Corporate Governance Comparison: Company Accounting Report Analysis

This report provides a comprehensive analysis of the corporate governance practices of BHP Billiton Ltd and Rio Tinto Ltd, two major players in the mining industry. The assessment focuses on the companies' adherence to corporate governance principles, examining their structures, board responsi...Read More

Running head: COMPANY ACCOUNTING
Company Accounting
Name of the Student:
Name of the University:
Author’s Note

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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Conclusion.......................................................................................................................................6
Reference.........................................................................................................................................7

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Introduction
The main purpose of the assessment is to consider the business of BHP Billiton ltd and
Rio Tinto ltd which are engaged in mining industry and has operations relating to extraction of
minerals and natural resources rom the surface of the earth1. The focus of the assessment is on
the corporate governance practices which is followed by both these companies and whether the
same are appropriate. The discussion would also make a comparison regarding which company
has a better corporate governance structure and has appropriately reported the same in their
annual reports for the current year.
Discussion
Corporate Governance can be defined as the set of rules and responsibilities which are
clearly established by the company so that the operational process of the business can be
conducted in a smooth fashion. The corporate governance principles which are to be followed by
a business needs to be appropriate and the same needs to be compliant with the regulations which
are already established2. The corporate governance principles which are required to be followed
are laid out by eight principles which companies are expected to follow for the purpose of
ensuring that proper corporate governance principles are followed.
BHP Billiton Ltd
The business of BHP Billiton ltd is dedicated towards maintaining sustainability in its
approach while conducting the operations of the business. The company follows the Corporate
Governance principles which are set out by ASX Council. The responsibility of managing the
1 "Annual Reporting 2018". 2019. BHP. Accessed September 29 2019. https://www.bhp.com/investor-centre/annual-
reporting-2018.
2 Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and practices. Oxford
University Press, USA, 2015.

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operations of the business lies on the board of directors which a proper charter is drafted which
needs to followed and the same states the roles and responsibilities of the directors of the
business. Sustainability is one of the core values for the business and the management of the
company always puts forward the health and safety of the employees before conducting the
operations of the business. The annual report of the business shows that the aim of the
management is to adopt the best governance standards which are present in Australia so that the
business is able to create long term values for its stakeholders. A presentation of the governance
structure which is followed by a business is shown below:
Figure 1: (Governance Structure of BHP Billiton)
Source: ()
The above governance structure which is followed by the business shows that at the heart
of it all is the shareholders and everything which the business does is for the benefits and value
creation of the shareholders. The board of directors have also established different board

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committees so that operational process of the business is appropriately supported. The different
committees which are established have their own roles to play and are associated with a specific
area of performance of the business3. The risk management committee is responsible for
identifying risks of the business and the steps which can be taken for the purpose of minimizing
the risks which is associated with the business. In addition to this, the business also adheres to
environment impacts of its activities and makes social investments in order support the society.
Rio Tinto ltd
The business of Rio Tinto is a close competitor of BHP Billiton ltd and is engaged in the
same business of mining. The management of the company considers sustainability as the main
policy of the business moving ahead4. The business wants to make continuous improvements in
the operational process so that a level of efficiency is maintained. The business follows the ASX
corporate governance principles and therefore the board and those charged with governance is
responsible for managing the operations of the business5. The board has a charter to direct them
regarding the roles and responsibilities of the same in the operations of the business. The
business has also established different committees so that they can oversee their respective area
of control in the business. In addition to this, the management of Rio Tinto has taken strides
towards maintaining environmental conditions as a sustainability committee is established by the
business. In addition to this, the business has also appointed a task force for reviewing the
3 Jizi, Mohammad Issam, Aly Salama, Robert Dixon, and Rebecca Stratling. "Corporate governance and corporate
social responsibility disclosure: Evidence from the US banking sector." Journal of business ethics 125, no. 4 (2014):
601-615.
4 "Results & Reports". 2019. Riotinto.Com. Accessed September 29 2019.
https://www.riotinto.com/investors/results-and-reports-2146.aspx.
5 Khan, Arifur, Mohammad Badrul Muttakin, and Javed Siddiqui. "Corporate governance and corporate social
responsibility disclosures: Evidence from an emerging economy." Journal of business ethics 114, no. 2 (2013): 207-
223.

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climatic changes and how the same have an impact on the global world. The governance of the
business aims to ensure that several environmental problems are considered and preventive
measures are taken for ensuring that the ecosystem in which the business operates is well
protected.
The business has also established a proper diversity program so that the needs of the
employees are considered and equality is maintained while dealing with the employees of the
business. The business has formulated strategies for ensuring that there is gender equality and
diversity and no discrimination of employees of any sort. The board of directors is of the belief
that through effective corporate governance structure in the business, the management would be
able to proceed toward the long-term goals and objectives of the business.
Comparison
On the basis of the discussion which is shown above, the corporate governance
framework which is followed by the management of Rio Tinto is much more appropriate as the
management has taken several steps and actions in order to promote sustainability or minimize
the risks which is faced by the business. The business of Rio Tinto also keeps a track of the
climatic changes and ensures that no activity of the business can impact the atmosphere. The
corporate governance principles which is followed by BHP Billiton is also good but the same
needs to be more detailed. Further the annual report of the business shows that the business is
likely to suffer from law suits penalty for the loss caused by the business in Brazil. In an overall
estimation, it can be said that the corporate governance framework which is followed by Rio
Tinto ltd is much better than the governance framework followed by BHP Billiton ltd.

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Conclusion
The above discussion shows the importance of good corporate governance system in a
business and how the same have an impact on the long-term performance of the business. The
discussion above analyses corporate governance framework which is adopted by the business of
BHP Billiton ltd and Rio Tinto ltd for handling the operational process of the business. The
discussion also shows a comparison regarding which company has a better corporate governance
structure.

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Reference
"Annual Reporting 2018". 2019. BHP. Accessed September 29 2019.
https://www.bhp.com/investor-centre/annual-reporting-2018.
Jizi, Mohammad Issam, Aly Salama, Robert Dixon, and Rebecca Stratling. "Corporate
governance and corporate social responsibility disclosure: Evidence from the US banking
sector." Journal of business ethics 125, no. 4 (2014): 601-615.
Khan, Arifur, Mohammad Badrul Muttakin, and Javed Siddiqui. "Corporate governance and
corporate social responsibility disclosures: Evidence from an emerging economy." Journal of
business ethics 114, no. 2 (2013): 207-223.
Riotinto.Com. 2019. "Results & Reports". Accessed September 29 2019.
https://www.riotinto.com/investors/results-and-reports-2146.aspx.
Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and
practices. Oxford University Press, USA, 2015.