Pinnacle Investment: Ethics, Governance, and Board Structure

This report examines the corporate governance and ethical framework of Pinnacle Investment Management. It begins with an overview of Pinnacle, its business operations, and its position in the Australian investment landscape. The report then delves into Pinnacle's corporate governance structure, including board composition, independence of directors, and the roles of the Chairperson and CEO. It analyzes the remuneration report and the company's commitment to ethical practices. Furthermore, the report explores board orientation and relevant theories, such as agency and stewardship theories, to understand how Pinnacle's governance aligns with these frameworks. The report assesses the application of agency theory to Pinnacle's board orientation, considering factors like director independence and potential conflicts of interest. Overall, the report aims to provide a comprehensive analysis of Pinnacle's corporate governance, highlighting its strengths, weaknesses, and alignment with ethical principles.

Ethics and Governance

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Executive summary
Ethics and governance is the concept of providing policies and rules in organizations in
order to maintain a safe and ethical environment. It is essential for the company that the
company conducts itself amongst the society and stakeholders and how it satisfies and meets the
expectations of the stakeholders.
Pinnacle Investment management is the leading organization in Australia which provides
multi-affiliated management services across the globe. This report focuses on the notion of ethics
and corporate governance and its related theories.

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Introduction
Ethics and governance of the company decide that how an organization works ethically
and ensure that it meets required standards in order to create collaboration in the business
operations (Kumar, 2016). It is important for the company how its leaders play roles
responsibilities in order to direct the company’s stakeholders. Ethics and governance two
different aspects however sometimes it assumed to be the same. Ethics is a set of values and
principals which govern an individual’s behavior or conducting and activity. Governance relates
to the board of the company that how they perform their responsibility and role. It covers worries
of board creation and structure, the board's dispatch and how it serves the process of the
responsibility of board to its partners (Ferrell, 2016).
This purpose of the report is to assess the Pinnacle’s ethical framework and how a
company operating its business and serves corporate governance. It will also assess agency and
legitimacy theory in order to understand the company’s ethics and corporate governance. By the
end of the report, the reader would be able to understand why ethics and corporate governance
are important aspects of the company and how an organization provides disclosure in respect of
social norms.

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Pinnacle and its ethical framework
Introduction of Pinnacle
Pinnacle is the Australian multi-affiliate investment organization. The company operates the
investment management industry. Investment management industry basically is asset
management which manages assets and these assets include, shares, bonds and several other for
the meeting the investment target for the benefit of the investors. These investors can be
insurance companies, charities, corporation, and other educational institutions (Pinnacle
Investmemt, 2018).
The company is also listed in ASX (PNI) and has around 52.1bn of assets. It also provides
distribution and other services to its affiliates firms. IT founded in 1985 and awarded as the best
distributor in the year of 2016 by Zenith Funds awards. Pinnacle investment management also
works as a trustee and responsible entity. It also is known as Wilson group Ltd but later it
changes in Pinnacle in 2016 (Reuters, 2019).
The company contains eleven partners which include: Antipodes partners, Firetrail
investment, Hyperion assets management, Longwave Capital partners, Metrics credit partners,
Omega global investors, and several others (Pinnacle, 2019). The company provides its partners
with:
 Working capital, seed and equity capital
 Distribution service and organization sustenance and responsible entity service to
empower leaders and managers to concentrate on delivery outperformance.

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 Independence, involving reporting structure and board directors, yet offering the
economies of scale and financial support essential in being part of a biggest investment
group (Pinncale , 2018).
Apart from that company’s strategies and principals are managing and developing investment
operations and also provides its affiliates some distribution, responsibility entity, and other
support. Its aim is to provide an investment specialist with a wider area of services and support
so that they can effectively deliver investment services to the clients. Its managers and directors
work independently which important aspect in sustain excellence of investment services for the
long term. Its investment managers are the equity interest of the company (Bloomberg, 2018).
Pinnacle performing better across the market as its NPAT is around 23.1mn and overall
profit to its shareholders is 23.4mn. This was reinforced by a 41.4 percent increase to $24.9mn in
Pinnacle’s share of net profits from the Pinnacle Affiliates. FUM rise by 43 percent to $38.0
billion in the 2018 FY (Pnnacle Group, 2017).
Corporate governance at Pinnacle
Board composition and independence and non-independence director’s ratio
Board of directors of the company is independent only in a condition where they are not a
member of the management team. They are free of any interest, relation, and business that can
suppose to interfere with the director’s capability to act in the best interest of the organization.
The leading body of the organization has not embraced any quantitative skirts in connection to
managing substances in which a chief may have a money-related premium and rather performs
evaluations on a case by case premise (Pinnacle , 2018).

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According to Corporation Act, 2001 and ASX rules list all the directors of the company
has to provide a report if they found any conflict of interest also they have to stay away from any
discussion and decision related to conflicts. The board continuously analyzes the independence
of every nation- executive director according to their interest disclosure and all the principals
which are listed in ASX.
Alan Watson is the independent chairperson. Deborah Beale and Gerald Bradley are also
independent directors of the company. On the other side, Steve Wilson is not recognized as
independent because he was executive of the group previously also currently has significant
interest and shareholder of the equity.
According to the company’s constitution, the board has maintained the balance of
independence and non-independence directors. This constitution required the board to be
between 10 directors at least half of them should be non- executive and 2 independent directors
with the diverse skills and experience involving gender. And currently, the board has 8 directors
which include 5 non-executive directors in which 4 of them are independent. Chairman is
independent as previously mentioned (Pinnacle , 2018).
(Pinnacle , 2018)

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Report of the Chairperson and CEO
According to the Chairman’s report, the company’s business continued to its growth as it
earned NPAT 8 23.1mn and its EPS is 14.3% up by 76.5 percent from the year 2017. This
growth arises from many activities in 201such as solid growth in Funds under Management and
financial outcome from current Affiliates also the involvement of new affiliates. The new
affiliates Antipodes and Spheria growing incredibly. In 2019 the company acquisition Metrics
Credit partners with 35% interest and 405 of omega investors. He also states that the company
stakeholders such as rectors, shareholders, and Affiliates are an important aspect of the company
expects for the constant support and reinforcement that lead to success (PIM, 2018).
Remuneration report
The company provides many in 3 specific matters:
 Base salary: employees of the company offered a better salary fi package which contains
fixed components of pay and rewards.
 Short term incentives: STI is an optional 'in danger' money motivator installment which
is paid to officials and representatives on a yearly premise and as per compensation
approaches and the terms and states of work.
 Long term incentives: LTI are intended to energize arrangement of the interests of
workforce with expanded an incentive to investors in the long haul. Members are
conceded LTI, which just vest subject to explicit conditions being met toward the finish
of the vesting time frame.

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 Omnibus incentive plan: The Company currently introduced an Omnibus incentive
program which contains the new LTI plans that offers performance rights and funded
shares to staff (PIM, 2018).
In addition, the company is committed to better corporate governance and every board of
director is responsible to cooperate with them. To maintain a safe and ethical work environment
Pinnacle provides some ASX principals and provide laws according to the interest of
stakeholders (Pinnacle , 2018).
Board orientation and underlying theories
Board orientation is the process of providing information to the organization’s roles and
responsibilities. The basic objective of the Board Orientation provides all the information of the
organization and the roles and responsibility of the board. It also supports better communication
and working relationship between board members (MACDONALD, 2018).
There are several theories to understand board orientation of Pinnacle such as Agency
theory, Stewardship theory, resource, managerial and ethical theories.
With a comparison of these theories of the board, orientation could be useful by
comparing different criteria. Board composition denotes to the estimated reliance on non-
independent as compares to independent directors. Agency theory can be implemented while a
company has the majority of independent directors selected by powerful shareholders. This
theory is a concept to understand the relationship between agents and principals. An agent or
director of the company represents the principals in a specific transaction and also expected to
serve the best interest of principals without intention for the self-interest. However, with this
theory, diverse principals and agents can create conflicts in the company’s environment as some

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directors might not perfectly act with the best interests. As a result disagreement and
miscommunication can cause various issues within the organization. With this theory, directors
communicate about the company’s income statement, balance sheet, and remuneration report
(Hussain, 2018).
While on the other side the Stewardship theory board has a majority of non-independent
directors they know how to run the business also supports the growth of the business assets. With
agency theory, the board of directors the company follow the shareholder’s’ objectives and
works for achieving them. In contrast with stewardship, the directors follow the board’s priorities
and work for their objectives. While a stewardship board will priorities the growth of the
business on behalf of the shareholders. The board will concentrate on those partner needs, while
the board concentrated on all partners will participate in an all-encompassing partner the
executive's approach. Key correspondences recognize the types of interchanges that various
sheets will needs. An organization board will center upon the budget summaries and the
compensation report to indicate how directors are bound to the investors' destinations. Be that as
it may, a board mindful of the "moral branch" of partner hypothesis will center upon deliberate
exposures—perhaps in the zone of corporate social obligation.
When it comes to the managerial theory it also can be implemented on the company
where the majority of board directors are independent and works for satisfying all the
stakeholders of the company. But agency theory is the can be appropriately implemented on
Pinnacle’s board orientation as the board member of the company are mostly independent,
According to board composition report of the company there are 8 board of directors and 5 of
them are non-executive and 4 of them are independent including chairman of the company which
is also considered independent director. Pinnacle’s directors represent the principals of their

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particular business transaction such as its chairman and director’s role is held by other
shareholders and directors follow the other shareholders' rules and fulfill their needs profits and
dividends. Its executive directors meet regularly to having a conversation of the company’s
business operation also other related important matters. These relevant matters arise from the
board meetings and everyone works in order to meet those targets.
However, as agency theory states that diverse interest of principal’s and different agents
can cause the major issues in the company as some of them might not act as the expected to. And
as a result, it leads to miscommunication amongst the board members. Pinnacle has to minimize
such situations by making strong policies. The company cans also change remuneration policies
to redirect the agent’s behavior and realign the interest of the principals. Every company’s
corporate governance is exploited to change the policies within the agent of the company
operates. The principal, by using the specialist to speak to the vital advantages, might defeat an
absence of data about the operator's exhibition of the assignment. Specialists must have
motivators urging them to action as one with the essential's benefits. Organization hypothesis
might be utilized to plan these motivators fittingly by thinking on what interests inspire the
operator to act. Motivating forces empowering the wrong conduct must be evacuated, and
principles demoralizing good danger must be set up. Understanding the constituents that make
issues enables organizations to grow better corporate strategy.
In addition to assessing that the director of the company is acting appropriately with his
best interest or not, Standard of “Agency loss” has appeared. Agency loss basically defines the
difference between the principal’s results and the consequences director’s behavior. For instance,
if Pinnacle’s director continuously performs well within the better interests the agency loss
would be zero but if the director is not acting accordingly and his or her action departs from the

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principal’s interest the agency loss becomes greater. Here are some examples when agency loss
arises:
• If agents and principals reflect each other’s interest in the identical income
• The principal is aware of the specialist's exercises, so the vital has sharp learning of the
dimension of administration he is getting
Hence chief issues include motivating and empower agents to prioritize principal rather
than their self-interest (Hussain, 2018).
Interpretation of company communication and legitimacy theory
Every company has to follow rules and policies in order to maintain the proper and ethical
framework and has to ensure that the company is operating within the social boundaries and
social norms.
Legitimacy theory explains how an organization has to work with social norms and ethical
framework. According to this theory, an organization should implement and develop voluntary
social disclosure towards fulfilling the social contract that helps to survive and run the
organization in a competitive and turbulent environment (Zürn, 2018). Pinnacle also has its code
of conduct which ensures that how it management fulfill the social norms and maintain a safe
environment also meet the expectation of society.
Legitimacy theory states that an organization works with social norms that can be regarded as
legitimate. Pinnacle is the organization which is works on social contract and works to meet the
expectation of the society and its stakeholders. According to its corporate governance statement
Company’s board adopted the social guidelines to balance its performance and governance

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(Pinnacle , 2018). Pinnacle’s corporate governance guidelines are driven by ASX principals. The
company has many committees such as Audit and compliance risk management committee. Its
responsibility is to maintain internal compliance and risk framework also handles some frauds
and illegal cases. The company also provides policies for illegal behaviors and empowers its
employee to report on any conflict they face. Pinnacle also introduced whistleblower policies
where an individual report for any wrong behavior or if they found someone breaching the code.
As legitimacy theory assess that social contract changes according to time, The Company
also changes its policies according to changes in laws. Pinnacle fulfills the requirement of being
legitimate as it provides some disclosure on some unethical issues. According to its Code of
Conducts report, the company also introduced many policies in order to maintain an ethical
framework across the company. Here are some policies:
 Corruption and Anti-bribery policy
 Conflict of interest policy
 Continues disclosure policy
 Grievance and Employee behavior policy
 Gift and entertainment policies
 Breach reporting policy
 Privacy policy
 Whistleblower policy
 PNI security trading policy (PIM, 2019)