ACCT20080: Ethics and Governance Analysis of IOOF Holdings Limited

This capstone project examines the corporate governance practices of IOOF Holdings Limited, an ASX-listed financial services company. It delves into the company's approach to corporate governance, board orientation, and interpretation of company communication through the lens of legitimacy theory. The project analyzes the composition of the board, including independent and non-independent members, and assesses the role of the board in strategic decision-making, financial reporting, and remuneration. The study also discusses board orientation as a crucial process for integrating new members and ensuring their understanding of the company's mission, vision, and stakeholder engagement. Furthermore, the project explores how IOOF uses voluntary disclosures to maintain legitimacy and fulfill its social contract. The analysis considers the company's adherence to ASX governance principles and its commitment to ethical standards. The project highlights the importance of stakeholder theory and the role of independent directors in monitoring potential conflicts of interest. Finally, the project emphasizes the company's approach to remuneration, including short-term and long-term incentives, and its focus on non-financial performance metrics.

Running Head: ETHICS AND GOVERNANCE
ETHICS AND GOVERNANCE
Name of the Student
Name of the University
Author Note

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Executive Summary
The corporate governance is application of best practices of management, compliance as well
as adherence to ethical standards for the effective wealth management as well as distribution
and discharging of social responsibility for the sustainability development of the
stakeholders. Moreover, board orientation helps the new board members for gaining
understanding regarding important aspects of organization. Further, the approach of
legitimacy theory supports firm to develop and implement voluntary disclosures of
environmental and social aspects for fulfilling social contract. Hence, this assignment
includes the discussion regarding corporate governance, board orientations as well as
interpreting company communication by using theory of legitimacy. Therefore, the paper
concludes that company applies core principle of good corporate governance, which depicts
fairness, accountability, responsibility and transparency.

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Table of Contents
Introduction................................................................................................................................3
Background of Company.......................................................................................................3
Discussion..................................................................................................................................4
Corporate Governance...........................................................................................................4
Board Orientation...................................................................................................................6
Interpretation of Communication of Company using the Legitimacy Theory.......................9
Conclusion................................................................................................................................10
Reference..................................................................................................................................12

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1)
Introduction
Corporate governance is the broader term, which helps in describing the policies,
customs, processes, institutions and laws that directs corporations in such a way that they
acts, administers as well as controls their operations in the ethical manner. This works for
achieving the goals of companies as well as manages relationship among different
stakeholders including shareholders and board. In addition, corporate governance deals with
accountability of individuals with mechanism that reduces the problem of principal-agent in
organization (Ioof.com.au.2019). The need for the mechanism of the corporate governance
arises because of interests that exist between various stakeholders. The stakeholder is having
different goals and views as well as they are having incomplete knowledge of preferences of
each other. The greatest examples of corporate governance of the big companies have been
witnessed by whole world such as WorldCom, Enron, Satyam Computers and other. It has
brought questions on the effectiveness of corporate governance mechanism followed by the
organizations that is part of the regulations of the affairs as well as books of the affairs.
Board orientations are the approach in which the new board members are provided
with the precise information to enhance their understanding regarding their role in
organization. Further, legitimacy theory serves as the mechanism that supports organizations
to develop and implement voluntary disclosures of the social and environmental impact to
fulfill social contracts (Tricker & Tricker, 2015). Therefore, this report includes the
discussion about corporate governance of IOOF Holdings Limited, orientation of boards as
well as interpretation of the company communication by applying the theory of legitimacy.

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Background of Company
IOOF Holdings Limited is the ASX listed company, whose headquarter is in
Australia. This Australian financial services company helps in offering wide ranges of the
products as well as services including the financial advices, investment management, services
of trustee and superannuation. The company was founded in year 1846 as the friendly society
as well as it has its origin in provisions of the sickness as well as funeral benefits before
prevalent government-funded welfare services availability. The company demutualized in
year 2002 and it got listed in 2003 on the ASX.
The administration segment and platform segment provides the services with the
master trust platforms that offer the access points to the ranges of the products of investments
(Ioof.com.au.2019). The segment of investment management invests and manages monies on
the behalf of institutional clients, corporate and others investor clients. The segment of
financial advices and distribution provides the financial planning advices as well as stock
broking services. Lastly, the segment of trustee provides agency, custodian and the estate
administration services. The product of the company consists of IOOF alliances wraps, IOOF
employer super, IOOF pursuit and others (Ioof.com.au.2019).
IOOF has completed various mergers as well as acquisitions that create significant
organization of financial services with having more than funds of $140 billion, under the
administration, management as well as advices and over the customers of 500,000. Recently,
the company is completed $ billion acquisition of the OnePath financial planning as well as
advises business of Australia & New Zealand Bank (Ioof.com.au.2019). Moreover, the
financial sector of Australia is largest contributor to national economy that helps in
contributing approx. $140 billion to the GDP. This sector has been the key driver of the
economic growth as well as with the total 450,000 people employed in the sector, it continue

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for being core sector of the economy of Australia in future (McCahery, Sautner & Starks,
2016).
Discussion
2)
Corporate Governance
In modern corporations, corporate governance has gained huge importance because of
the ownership as well as management control separation in organization. The shareholders’
interests are conflicting with managers’ interests. The structure of corporate governance
specifies distribution of the rights as well as responsibilities among the various participants in
company such as shareholders, board, managers as well as others stakeholders, which spells
out rules and the procedures to make decisions on the affairs of corporate (Ioof.com.au.2019).
In case of IOOF Holdings Limited, their approach is based on the set of behaviors and values,
which underpins day-to-day business activities, seeks for protecting interests of stakeholders
as well as provides fair dealing and transparency. The directors as well as management of
IOOF Holdings Limited recognize significance of the good corporate governance and are
committed towards maintaining highest corporate governance standards within Group. IOOF
complies with governance principles of ASX, which is set out in Appendix 4G of the
company (Armstronget al. 2015).
Composition of the Board Members
The board of directors of IOOF Holdings Limited is responsible for governance of
controlled entities of IOOF. They are responsible for approving strategic actions, reviewing,
approving as well as monitoring progress of the major acquisitions and divestures, capital
management and capital expenditure. Moreover, they approve annual targets, financial report
and monitors the financial performance, provides governance arrangements oversights, sets

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value and principles, monitors and review polices to maintain high ethical standards and
many more responsibilities. The company’s ratio of independent to the non-independent
members is 5:2. Further, the independent board members are Jane Harvey, AllanGriffiths,
Elizabeth Flynn,George Venardosand John Selak.Moreover, the non-independent board
members are Christopher Kelaher and Renato Mota. Further, chairperson of board is also
independent director that is Allan Griffiths (Jiziet al. 2014).
Chairperson and Board Report
The director has presented their report with financial report of the IOOF Holdings
Ltd. as well as of IOOF Group. The nominations committees as well as the group
remuneration committees has reviewed balances of experiences, skills, knowledge,
independence as well as directors diversity. Every year board members complete skills
matrix. Moreover, the inclusion of the benefit funds is having no impact on theprofit after tax
for 2018. However, it results in offsetting the pre-tax profits as well as amounts of income tax
that are not available to shareholders (Chan, Watson & Woodliff, 2014).
Remuneration Report
The aim of the group is for continuing to ensure that the framework of remunerations
and the outcomes drives right behavior that helps in motivating, rewarding as well as
retaining the key people across business. During 2019, there was solid financial performance
from UNPAT perspective for group as the result of which shareholders were affected
adversely by the underperformance of share prices across financial sector. Hence, there was
no discretionary award of short-term incentives to any of KMP or other senior management
personnel (Larcker & Tayan, 2015). The year 2020 will bring transformation and transition
by finalizing longer-term framework of remuneration and reflecting the regulatory as well as
market expectations from the year 2021. The committee of group remuneration is currently

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considering removing short-term incentives for all KMP. There is also expectation for change
of long-term incentives to minimum of four years with ranges of financial and non-financial
measures of performance to be included when awarding these. However, company intends to
increase the focus on metrics of non-financial performances (Mason & Simmons, 2014).
3)
Board Orientation
The board orientation is vital process that helps new board member to be welcomed in
boardroom. The new board member gains first impression of the company during the
orientations. This orientation of board is formal, which last long for few days. There can be
informal orientation of board in which the new board member get first glimpse of
corporation’s culture. It is defined as the process, under which new board member gets
acquainted with company and its history, fellow directors and fellow board members
(Shaukat, Qiu & Trojanowski, 2016). Further, any board member can take the orientation.
The plan and policy are set regarding the way orientations is imparted. Moreover, during the
orientation program, the newly elected board gets the glimpse of the new role and duties by
the help of developing the understanding regarding mission, vision, culture as well as goals of
the organizations. The board orientation that is meaningful and thorough helps new board
members to envision with new roles and inspires to put best of their effort for going in first
board meeting (Arena, Bozzolan & Michelon, 2015). The board orientation is most important
aspects as it assists new board member to know what are the issues, what needs to be done
and how their board position is used without any costly missteps. This process also ensures
that new directors are fully acquainted with knowledge, skills and talent. The new board
members are expected to pursue their roles and responsibilities confidently and well as aids
towards planning and giving their foresights on the various issues of organization (Liao, Luo
& Tang, 2015).

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The newly elected board member requires understanding of the stakeholders’ theory.
The different constituency groups have legitimacy on the company and they are in position to
affect organizational outcome. In this particular theory, companies are observed as social
institution, which has their responsibilities over the fiduciary responsibilities to stakeholders
(Rao & Tilt, 2016).Further, the organizations that are successful in the long-term support of
society as well as economy, contributes in growth and prosperity. Hence, organizations
should evolve in developing and sustaining meaning relationships with wider ranges of
stakeholders. Moreover, company’s directors are responsible to identify and know the views
and interests of the stakeholders group for which board of directors is having legitimate
interests to achieve desired level of objective (Chang et al. 2017).In case of IOOF, the
majority of independent directors are more in comparison to dependent directors. These
agents represent principal in the particular transactions of the business and it is expected that
they represent in best interests of the principal without the regard for the self-interest. The
composition of board plays important role because it influence the decision-making. From
perspective of shareholder-agency theory, there is claim that greater proportion of outside
directors on the boards acts for monitoring independently in the situations where there is
conflicts of the interest between the shareholders as well as the managers. Further, majority
of independent director over dependent director in IOOF may possess this threat.
The major focus of the board is towards growth, dividends as well as profits. It is
analyzed that the company has not paid any dividend in the year 2018 but it has paid dividend
in 2019. Moreover, it is analyzed that board of the company, especially with the help of
remuneration report, income statement as well as balance sheet communicates with the
stakeholders regarding their various strategic planning and performances. The remuneration
report that reflects how the growth of the company is reflected in the changes in the executive
remuneration and the overall performance of the company is reflected with the changes in

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figures of income and balance sheet statement. The board of company maintains ethical
conduct by making disclosures through the statements every year on reporting period.
The company gas appointed the new CEO, Renato Mota as the managing director.
The chairperson has stated that Renato appointment as CEO has marked new era for resetting
the business as well as focusing on future. Renato has been appointed because of the
robustness of the company’s succession plan. This new CEO has the track record of number
of years for leading IOOF by the series of strategic initiatives as well as forward thinking
(Chief Executive Officer appointment and Board renewal.2019). It consists of developing
Advice-led strategy, introducing ClientFirst transformation that has began in 2015 and
establishing Advice Academy from year 2016, which is goal based coaching as well as
business management program for the financial advisors to improve financial advice quality.
Further, the mandate of the Renato will continue change program as acting as CEO for
reshaping the business as well as adapting the culture and capability for suiting evolving
wealth management environment (Post, Rahman & McQuillen, 2015). In addition, IOOF has
also appointed Andrew Bloore as the independent Non-Executive director. He has been
independent non-executive director of three subsidiaries of IOOF, in which he has played
integral role to enhance governance as well as meet conditions of APRA license applicable
for the businesses (ASX Announcements. 2019).This new members will be given orientation
regarding different issues and aspects of company, certain highlights of which are as follows:
 Since 1846, IOOF has been known to help Australians for securing their financial
future. The company has grown substantially for becoming the largest groups in
industry of financial services.
 The company provides advisers as well as their clients with financial advise,
investment management as well as portfolio management and administration.

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 IOOF has updated on the APRA license conditions. APRA helps in providing formal
directions in relation to Office of Superannuation Trustee (Ioof.com.au.2019).
 IOOF has provided the update on progress of acquisition of ANZ One Path P&I
Acquisitions.
 The net inflows of $337 have been experienced by IOOF Holdings Ltd. in the funds
under management, advice and administrations for third quarter of financial year of
2019 (Ioof.com.au.2019).
 There is announcement by IOOF Holdings Ltd. that Bridges Financial Services Group
Pty Ltd, which is its subsidiary, has entered into the strategic partnership with the
Bendigo for advising the servicing rights of Bendigo FP clients (Ioof.com.au.2019).
 There is the announcement by IOOF Holdings Ltd. regarding change in leadership as
it is looking for the future as well as it continues to focuses on the restoring of trust as
well as accelerating the changes in interest of better outcomes of client (Fuente,
García-Sanchez & Lozano, 2017).
4)
Interpretation of Communication of Company using the Legitimacy Theory
The theory of legitimacy is generalized approach or perception, under which the
company takes appropriate, desirable as well as proper action within some of the social
constructed systems of norms, values, beliefs. This theory plays vital role in explaining
organizational behavior to implement and develop voluntary social and environmental
disclosures of information (Deegan, 2002). The legitimacy theory helps in fulfilling social
contracts that enables recognizing survival and objectives in the uncertain turbulent
environment. Further, organizational social perceptions are reported in accordance to
expectations of society (Deegan, Rankin & Tobin, 2002). The legitimacy theory highlights
extent to which the social as well as environmental disclosures by corporate are being

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influenced by the boundaries, which are established by societies to appreciate as well as
avoid getting penalized by community in general within firm operates (Milne & Patten,
2002).
The board of IOOF Group adopts ethical code of conduct, which applies for all the
directors, officers, employees, consultants and contractors. It is designed for ensuring higher
standard of honesty as well as ethical conduct and behavior of individual. Each and every
employees of the company are required for reading and the arrangements over the shares of
IOOF are required for notifying to company secretary (Shehata, 2014). The company makes
the disclosures at certain period of time that helps stakeholders and other users to gain the
understanding of engagement level of company with their users as well as stakeholders.
Further, IOOF communicates with the statements such as financial statements, corporate
governance statements as well as sustainability reports for disclosing regarding the results of
various aspects of their business operations (Seele & Gatti, 2017). These statements reflect
transparency and integrity of company in terms of business operations. The company’s board
has strong commitment towards the quality as well as financial reporting and its system for
the risk management, internal control and compliance. The IOOF board receives regular
reports about operational performance as well as financial condition of IOOF and its
controlled entities (Kiliç, Kuzey & Uyar, 2015). Further, the Chief Financial officer as well
as Managing Directors reports in writing to Board that consolidated financial statements of
IOOF and each subsidiaries for full year and half year presents fair and true view in every
material respects of financial condition of Group, which is as per accounting standard.
Therefore, company’s board is conscious of ensuring best practices of corporate governance
with the help of continuing their efforts towards anticipating and responding towards ethical
conduct (Reguera-Alvarado,de Fuentes & Laffarga, 2017).