Corporate Governance: Financial Report Analysis, Semester 2

This report provides an analysis of corporate governance practices by examining the annual financial reports of two companies listed on the Australian Stock Exchange (ASX). The report begins by outlining the corporate governance strategies of JB HI-FI and Wesfarmers, focusing on information disclosed to stakeholders, including board composition, risk management, and director compensation. Part A compares and contrasts key aspects such as director independence, shareholdings, and the role of the chairman and CEO. Part B delves deeper into the principles of corporate governance, discussing its impact on accounting practices, the importance of independent directors, and the role of regulatory bodies like ASIC and CLERP 9. The report also addresses the influence of corporate governance on financial reporting, integrated reporting, and the adoption of governance rules internationally. The conclusion emphasizes the significance of effective corporate governance for transparency, accountability, and the overall success of a business.

Running head: CORPORATE GOVERNANCE
Corporate Governance
Student Name:
University Name:
Note to the Author:

1
CORPORATE GOVERNANCE
Table of Contents
Part A.........................................................................................................................................2
Condition 1.............................................................................................................................2
Condition 2.............................................................................................................................2
Condition 3.............................................................................................................................3
Part B..........................................................................................................................................4
Introduction............................................................................................................................4
Discussion..............................................................................................................................4
Conclusion..............................................................................................................................7
References..................................................................................................................................9

2
CORPORATE GOVERNANCE
Part A
Condition 1
JB HI-FI and Wesfarmers have published their strategies with regards to corporate
governance, practices and policies in a private section in the annual report called the
“Overview of Corporate Governance” and Statement of Corporate Governance respectively.
The work for these organizations is to give out to the stakeholder specific and important
information. The information regarding the function and responsibilities of the associates of
the board, strategies related to risk management, board composition, auditor’s freedom and
the compensation of the directors have even disclosed in the annual report published by the
organization (jbhifi.com.au, 2019).
Condition 2
a. According to the Wesfarmers’s annual report, the organization presently has nine
directors (wesfarmers.com.au, 2019). The annual report of JB HI-FI Limited for the
year 2018 reveals that there are 7 directors (jbhifi.com.au, 2019).
b. Eight of them are non-executive directors. The percentage has been found to be
88.89% (wesfarmers.com.au, 2019) for the non-executive directors. In JB HI-FI, 6 of
them are non-executive directors and percentile is found to be to 85.71%.
c. According to 2018 annual report for Wesfarmers, all the non-executive directors are
independent and the percentage comes to 88.89%.
According to Annual Report of JB HI-FI for 2018, all the directors are independent
and percentage comes to 100%.
d. According to the Annual Report of Wesfarmers for 2018, Michael Chaney AO is the
chairman of the organization (jbhifi.com.au, 2019). The company has taken some of
the hard decisions for the betterment of the company in 2018. The profit recorded was

3
CORPORATE GOVERNANCE
from the continuing operation otherwise over all the company witnessed fall in the net
profit of 2018. The company is following the strategies of feasible
(wesfarmers.com.au, 2019).
According to the Annual Report of JB HI-FI for the year 2018, Richard Murray and
Greg Richards are known to be the chairman and group Chief Executive officer of the
organization. The increment sale, gross profit and also net profit has been registered
in 2018. Along it the company has taken some of the crucial decision for the company
in 2018 (jbhifi.com.au, 2019).
e. In 2018 the company of Wesfarmers issued a share of 2342000 shares in which the
director holds 4180000 shares. The percentage is 17.85% (wesfarmers.com.au, 2019).
In Annual report of JB HI-FI, directors holds a share total 461969 the percentage
comes to 0.40% (jbhifi.com.au, 2019).
f. Two of the company has not provided the information on the barred holders.
Condition 3
It is concluded that the percentile of directors who are independent in JB HI-FI is
higher than that of Wesfarmers (wesfarmers.com.au, 2019). Two of the organizations have
non-executive directors and both follows the corporate governance principles of Australian
corporate frame work. Both the company has provided all adequate important knowledge
about the necessary aspects of the organisational corporate governance (jbhifi.com.au, 2019).
The company is also following the corporate regulations to adhere to the rules and regulation
of the governance. Both the company is well adherence to the corporate governance. This
will help them to work smoothly without any hindrance from the Australian government. It
can therefore be inferred that both the organizations have sufficiently published the essential
information with regards to corporate governance.

4
CORPORATE GOVERNANCE
Part B
Introduction
To assist the governing of the company Corporate Governance lays the system,
principles and processes. The corporate governance structure of an organization has an
effective role to play with the help of which the essential guidelines are provided to the
organizations with respect to which they control and direct their business activities with the
help of which the organizational goals can be attained. To achieve organisational goal
Corporate Governance have a fundamental function in laying the essential guidelines to the
organizations. It directs and controls the business activities (Dahan, Hadani & Schuler, 2013).
It is seen that financial and accounting practices have an essential role to play in the
development of the organizations. But, there are chances where significant level of
manipulations are done within practices of accounting of the companies in order to attain
certain gains in the business. Sometime illegal practise happen in companies due to
manipulation of the financial data leading to fraud. To avoid frauds and manipulation
implementation of effective corporate governance strategies needs to be practised (Darrat et
al., 2016). The manipulation happens due to the non-adherence of the laws which leads to a
bad management and bad reputation of the company in the eyes of the stakeholder. The goal
of this report is to investigate the important function of corporate governance in the field of
accounting by considering essential aspects.
Discussion
Ineffective corporate governance impacts a very negative impact on the proper
functioning of company. For instance, the absence of sufficient amount of directors from
outside increases the chances of corporate failure due to the trust that insider directors are not
adequately independent from the company management (Grayson & Jane, 2017). Dual role

5
CORPORATE GOVERNANCE
performed by the CEO can increase the chances of corporate failure. Lack of corporate
governance can lead to failure of the company’s proper payment to the directors due to the
facts that the directors can be paid more than fixed amount. This explains that the
unavailability of corporate governance is associated firmly with the probability of the failure
of corporate governance (Mayer, 2013). For this factor the organizations are required to make
sure that the availability of corporate governance process within the companies are
maintained.
Two specific corporate governance approaches can lead to company’s proper
mechanism. They follow the rule based and principle based approaches in corporate
governance. To abide by the law the rule based corporate governance is based on the view
that there is a need for a certain law bases obligation. This is to ensure that the company is
not under any negative impact and the stakeholder is confidence about it. Thus company
follows al the related law (Delaney, 2015).
Whereas the doctrine based approach of the corporate governance is regarded and a
substitute of rules dependent approach as is specifies that certain rules is not good for the
organizations to modify the adequate framework of corporate (De Graaf & Stoelhorst, 2013).
Australia needs the company to follow the standard of corporate governance if listed on ASX.
Australian securities and investment commission plays important roles. In all the aspects of
corporate governance is explained as follows:
ASIC says that corporate governance plays a very crucial role for an excellent
presentation in the organizations. ASIC has their view on various prospect of corporate
governance which is included some of the important regulations and guidelines which was
issued to ensure that it was followed in the Australian companies. It also combines important
information of the Directors obligation along with instructions which contains major interest

6
CORPORATE GOVERNANCE
for the stakeholders such as risk management. To understand the issue the ASIC undertakes
commitment to the key stakeholders of the company. Principles like conflict management,
risk management, shareholder engagement, oversight of the directors, executive
remuneration, culture and others are issued by ASIC (Singh & Rose, 2018).
CLERP 9 is used to assure the different corporate disclosures akin to corporate
governance with goal to strengthen the frame work for financial reporting. This consist of
new reforms like ascertaining repeated revelation of the vital aspects similar to corporate
governance, essential changes that makes the auditing and financial reporting of annual
report, management debate and evaluations. Furthermore, licensing is required for the
purpose of providing financial services in order to handle the interest conflicts and the
revision related to the raising of funds. It also needs executive remuneration and ensuring the
combination of the stakeholders. The implementation of the corporate governance in
Australia has been both in ASIC and CLERP 9 (Rashid, 2018).
The importance of independent director is required in the organizations to have
thriving corporate governance. It is seen that the independent directors are the non-executive
directors who have less association with the firm so that they can pass the decisions
independently. The directors who are independent are like guide for the organizations as their
role ensures the improvement in corporate creditability with corporate governance. They also
plays the important role of risk mitigation. The directors also form different kind of
communities within the organisations to ensure effectiveness of the governance. The
independent directors work as watchdogs who ensures the effective use of corporate
governance in the organizations (Armstrong, Core & Guay, 2014).
Corporate governance laws in the organisation majorly work on the prudence for the
senior manager of the organizations. That’s why the company management have to undertake

7
CORPORATE GOVERNANCE
decisions based on the prosperity and ethics (Wheldon & Webley, 2013). Unethical means
used by the senior management is aborted by this major and happens that it helps to curve the
risk for the organisation. Along with this corporate governances bring transparency and
accountability in the organisation (Wieland, 2014). This also helps in strengthening the
corporation.
There associates a direct correlation among integrated reporting and corporate
governance. This establishes a trust between among the stakeholders with respect to the
establishment of feeling of trust among the upper management (Jacoby, 2018). It is essential
to mention that integrated reporting is based on working of corporate governance. The
connection between financial and non-financial knowledge implanted in integrated reporting
can be enhanced of corporate governance. Corporate governance leads to better decision and
also action and also allocation of the important resources aiming to sustainability of the
values (Krüger, 2015).
Considering the aspect in the international scope it needs to be taken care that many
countries along with Australia adopted the rules of corporate governance. It depends on the
unique needs that the company need to formulate the corporate governance. Along with
United States, United Kingdom, Japan and other European countries put a lot of emphasis on
stakeholder’s interest with capital market players like suppliers, employees and public.
However government of all countries aims to enhance the belief as well as confidence
through proper implementation of the corporate governance ((Krüger, 2015)).
Conclusion
An active corporate governance mechanism always brings transparency as well as
effectiveness in the business organisation. To avoid corporate failure company needs to
follow corporate governance. The company can accept rules based approach and also

8
CORPORATE GOVERNANCE
principle coined on the process of corporate governance. It is seen that in Australia, it is
required for the organizations to ensure towards the implementation of the principles and
standards of CLERP 9 and ASIC for efficient corporate governance mechanism. Therefore, in
order to make sure that efficient techniques and processes for corporate governance have
been followed by the companies, this report has been constructed. This report has even
disclosed whether the companies have followed the ethics related to integrate reporting in
order to attain efficient corporate governance.

9
CORPORATE GOVERNANCE
References
Armstrong, C. S., Core, J. E., & Guay, W. R. (2014). Do independent directors cause
improvements in firm transparency?. Journal of Financial Economics, 113(3), 383-
403.
Dahan, N. M., Hadani, M., & Schuler, D. A. (2013). The governance challenges of corporate
political activity. Business & Society, 52(3), 365-387.
Darrat, A. F., Gray, S., Park, J. C., & Wu, Y. (2016). Corporate governance and bankruptcy
risk. Journal of Accounting, Auditing & Finance, 31(2), 163-202.
De Graaf, F. J., & Stoelhorst, J. W. (2013). The role of governance in corporate social
responsibility: Lessons from Dutch finance. Business & Society, 52(2), 282-317.
Delaney, L. (2015). The challenges of an integrated governance process in
healthcare. Clinical Governance: An International Journal, 20(2), 74-81.
Grayson, D., & Jane, N. (2017). Corporate responsibility coalitions: The past, present, and
future of alliances for sustainable capitalism. Routledge.
Investors.jbhifi.com.au. (2019). Annual Report 2018. Retrieved 31 January 2019, from
https://investors.jbhifi.com.au/wp-content/uploads/2018/10/Annual-Report-2018-
with-Chairmans-CEOs-Report.pdf
Jacoby, S. M. (2018). The embedded corporation: Corporate governance and employment
relations in Japan and the United States. Princeton University Press.
Krüger, P. (2015). Corporate goodness and shareholder wealth. Journal of financial
economics, 115(2), 304-329.

10
CORPORATE GOVERNANCE
Mayer, C. (2013). Firm commitment: Why the corporation is failing us and how to restore
trust in it. OUP Oxford.
Rashid, A. (2018). Board independence and firm performance: Evidence from
Bangladesh. Future Business Journal, 4(1), 34-49.
Singh, G., & Rose, A. (2018). Forthcoming principles and recommendations focus on
corporate culture. Governance Directions, 70(7), 432.
Wesfarmers.com.au. (2019). Retrieved 13 February 2019, from
https://www.wesfarmers.com.au/docs/default-source/reports/wes18-044-2018-annual-
report.pdf?sfvrsn=4
Wheldon, P., & Webley, S. (2013). Corporate ethics policies and programs 2013 UK and
continental European survey. London: Institute of Business Ethics.
Wieland, J. (2014). Governance Ethics: Global value creation, economic organization and
normativity (Vol. 48). Cham/Heidelberg/New York/Dordrecht/London: Springer.