Capstone Project: Corporate Governance at Chorus Limited Analysis

This project examines the corporate governance and ethical strategies employed by Chorus Limited, an Australian Stock Exchange listed company. The analysis focuses on Chorus's board orientation, shareholder and stakeholder relationships, and the application of various corporate governance theories, including agency, stewardship, and stakeholder theories. The study reviews Chorus's 2019 financial report, including the remuneration of directors and the CEO, Kate Mckenzie, and interprets Chorus's communications through the lens of legitimacy theory. The project identifies the key corporate governance orientations utilized by Chorus Limited, concluding that the company primarily utilizes agency, ethical, and resource-based theories in its governance framework, with a board composed of independent directors. The project also discusses the implications of these orientations on stakeholder management and the company's overall ethical outlook.

Running head: CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
Corporate Governance and Ethical outlook
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Author Note

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
Executive Summary
This study tries to capture the various corporate governance orientations that different
companies use to maintain legitimacy in the organization. The study also tries to understand
how Chorus limited, which is an Australian Stock Exchange Limited company, has used the
different types of corporate governance orientation and which orientations it has used the
most. The study concludes that Chorus has used three theories the most which are namely
Agency, ethical and resource-based theories.

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
Table of Contents
Introduction................................................................................................................................3
A Brief overview of Chorus Limited.....................................................................................3
Aim of the Study....................................................................................................................4
Corporate Governance at Chorus Limited.................................................................................4
Board Orientation.......................................................................................................................7
Shareholder – Agency Orientation.........................................................................................7
Shareholder – Stewardship Orientation.................................................................................8
Stakeholder – Managerial branch...........................................................................................9
Stakeholder – Ethical Branch...............................................................................................10
Resource...............................................................................................................................11
Conclusion................................................................................................................................12
Interpretation of Chorus Limited’s Communication............................................................12
References................................................................................................................................14

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
Introduction
A Brief overview of Chorus Limited
There are various telecommunication providers in New Zealand. One of them is
Chorus Limited. Chorus is listed on ASX with the code CNU. Chorus is the biggest telecom
provider in New Zealand. Chorus owns most of the telephone networks. Chorus is the
provider of ultra-fast broadband service in NewZealand (Fabling & Grimes, 2016). Chorus
was founded in the year 2011 and had its headquarters in wellington, New Zealand. The
name chorus came into the business in the year 2008. On the 1st of December, Chorus became
a separate entity. Before 2011, Chorus was a part of Telecom New Zealand. Chorus had won
most of the project that was assigned from the government of New Zealand, although it can
only sell as a wholesaler to different retailers (Chorus.co.nz, 2020).
Chorus sells both copper as well as Fibre products (Cornaglia, Young & Marchetta,
2015). Chorus started providing ADSL and VDSL2 networks from the year 2014. Most of
Chorus’s networks were high speed, although speed differs upon the plan that the Customer
had chosen (Bebensee et al., 2014). The ADSL and VDSL networks that were provided by
Chorus were dependent on the distance of the customer from the device (Gaudino et al.,
2014). If the customer were closer, then the customer would enjoy higher speeds, whereas
customers who were far away would not enjoy such high speeds. This is the reason Chorus
came up with a new type of networking system known as fiber to the node network. This new
network brought the device closer to the customers. So, most of the customers could now
enjoy high-speed data. Chorus had received contracts from two companies, namely Vision
and Downer in April of 2013. The contracts were worth a total NZ $ 1 billion. The contract
was to build an Ultra-fast broadband network all over New Zealand. Chorus had also
received a government subsidy of NZ $ 929 million. In the year 2019, Chorus Limited has a

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
total of 1,450,000 connections that are fixed; 1,196,000 connections of broadband; 610,000
high-speed connections that fiber. But the Net profit of Chorus Limited has reduced by NZ $
32 million. But Chorus Limited has been able to achieve a customer satisfaction score of 7.7,
which was 7.5 in the year 2018.
Aim of the Study
This report is to study the various corporate governance and ethical strategies
that companies use and also understand how Chorus Limited has implemented its Corporate
governance and ethical strategies. The study will study the financial report 2019 as provided
by Chorus on its website. The study will also examine the various ratio of the directors, Chief
Executive Officer at Chorus, and how they are renumerated. Then an interpretation of Chorus
Limited’s communications will be made with the use of Legitimacy theory. The study has
also applied various theories over Chorus Limited and tried to understand whether Chorus
Limited applied those theories in its company and also if Chorus has applied those theories,
then it has been understood how those theories have been implemented in the company. The
study also refers to the board of directors and the way they are renumerated. The study finally
concludes which of the different corporate governance orientations Chorus Limited has used
the most.
Corporate Governance at Chorus Limited
As per the financial report provided by Chorus for the year 2019, it has been found
that Kate Mckenzie is the current Chief Executive officer at Chorus. Patrick Strange is the
Chair Independent Director at Chorus Limited and was appointed in the year 2015
(Armstrong, Core & Guay, 2014). Jon Hartley is the Deputy Chair Independent Director
since the year 2011; Mark Cross was an independent director since the year 2016; Prure
Flacks is an independent director since the year 2011; Murray Jordan is an independent

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
director since 2015; Jack Matthews is an independent director since 2017; Anne Urlwin is
also an independent director since 2011. The only Non-independent managing director at
Chorus is Kate Mckenzie. Kate Mckenzie was appointed to the role of non-independent
managing director in the year 2017. The ratio of independent to the non-independent director
for Chorus Limited is 7:1 (Dou, Sahgal & Zhang, 2015). The board is comprised of mostly
the stakeholders of Chorus Limited. The board is comprised in such a way that it supports
corporate governance and also adds value to the organization. The board members of Chorus
Limited do most of the decision making. Chorus is listed on the Australian Stock Exchange.
Chorus even follows the corporate governance code laid out by the Australian Stock
Exchange. Chorus was provided with support from the Nominations and Corporate
Governance (NCGC) (Abdullah, Ismail & Nachum, 2016). The board member at Chorus
Limited is responsible for regular evaluation of the composition of the board member’s skills
and putting them to better use and also evaluate every year. Whenever there is a need for a
new skill in the governance process, new recruitment is done. The board member at Chorus
Limited always remains involved in the strategic decisions.

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
The Chief executive officer cum non-independent managing director Kate Mckenzie
at Chorus Limited was renumerated with NZ $ 2,068,560 for the financial year 2019, which
included her STI (Short term incentive) of NZ $ 844,560 and her salary of NZ $ 1,224,000.
The Short term incentives are paid to an individual director based on his or her performance
level. Short term incentives also depend on the company’s performance. The short term
incentive is generally 75 % of the salary of the individual director (Näslund, 2018). In 2019,
Chorus Limited achieved a Short term incentive of 92 % of the total salary of Kate Mckenzie.
Patrick Strange was paid a total fees of NZ $ 2,236,500; Jon Hartley was paid a total fee of
1,677,500; Mark Cross was paid a total fee of NZ $ 1,303,000; Prue Flacks was paid a total

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
fee of NZ $ 1,457,800; Murray Jordan was paid a total fee of NZ $ 1,257,500; Jack Matthews
was paid a total fee of NZ $ 1,257,500; Anne Urlwin was paid a total fee of NZ $ 1,538,000.
Kate Mckenzie, who is also one of the directors, did not receive any remuneration for her
position as a director (Amba, 2014). The total fee that is paid to the directors comprises of
board fees along with a fee for auditing and risk managing, a fee for performance and fee for
NCGC.
Board Orientation
Shareholder – Agency Orientation
Agency Theory is a way of solving problems among companies and its various
agents, which in our case, are the various board member at Chorus Limited. The board
members are also the shareholders of Chorus Limited (Glinkowska & Kaczmarek, 2015). In
shareholder - Agency orientation of the board, the board is mostly comprised of independent
directors. Seven out of eight board members at Chorus Limited is comprised of independent

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
directors. The board has its focus on the growth of the company (Shi, Connelly & Hoskisson,
2017). The board communication comprises of the various financial statements that are
provided by Chorus Limited for the year 2019. There are generally two parties in a day to day
transaction. In Chorus Limited, there are two parties, that is the company itself and its
shareholders that are the board of directors. Agency Theory is used to capture the relation
between them. The agents do the decision-making process. In Chorus Limited, the board of
directors takes all the strategic decisions. The board of directors at Chorus make use of the
resources provided by the company and invest in the various functions of the telecom
industry. These investments carry heavy risks along with it. These risks have to be assessed
properly as they can lead to overall damage to the company.
Shareholder – Stewardship Orientation
Stewardship theory means that the employees at Chorus Limited will be working to
increase the profit of the company so that shareholders of Chorus Limited can enjoy huge
gains (Pande & Ansari, 2014). The employees of Chorus Limited will be appreciated when

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
the shareholders of Chorus Limited get huge gains from their investment at Chorus Limited
and also when Chorus Limited gets an overall success (Madison et al., 2016). But there are
certain limitations of this type of orientation. The concept that the employees Chorus Limited
have to work hard to earn higher profits for the company creates a huge level of pressure
towards the employees. Chorus Limited is doesn’t use Stewardship Orientation as most of the
decisions of Chorus Limited are taken by the board of directors, and all of the board of
directors are also the shareholders of Chorus Limited. But the stewardship concept does
provide some benefits for an organization. It creates a sense of common goal for its
employees. So, the employees get motivated to earn huge profits for the organization.
Stewardship Theory has a requirement that the chief executive officer of Chorus Limited, that
is, Kate Mckenzie, has to be very motivated towards achieving organizational success. Also,
only one of the directors at Chorus Limited is a non-independent director, so Chorus Limited
is not a stewardship organization.
Stakeholder – Managerial branch
Stakeholder theory means that the people who have invested their money in Chorus
Limited are the only people who will be concerned regarding the success of the organization
(Ayuso et al., 2014). In Chorus Limited, all the board members are paid a salary and also paid
incentives based on the growth and performance of them individually as well as the company
Chorus Limited as a whole. The employees Chorus Limited are always required to be
involved in communicating information relating to the Chorus Limited to its shareholders.
Chorus Limited always updates all information to its website. All information that can be of
interest to the investors of Chorus Limited is made easily accessible (L’Huillier, 2014). The
shareholders of the company are given the utmost importance. Shareholders of Chorus
Limited are even allowed to post questions regarding the company. Shareholders of Chorus
Limited also have voting rights. They can vote for any new decisions. Shareholders of Chorus

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
Limited can also attend meetings. These meetings are not actual meetings but proxy
meetings. In a proxy meeting, none of the participants has to attend any meeting physically.
They can share their opinions through votes. There is an allotted one vote for each share a
person owns. Chorus Limited can be termed as a stakeholder theory company as the
shareholders of Chorus Limited are given the highest priority.
Stakeholder – Ethical Branch
In ethical theory, the company is mostly concerned about the corporate social
responsibility of the company. Chorus Limited has provided many ethical as well as market
disclosure in its financial report in 2019. At Chorus Limited, honesty is highly expected from
its employees as well as the directors (Yazdani & Murad, 2015). Some ethical policies like
the difference of opinion, providing gifts and other things for an individual’s benefit, anti-
corruption, disclosure of confidential information, misuse of Chorus Limited’s assets,
obeying the laws, and immediate complaint against wrong behavior in Chorus Limited is
strictly abided. Any gifts above the value of NZ $ 150 are strictly prohibited at Chorus
Limited. Bullying and harassment of any employee are punishable in Chorus Limited (Mason
& Simmons, 2014). For such acts, Chorus Limited has designed a Zero tolerance policy.
Also, the whistleblowers are highly protected by Chorus Limited. Chorus Limited has also
shown a high preference for the allover condition of its workforce. Chorus Limited has set a
target that by 2022 it will increase the number of women in its company who get paid more
than the men. Chorus Limited has shown that it wants to empower its female employees.
Chorus Limited has also shown that it is very much interested in the physical, mental and
cultural well being of its employees. So, Chorus Limited can be said to abide by ethical
theory for these reasons and also that most of its board members are independent directors.

CORPORATE GOVERNANCE AND ETHICAL OUTLOOK
Resource
The board composition is not important in the case of a resource based company. The
main aim of such companies is on how they can secure the various resources. Chorus Limited
has shown much interest in securing the resources of the company (Chan, Watson &
Woodliff, 2014). Also, Chorus Limited has mentioned that it recruits its board members
according to the skills required by the company. Resource theory says that the company will
give high preferences to those who provide resources to it. But as per the financial report in
2019, as provided by Chorus Limited, it has shown a high interest in capital management. It
can be said that Chorus Limited is a resource-based company as it has t mentioned much
theory for management of Chorus Limited’s capital.