Corporate Governance Report: Analysis of JB Hi-Fi's Practices

This report provides a comprehensive analysis of the corporate governance and social responsibility practices of JB Hi-Fi Limited, an Australian entertainment retail company. The report examines key aspects of JB Hi-Fi's governance, including its foundation for management and oversight, board structure, ethical responsibilities, integrity in corporate reporting, timely and balanced disclosure, rights of security holders, risk management framework, and fair remuneration. The analysis is based on the ASX corporate governance principles and recommendations, evaluating JB Hi-Fi's compliance with these guidelines. The report highlights the company's strengths, such as its strong board structure and commitment to ethical conduct, while also identifying areas for improvement, particularly in terms of balanced disclosure and corporate social responsibility. Overall, the report offers valuable insights into JB Hi-Fi's governance framework and its impact on stakeholders.

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Corporate Governance & Social Responsibility Report: JB Hi-Fi Limited
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Table of Contents
Introduction......................................................................................................................................3
Foundation for Management and Oversight....................................................................................3
Board Structure................................................................................................................................4
Ethics and Responsibilities..............................................................................................................5
Integrity in Corporate Reporting.....................................................................................................6
Timely and Balanced Disclosure.....................................................................................................7
Rights of Security Holders...............................................................................................................8
Risk Management Framework.........................................................................................................9
Fair Remuneration.........................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
Appendix........................................................................................................................................13

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Corporate Governance & Social Responsibility: JB Hi-Fi Limited
Introduction
Corporate governance is among the aspects used to judge the efficiency of
organisations/corporations. It encompasses the framework of set regulations that define
relationships, system, and processes through which authority is exercised within
corporations/organisations. As aspects of management, corporate governance and social
responsibility are essential in creating investor confidence. Such confidence is crucial in ensuring
that the companies listed on the ASX compete fairly with others. Essentially, this report
highlights the eight basic principles of corporate governance with regards to JB Hi-Fi Solutions,
an entertainment retail based in Australia. It succinctly analyses the various aspects of ASX
corporate governance best practice principles, guidelines, and recommendations.
Foundation for Management and Oversight
As a requirement from ASX corporate governance council principles and
recommendations, all listed companies need to disclose the roles and responsibilities of the board
of management. This recommendations further requires the company to highlight how the
performance of the company is monitored and evaluated. Based on this requirements, JB Hi-Fi
Limited has a managed to conform to the requirements of ASX 2014 principles. In compliance
with this principle, the company makes its open in their annual reports the functions or roles the
board is tasked to undertake in running the operations of the company. According to the JB Hi-Fi
annual report (2016, p. 1), the company elaborates the responsibilities of the board including
protecting and enhancing shareholders’ value as well as monitoring the performance of the
company on behalf of them (shareholders). Furthermore, the board is tasked with evaluating

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executives and ensuring transparency is maintained in the company’s day-to-day activities (JB
Hi-Fi Limited 2016, p. 1).
Judging from the compliance level of JB Hi-Fi on ASX recommendations, it is clear that
the company’s corporate governance regime is strong with respect to the foundation for
management and oversight. This level of internal control is validated by the strength of the board
of directors of the company has on management, evaluation, and operations of the JB Hi-Fi
Limited. Essentially, corporate governance is said to be at its best when there is clear
demarcation of responsibilities between the executives and the board with regards to the
oversight of an organisation’s operations (Bose 2018, p. 106). This attribute has been attained by
JB Hi-Fi Solutions in its quest to comply with the ASX recommendations and underlying
principle of a solid foundation for management. Presumably, this might be the reason behind the
exemplary performance of the company in the retail industry that saw their sales go up by 8.3%
to reach $3,954.5 million in 2016 (JB Hi-Fi Limited 2016, p. 18).
Board Structure
The ASX recommendations are based on composition, size and skills and commitment of
the board of directors. Although there might be variations according to the size of the company,
it is essential for the members to be from different backgrounds, professions, and cultures for a
perfect blend to be obtained. JB Hi-Fi possesses an effective blend of expertise and professionals
in its board. The composition is meant to create value for the company based on its operational
strategies as well as vision. Particularly, the company has board members across different
professions including, finance, management, retail, risk evaluations, property, and governance
among others. Furthermore, the company has six directors who are mainly non-executives, thus
making the fit for oversight of the company (JB Hi-Fi Limited 2016, pp. 1-2). With five out of

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the six directors being independent, the company is considered to be in full compliance with this
ASX corporate governance principles.
In categorizing the strength of the governance regime for JB Hi-Fi, it is apparent that is
has a strong internal control in terms of board structure. This strength is informed by the
composition of the board which has varied experience and non-executive in nature. Furthermore,
the company’s board is above the minimum of three as stipulated by the regulations of the ASX
listed entities. Additionally, the company has the board’s succession policy shared on their
website which makes the structure more transparent and essential in creating value for the
company’s integrity (JB Hi-Fi Investors, n.d.). Ideally, transparency in recruitment, operations,
and existing policies in any organisation is pivotal in creating value such as public relations and
image (Golob and Bartlett 2007, p. 6). JB Hi-Fi Limited has successfully achieved this milestone
through the transparency in their corporate governance. Consequently, the company has
managed to compete effectively in the retail industry owing to its board structure that doesn’t
meddle with the operations of the executives.
Ethics and Responsibilities
The reputation of any organisation is a valuable asset that determines its relationship with
the community and other stakeholders in the industry it operates. If damaged, there can be
serious negative impacts on the side of the company. JB Hi-Fi has enacted a code of conduct that
guides how the directors, executives and other employees behave. Among the crucial issues
reflected in their codes of conduct is respect for all, safe working environment, obeying state
laws and maintaining the confidentiality of both the customers and the company staff (JB Hi-Fi
Limited, 2016, pp. 4-5). Additionally, the company is engaged in several corporate social
responsibility activities and reporting. Annually, it discloses its energy consumptions and green

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gas emissions through the Carbon Disclosure Project (CDP) (JB Hi-Fi Limited, 2016, p 10). This
move is aimed at showing the ethical responsibility of the company to the environment as
required by ASX regulations.
From this analysis on ethics as responsibility principle, the company can be said to be
semi-strong in terms of acting ethically and responsibly towards the society and environment.
This is based on their limited reporting on an expected measure to be taken to limit the
environmental damage their products have to the environment. Furthermore, the company has
less CSR programs thus making its lack enough force to deal with the growing demands in the
society. Although the company has tried to fully comply with the regulation, corporate social
responsibilities are supposed to cover almost the entire aspects of the society which are impacted
by the business being undertaken (Bird 2009, p. 92). For this reason, the company still has some
paces to cover in order to be fully compliant with ASX corporate governance requirements in
terms of CSR and ethical responsibilities.
Integrity in Corporate Reporting
Financial reporting has been a challenging task for man organisations due to integrity
issues. The case of JB Hi-Fi Solutions has been different due to the efforts they have put to
ensure transparency and honesty in reporting all their corporate activities including financial and
social responsibility reporting. In essence, the company has put in place mechanisms to
guarantee integrity is maintained in their reporting. Particularly, it relies on the Corporation Act
and ASX recommendations to design their report approach that conforms to both requirements.
They have managed to maintain the 30th June of every year as the end of their financial year.
Furthermore, the board of the company approved the Continuous Disclosure Policy that ensures
all information is disclosed to the stakeholders when reporting their annual financial performance

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as well as financial records (JB Hi-Fi Limited 2016, p. 6). Although the board is responsible for
ensuring transparency and safeguarding integrity in reporting, the company also has external
independent auditors who carry out parallel audits to authenticate the reports produced by the
management.
Having all these procedure and policies in place, JB Hi-Fi Limited is considered to have a
strong regime in corporate governance on matters concerning integrity in reporting. This is
stemmed from their mode of undertaking various reports and having the relevant executives
declare independence by appending their signatures. Also, the company has fully complied with
the ASX 2014 recommendations that call for the safeguarding of integrity in corporate reporting.
This perspective of reporting is further supported by the Corporation Act. Depending on the
approach used in reporting, they have to be authenticity, honesty, and good-will while reporting
on different enterprise operations (Easton, 2016, p. 148). According to the information on the
2016 annual financial report of JB Hi-Fi, these aspects of reporting have been fulfilled.
Timely and Balanced Disclosure
Listed companies on the ASX are required to avail all information for the shareholders
and the council to access with ease. However, this result should not only be sugar-coated but also
show the negatives the company is experiencing. JB Hi-Fi Limited has tried to comply with this
principle by making its policies available on their website. Although there is limited information
on specific issues, the disclosure is above board and better than most of the listed companies on
ASX. For instance, the policies on financial reporting, codes of conduct and regulations on
employees are all shared through the Continuous Disclosure Policy that seeks to furnish all the
involved people and organisations of any news on policies (JB Hi-Fi Limited 2016, p. 6).
However, the company has no elaborate approach of updating the ASX council of any changes

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or information that may be useful to its stakeholders and clients. Furthermore, the company’s
annual report seems to disregard the negative aspects of the company.
As a result, it can be concluded that the company’s corporate governance in regards to
balanced disclosure is weak. Despite having the CDP in place, there are still critical concerns
with their mode of disclosing information that does not align with the ASX recommendations.
By disclosing the information only on their annual reports, the timeliness of the disclosure is
wanting and do not match the standards set by the ASX council. Although it shares it financial
performance information, diversity in the workforce and corporate social responsibilities, the
information is only shared once in a year. Any other changes that occur in between the reporting
periods remain within the company and potentially unknown to some investors, consumers and
the ASX council. Essentially, a balanced disclosure will not only allow the company to reach out
to investors but also give it an opportunity to argue about transparency (Wittenberg-Cox, 2014).
Rights of Security Holders
For listed entities, holding the management to account is a crucial undertaking that
requires the security holders to be given unlimited access to information. According to ASX
requirements, listed companies require to have short profiles of the management and the board
available in the official websites. JB Hi-Fi has managed to fulfill this requirement as it has all its
board members profiles and photos on their website. Furthermore, copies of its annual reports are
available to the public for viewing, thus enhancing the adherence to respect on the rights of
security holders. Although not all information is shared with the ASX, a substantial level of
transparency is seen. Among the key things concerning the security, holders shared include
market announcements, company’s dividend policy, calendar of forthcoming events and AGM,
company contact details and board committee charter (JB Hi-Fi Limited, 2016, p. 7). All this

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procedure are meant to ensure the company conforms to the ASX recommendations on the right
of security holders.
Based on these sharing approach, the corporate governance of JB Hi-Fi with respect to
respecting the right of security holders is strong. The rationale behind this level of internal
control is based on the revelation that the company’s annual reports, policies, announcements,
history of the company and the board are all available on the company’s website for viewing.
This allows unlimited access by the security holders and other potential investors in the
company. Additionally, the company allows the shareholders to manage their own accounts
electronically and have the authority to access the company’s registry at their convenience.
Risk Management Framework
In most instances, investors rely on information provided to assess investment risks
before making their decisions. For this reason, ASX listed entities are required to have a risk
management framework and frequently update it for maximum effectiveness. Under this
requirement, JB Hi-Fi has a policy that weighs the risk and rewards of any investment they
intend to undertake. The board has mandated the audit and risk assessment committee with the
job of overseeing that policies and procedures are implemented. Primarily, this is aimed at
ensuring that the company operates in a manner that manages all the available and potential risks
sufficiently (JB Hi-Fi Limited, 2016, p. 7). However, the company lacks an internal audit team
but instead has a risk management team that is led by a manager. Their risk assessment
framework is reviewed annually and approved by the board. All this effort is to comply with the
ASX recommendation that calls for listed companies to recognize and manage risk.

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Based on the framework for risk management adopted by JB Hi-Fi Limited, its corporate
governance on the issue can be said to be moderate (semi-strong). This is mainly due to the fact
that it lacks an internal audit that is crucial in undertaking a forensic analysis of their risks as
well as financial strength. Although the company has managed to have an annual review of the
framework and has risk committee in place, it is still crucial for the company to have both
internal and external independent teams analyzing the company’s performance and risks
involved. Ideally, proper management of risks can guarantee an organisation successful
investments as well as an influx of willing investors (Dionne, 2013, p. 153).
Fair Remuneration
In any business, remuneration is a key factor that investors consider before venturing into
an organisation. For this reason, ASX listed companies are recommended to have a remuneration
committee that is chaired by an independent board of directors. In regards to this requirement, JB
Hi-Fi has a remuneration committee in place consisting of independent directors. The company
further has policies that guide the remuneration process and all details are shared in a
Remuneration Report that is based on an evaluation of the performance of the executives and
non-executives (JB Hi-Fi Limited, 2016, p. 9). Furthermore, the principle used to develop the
enumeration plan are also included in the report as well. This alignment of the company by
providing a fair and responsibly is meant to ensure the company fully complies with the existing
ASX corporate governance recommendation. The conformity allows the company to have a
stable position in the retail industry and ensure transparency is present in their dealings.
Judging from the level of compliance the company has in providing a fair and responsible
remuneration procedure and practices, its corporate governance strength can be said to be strong
with regards to this principle. Primarily, the company has managed to have a committee,

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policies, and openness in revealing how the executives and non-executives are remunerated
according to their performance in running the operations of the company. In essence, this
approach has allowed the company to retain its top performing directors for over ten years while
at the same time attracting other potential directors to join the team. Although corporate
governance is a central focus in most companies, it remains to be vulnerable to jeopardy since
those making the policies are responsible for their own remunerations (Mallin, 2013, p. 24). For
this reason, JJB Hi-Fi would need to continue upholding their policies and avoid any internal
interferences that may arise from some board members.
Conclusion
JB Hi-Fi Limited is an ASX listed entity is expected to conform to all the requirements
set for it to compete well with others. From the analysis of the eight principles with respect to the
corporate governance and social responsibility approach of the company, it is apparent that the
company generally has a strong corporate governance regime that is transparent, professional
and diversified in terms of practices. It is for this reason that the company has been able to
comply with the set ASX 2014 recommendations. In addition, the board has a diversity of
expertise, gender, and independence of the members. This makes the company one of those that
has managed to maintain a strong internal control structure that has guaranteed it growth and
development in every aspect of its operations.

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References
Bird, F. (2009). The ethical responsibilities of businesses in developing areas. Journal of
Business Ethics, 89(S2), pp.85-97.
Bose, A. (2018). Do stringent corporate governance practices ensure diligent corporate social
responsibility among organisations: Investigating the link therein. International Journal of
Business and Emerging Markets, 10(2), p.106.
Dionne, G. (2013). Risk Management: History, Definition, and Critique. Risk Management and
Insurance Review, 16(2), pp.147-166.
Easton, P. (2016). Financial Reporting: An enterprise operations perspective. Journal of
Financial Reporting, 1(1), pp.143-151.
Golob, U. and Bartlett, J. (2007). Communicating about corporate social responsibility: A
comparative study of CSR reporting in Australia and Slovenia. Public Relations Review, 33(1),
pp.1-9.
JB Hi-Fi Investors. (n.d.). Corporate Governance | JB Hi-Fi Solutions. [Online] Available at
https://investors.jbhifi.com.au/corporate-governance/ [Accessed 6 Sep. 2018].
JB Hi-Fi Limited (2016). Annual report for the financial year ended 30th June 2016. [Online]
Available at
http://www.annualreports.com/HostedData/AnnualReportArchive/J/ASX_JBH_2016.pdf
[Accessed 6 Sep. 2018].
Mallin, C. (2013). Corporate governance. Oxford: Oxford University Press.