Analysis of Ethical Governance at QBE Insurance Group: ACCT20080

This report provides a comprehensive analysis of the ethical governance practices of QBE Insurance Group. The report begins with an executive summary and an introduction that outlines the importance of corporate governance and ethics. It then provides background information about QBE Insurance, including its history, business operations, and market position. The core of the report examines QBE's corporate governance policies, drawing on information from its website, annual reports, and media reports. The analysis focuses on key areas such as the company's board orientation, transparency through voluntary disclosures, and the application of ethical frameworks like stakeholder theory and legitimacy theory. The report also assesses QBE's commitment to ethical conduct and its approach to managing risks and stakeholder relationships. Furthermore, it discusses the company's financial performance, including challenges faced and strategic responses. The report concludes by summarizing the importance of ethical governance for QBE Insurance and its overall impact on the company's stakeholders.

Running head: BUSINESS MANAGEMENT
ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
Name of the Student
Name of the University
Author note

1ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
Executive Summary
The corporate governance and ethics is an important consideration for many corporate
organizations. The structural framework of the corporate governance is very complex and has a
direct effect on the revenue and overall perception of the company. It is very important that the
company is ethical and effective in all their management policies. The chosen company is QBE
insurance group.
The following report discusses the importance of corporate governance and analyses them
through their website, annual reports and media reports. The company exhibits a complex
corporate governance policy and is discussed firstly through introduction that introduces the
purpose of the report, followed by the summary of QBE which provides additional information
regarding the company. Then discusses the board orientation, followed by Interpretation of
company communications using legitimacy theory and lastly it concludes discussing the
importance of the company.

2ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
Introduction
Clarke (2004) describe ethical governance activities by an organization which are right
and justified and is aimed at serving public interest through actions such as impartiality,
accountability, integrity, honest, transparent practices and others. The value system is extremely
essential for the proper functioning of the company (Clarke, 2004). The customer and the
members of the organisation are all affected by the ethical governance policy of the company.
The purpose of the report is to analyse the ethical governance of QBE insurance group.
About the company
The following comp any in discussion is QBE insurance group and its primary objective
is to provide their customer to manage risk by rendering its services for an exchange of a regular
fee that is known as premium. An individual or company is able to claim certain financial return
when they face any loss, or risk based on their insurance plan (QBE.com. 2020). The premium
received by the insurance companies not only help in settling the claims of their consumers but
also helps increase additional profit and income as they are able to invest the extra income in
other long term investments for the company. The QBE Insurance Group is listed under the
insurance industry and is one of the oldest insurance company in the world (QBE.com. 2020).
The insurance company is rated as one the top 20 insurances all over the world. QBE is
Australia’s second largest global insurance group. The foundation of QBE insurance company
was formed by James Burn and Robert Philp in 1886, it was then called the North Queensland
Insurance Company Limited (QI). By 1890, QI had it branches in various places such as the
Pacific Islands, London, Hong Kong, Singapore and New Zealand and by 1924, it had expanded
in New York. The company founder Burns founded the Bankers’ and Traders’ Insurance

3ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
Company (B&T) in 1921 of which QI was the largest shareholder. QI and B&T merged together
in 1973 to become QBE Insurance Company (QBE.com. 2020).
QBE is in the insurance company that sponsors various sports teams such as the Sydney
Swans from the Australian Football league, England Rugby and others. The current CEO of the
company is Patrick Regan. The company has very serious code of ethics which controls and
guides the governance practice of the company. The company has formed efficient policies to
prevent its members from involving in any encroachment of human right. The company has
A$15.63 billion as market capitalisation as of reports from 2018 (QBE.com. 2020).
Summary of corporate governance at QBE
The annual reports of a company serves two main purposes, one is to ensure the policies
and growth is transparent for the members of the organisation and their stakeholders (Hermalin,
2014). Second reason is that the annual reports serves as a communication strategy to attract new
investors as well as to retain them (Psaros, 2009). Moreover, annual report provide information
the company’s growth and also shows plans of the future which is very important for all
members within the organisation as well as in its external environment.
According to the annual report of 2017 QBE has released a statement that shows that the
company has incurred a pre-tax loss of $3 million in the year that was previously a pre-tax profit
of $1061 million in 2016. The annual report indicates that the major loss was caused by the
claims in QBE North American Operations (Duran, 2020). The company went through a
significant leadership transition with the appointment of Pat Regan as the Group Chief Executive
Office and the company is changing their operations in Australia and New Zealand to improve
their performance and enhancing QBE’s capital management state.

4ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
The annual report shows that the core members of the organization is a mix of
independent and non-independent members of the organization. W. Marston Becker is the
chairman of QBE Insurance Group, he is an independent non-executive director of the board. He
is a member of the Audit, Investment, People & Remuneration and other committees. Patrick
Regan is the chief executive officer of QBE who joined in 2018 (McCahery et al, 2016). The
board consists of very experienced people of the business community who have significant
knowledge in the given field (QBE.com. 2020). Out of 11 members in the Board of Directors 7
people are independent and non-executive members of the board. This means that the ratio
between the members and non-independent members is 7:11.The remuneration report of 2018,
entails that the CEO of QBE draws a remuneration of $2919 in total which included EIP cash,
earning from the conditional rights and other sources. Vivek Bhatia Chief Executive Officer of
Australian & New Zealand Operations receives $2256 (QBE.com. 2020). In the remuneration
report it can be noticed that as the members are down the hierarchy they have reduced
remunerations. The remuneration report is one of the parameters that is useful in understanding
the financial report for the investors and the current stakeholders of the company.
According to the report of 2018 the CEO and Chairman informed that they have
withdrawn their services from certain countries such as Latin America, Thailand, Indonesia and
few other countries. Patrick Regan and Martson Becker both released a statement stating the
company was saved from making losses by simplifying there operations (Duran, 2020). They
had also focused on improving their core functions such as their pricing policies, underwriting
and claims, which helped to improve their financial performance which was lagging in 2017
(Duran, 2020). They have also stated they encourage a very inclusive, culturally diverse work
culture and want to promote customer centric goals and aspirations.

5ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
The report helps to understand that the company faced some severe monetary issues and losses
that led them to shut their services in the Latin America, Hong Kong, Thailand and other places
as they were incurring heavy losses (Duran, 2020). The company wants to increase their target
rate and improve their global pricing capacities. Their future plans include better management
strategies that can help them reduce their losses further and gain more revenue in their chosen
market. They have also focused on simplifying their operational management which has already
helped them recover financially than 2017 where they faced hardships.
Board orientation
Studies state that there is an increased study and scrutiny of the board members of the
organisations. The board orientation is dependent on various factors and the most important for
the growth of the company (Oyewunmi et al. 2017). Corporate governance has become one of
the most important issue as they have a direct correlation with the business ethics of the
organisation (Asx.com.au. 2020). Clarke (2004) are of the opinion that various factors such as
poor management, globalisation, and increased shareholder activities can affect the organisation
and its performance greatly.
Psaros (2009) define corporate governance as a framework of rules and its relationship
with various processes and systems within an organisation by which the authority is exercised
and controlled. Corporate governance is influential in monitoring the goals set by the company, it
also decides the evolution process of the company (Psaros, 2009). In case of the company in
discussion QBE Insurance the company displays social responsibility and ethical administration
to ensure that the stakeholders have a positive impact and takes measures to reduce the negative
impact on their stakeholders (Asx.com.au. 2020). QBE is ethical in its administration and
ensures that their policies are in accordance to the law and protects the consumers and the

6ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
stakeholders from any sort of malpractices. According to their 2017 report it can be understood
that the company pays a significant attention to managing the risks and breaches within the
company. The board of QBE has drafted a framework within which the company has taken into
account the International Standard ISO 19600:2014 which provides the guideline for compliance
management system. QBE is strictly against any financial crime and does not tolerate nay of its
members committing such a crime. The company is also has strict policies against bribery and
anti-corruption acts. According to their website they have stated that they are aware of the
various cyber-crimes and have policies that ensure the safety and security of their clients and
employees they have programs that allow the members to be aware of the risks they may be open
to.
The company website provides information on various philanthropic behaviour that
includes their association with Stars Foundation to empower young indigenous women. More
recently the company has donated to the relief and support of the Australian bushfire to help in
the recovery of the wildlife and $400,000 to RedCrossAU and savechildrenaus. These kind of
work shows the stakeholders that the company is ethical and worth investing in. This goes to
illustrate that the company adheres to the laws and regulation of the government and practices
effective corporate governance.
The QBE insurance group follows mainly a mix of resource model and agency model.
The agency model is one of the most widely sued theory that is used in most corporate
institutions. The board orientation follows a mix of independent and non-independent members
which is common in both the models (Johnson, 2017). The board orientation helps the audience
to understand QBE’s dependency on their external and internal directors. As in agency and
resource model the company may have a mix of non-independent members who are experienced

7ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
and know how to run the business as well as the independent members of the organisation who
have the skills and links to external resources that will help to secure and maintain links to the
external resources . This ensures that the company has set of mix skill in their organisation
which can help to gain the maximum advantage over their competitors. The annual report shows
that the company has a larger mix of independent directors who may have been appointed by
powerful shareholder. QBE therefore pays a lot of importance to their annual report which
emphasises on balance sheet, remuneration report and income statement so that they can be
transparent to their stakeholders and future investors (Hermalin, 2014). The Chairman and the
CEO have released a statement in their annual report that they had to shut down their functions
in Latin America, Thailand and other international branches as they were facing massive loss and
wanted to ensure better results and growth for their shareholders and stakeholders (QBE.com.
2020). In order to manage their resources the company has undertaken to invest and underwrite
the coal industry while others are invested in climate change and sustainable projects as well
QBE faces challenges from its competitors such as AXA, Generali, Zurich and other European
companies. Thus, this shows that QBE is following the resource model of corporate governance
where they show interest in developing the assets of the company and securing the financial
needs of the company (QBE.com. 2020).
Other than this QBE also follows the stakeholder model in certain areas of their corporate
governance where the board focuses on the needs of the stakeholders which is primarily the
financial profits and dividends of the company. The board orientation also shows that because
the majority of the board members are independent to ensure their expert knowledge in their
respective fields. The QBE organisation shows more of the ethical branch of the stakeholder
model where they communicate about their CSR activities through their annual and website

8ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
report. For example the company website shows that they are in the Bloomberg Gender-Equality
Index which shows that the organisation work culture promotes inclusive work culture
(QBE.com. 2020).
Interpretation of company communications using Legitimacy Theory
Communication is one of the key elements that a company must practice so as to ensure
they maintain a transparency with their stakeholders and investors it is also a social contract. The
organisation has a duty of managing the expectation of the stakeholder by disclosing the
information about the company and relating information regarding the financial health of the
company. This one of the most important part of transparency in corporate governance that
allows the future investors to make a conscious and informed decisions (Hermalin, 2014). In the
case of QBE the 2017 annual report showed that they underwent severe loss and that can be
harmful for the company’s reputation however it is their responsibility to ensure that the
stakeholders are adequately informed. According to the legitimacy theory the organisation is
under a social obligation to perform actions that are socially acceptable so that they can be
approved by their stakeholders and the society. Deegan (2006) states that legitimacy is not
merely an honour but it has economic implications as well that can motivate current and future
investors to invest in the company. For example, QBE faced a lot of pressure from their investors
and stakeholders to not invest in the coal mining industry therefore, the company is currently
supporting the climate change issue and investing in renewal sources of energy. This is also
because the present society wants more environment friendly approaches from the business
community therefore investing in coal mining is not suitable as they produce greenhouse gases
and create global warming (Gupta, 2019).

9ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
QBE makes public disclosure in many ways through their annual report, corporate
website, newspaper and social media (Brown & Deegan, 1998). The main concept is that the
board of directors do not have to approve the mandate, they are voluntary in nature needs to the
disclosed in the annual report of the company (McCahery et al, 2016). Deegan (2006) states that
the companies that were prosecuted for their environmental policies showed more disclosure of
their environmental policies than the firms that were not prosecuted. Proving that legitimacy
theory encouraged more transparency of the annual reports. Furthermore, Mousa & Hassan
(2015) are of the opinion that disclosures in annual report changed significantly when there was
major environmental disaster or some social disasters. The reports in such times showed an
increased report and disclosure of the organisation’s policies. Thus showing that legitimacy
theory is an important part of ensuring transparency in communication in the corporates.
Conclusion
Corporate governance is complex set of structural framework that dictates the
organisational behaviour and attitude. QBE is one the largest insurance group and has some
positive as well as some negatives in their strategic management and policies. To conclude, the
annual reports and the board orientation helps to understand the corporate governance policies
and ethical values of the organisation.

10ETHICAL GOVERNANCE OF QBE INSURANCE COMPANY
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