Ethics: New Challenges in a Globalised World. London: Palgrave
Macmillan.
Muller, R. (2017). Project governance. Oxford: Routledge.
Neubauer, F., & Lank, A. (2017). The family business: Its governance for sustainability. New
York: Springer.
Schwartz, M. S. (2011). Corporate Social Responsibility: An Ethical Approach. New York:
Broadview Press.

REPORT 14
Tricker, B. (2015). Corporate Governance: Principle, Policies and Practices. Oxford: Oxford
University Press.
Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and
practices. New York: Oxford University Press.
Zientara, P. (2017). Socio emotional Wealth and Corporate Social Responsibility: A Critical
Analysis. Journal of Business Ethics, 144(1), 185–186.