Federation University BULAW5915: ANZ Banking Group Governance

This report provides an in-depth analysis of the corporate governance practices at ANZ Banking Group, examining its adherence to the Australian Stock Exchange (ASX) Corporate Governance Council's principles. It discusses the importance of corporate governance, including accountability, transparency, and responsibility, and evaluates ANZ's corporate governance structure, focusing on the independence of its board of directors and auditors. The report also explores the potential implications of non-adherence to corporate governance principles, such as economic, social, legal, and political consequences. Furthermore, it highlights the role of auditors in maintaining financial stability and ensuring compliance with regulations, emphasizing ANZ's commitment to good corporate governance through its Stakeholder Engagement Model and Audit Committee.

ANZ Banking Group

Table of Contents
Question 1..................................................................................................................................3
Introduction of the company......................................................................................................3
Australian Stock Exchange (ASX).............................................................................................3
Corporate governance................................................................................................................4
Corporate Governance at ANZ..................................................................................................4
Independence of Auditors..........................................................................................................5
Role of Auditors at ANZ............................................................................................................6
Question B..................................................................................................................................7
ASX Corporate Governance Council.........................................................................................7
Implications of non-adherence to corporate governance principles..........................................7
Theories of Corporate Governance............................................................................................9
References................................................................................................................................11

Question 1
Introduction of the company
ANZ Banking group has been working in the international financial market since 180 years.
The business group is undertaking its business activities in nearly 34 different countries. The
ANZ bank is one of the most efficient banks at global level and in Australia the bank is
among the top four banks of the country. The international headquarter of the bank is located
at Melbourne. Ever since the inception, the bank has put forth continuous efforts to reach to
its current position (ANZ, 2018).
Australian Stock Exchange (ASX)
The organization is listed on the Australian Stock Exchange (ANZ, 2018). As a result the
company is required to disclose the steps taken by the organization towards the fulfilment of
the recommendations related to the Corporate Governance Council. The organization needs
to consistently report on the measures taken by the organization in order to abide by the
corporate governance principles at the end of every financial year with proper explanation
wherever required (ANZ, 2018).
The organization releases corporate governance statement on a yearly basis in order to throw
light on the organizations approach towards the governance. The corporate governance
structure provides a strong structure to the company and helps in taking responsible decisions
for the benefit of the organization. The main aim of the corporate governance principal is to
ensure accountability in the organization, maintain fairness in its operations, and encourage
transparency as well as to promote responsibility within the organization (Inter Raoues,
2018).

Corporate governance
Corporate governance in simple words can be understood as the policies and processes that
are adopted by the organization in order to control and govern the company. These
governance principles help the companies to move ahead and achieve their goals and
objectives in a successful manner. Good corporate governance has the ability to encourage
honesty and transparency in the business environment which boosts the structured planning
within the organization (Schroeder, 2017). With the help of good corporate governance the
organization is able to maintain a balance between the needs of different shareholders.
Corporate governance ensures that the organization is fulfilling its duties and responsibilities
towards their shareholders and stakeholders. A good corporate governance is ensured within
the organization when the company shares the financial, operation as well as the all the other
necessary information to the shareholders of the company as well as to the general public in
order to maintain transparency within the company (MSG, 2018).
Corporate Governance at ANZ
The structure of the governance is one of the most important corporate governance principles.
This is supported by the structure of the board of directors and the duties discharged by the
board of directors. It is very important that the right group of people govern the organization
which should be based upon the experience and skills of the board members. The structure of
the board of directors of ANZ includes seven non-executive and independent directors and
apart from this one executive director. According to the constitution of the company the
company the Board has all the rights to delegate any of its powers to the responsible
committees of the board. There are five principal board committees of the banking group
which is governed by its own Charter. As the board of directors there are certain duties that
need to be accomplished by the board members in order to fulfil the corporate governance

principles. At ANZ, the board members undertake all the efforts to fulfil the activities and
duties as the board members. The board members develop and implement the charter for the
respective committees. The board members provide with necessary advice related to the
sustainability issues being faced by the organization. The organizational culture is reviewed
frequently by the board members (ANZ, 2017). In order to discharge the duties freely without
any hesitation it is very important that independency is enjoyed by the board of directors.
This is the main reason behind the high number of non-executive directors in the list of board
of directors of ANZ (ANZ, 2017). Hence, from this it can be inferred that the ANZ banking
group has adopted good corporate governance in the organization as it has focused on the
structure of its board of directors and has also ensured its independency.
Independence of Auditors
Independence of auditors is another important aspect of good corporate governance. It is very
important that the audit of the company is independent from the management of the
company. The internal audit of the company should enjoy the respect as well as the
cooperation of both the board of directors as well as the management of the company in order
to work with confidence within the company. This also ensures transparency within the
company. It is the duty of the board of directors to make formal arrangements in order to
appoint the auditors of the organization. The board should ensure that a cordial relationship is
shared between the two in order to ensure smooth functioning of the company (NCCG,
2018). The financial reports prepared by independent auditors are able to reflect the true
financial position of the company and the auditor is able to reflect their experience and
knowledge without any other consideration. Independency ensures that the auditor remain
free from any kind of negative influence that may impact the organization in the long run
(Salehi, 2008). Independence of auditors is important as it saves the organization from frauds

as well as is also able to bring into notice any kind of change initiated from the owners or the
management of the organization which is disturbing (Bahrawe1, Haron, & Hasan, 2016).
Role of Auditors at ANZ
In order to maintain financial stability within the organization the ANZ banking group has
adopted the system of independent internal audit. Hence, there is a clear demarcation between
the role of auditors and the management of the company. The internal audit of the company
works under the Charter released by the board of directors. The Audit Committee of the
company looks into all the activities and matters related to auditing. The main role of internal
auditors within the organization is to present the board as well as the management with all the
necessary details that will help in taking the right decisions for the company. The internal
audit of the company comprises of seven general managers that take care of their respective
divisions. The audit committee of the company has to work in line with the risk management
team of the company so that any adverse conditions can be avoided in a very strategic
manner. The external auditors of the company also provides independent opinions through
the financial report of the company and also makes sure to tell the organization that they are
following the necessary regulations and compliances or not. The external auditors of the
company conduct auditing of the company on the basis of the Australian Accounting
Standards. The ANZ banking group has developed Stakeholder Engagement Model in order
to maintain a balance between the stakeholders of the company and the external auditors. The
appointment as well as retention of the external auditors is taken care of by the Audit
Committee of the company (ANZ, 2017). This reveals that the company is strongly in favour
of good corporate governance and has taken all the possible steps in order to ensure that the
principles of corporate governance are adopted and implemented by the company in a
successful manner.

Question B
Good corporate governance means the establishment of a strong structure between the
management of the company and the directors of the company along with the staff members
and other important internal and external stakeholders of the company. Accountability,
transparency, responsibility, creating long term value etc. are some of the common principles
of good corporate governance. Good corporate governance ensures that everyone is held
responsible for their acts (Mukher, 2018).
ASX Corporate Governance Council
The Australian Stock Exchange has released certain corporate governance principles that
need to be followed by the organizations listed under the ASX. Corporate governance is
important in Australia as it is used to determine the cost of the capital of an organization in
the global capital market (ASX, 2006). These principles are applied in the Australia market in
order to ensure that the Australian companies are able to compete at global level with
efficiency. This also helps the Australian firms to stay transparent to their stakeholders (ASX,
2014). The ASX Corporate Governance Council was established by ASX in order to make
principles and recommendations related to corporate governance in order to ensure investor
confidence by understanding the expectations of the stakeholders. These principles and
recommendations aim to reflect the international good practice adopted by the Australian
organizations. Hence, this is the main reason that the ASX has given special emphasis to the
adoption of principles of corporate governance within the Australian Company (ASX, 2010).
Implications of non-adherence to corporate governance principles
In order to compete in the global world almost every organization follows the corporate
governance principles. But there are times when wrong decisions are taken because of which

the organization fails to adhere with the corporate governance principles. As a result there are
certain consequences that are faced by the company. Non adherence to corporate governance
principles will increase the operation risk and will further negatively impact the interest of the
stakeholders of the company (Zerban & Madani, 2017). There are many different
consequences of non adherence to corporate governance like economic consequences, social
consequences, legal consequences, and environmental consequences. Following are some of
the consequences that may be faced by ANZ banking group if they fail to adhere to the
corporate governance principles
Economic consequences: With the help of the corporate governance principles the
organization is able to protect its investors as well as other stakeholders. If the organizations
fail to adhere to these principles then there are chances that the organization may lose the
confidence of the shareholder in the organization. This will create a problem in front of the
organization at the time of raising capital for the company. This may lead to lack of risk
management within the organization. Hence, the company will face many negative
repercussions of this in order to sustain in the economy (Lister, 2017).
Social Consequence: The social consequence of non adherence to corporate governance is
that the customers will start to show less interest in the organization and there are chances
that the existing customers may go to some other organizations. Hence the company will lose
its competitive edge in the society.
Legal consequences: The legal consequences include the penalties that may apply on the
organization from the Australian Stock Exchange. As the corporate governance norms and
principles are decided by the ASX Corporate Governance Council the council has all the
rights to undertake legal proceedings against the companies who are not adhering to the
corporate governance principles. The ASX uses these standards in order to calculate the

capital of the company. Hence, non adherence may disrupt the working of ASX and strict
actions can be taken against the company (Monaco, 2002).
Political Consequences: the political consequences can be very severe. There are chances
that the license can be dismissed of suspended by the government for non adherence to the
corporate governance principles. This can be considered as ethical misconduct by the
government institutions and on the basis of this charges actions can be taken against the
company (Russo, 2018).
Hence, it can be concluded that it is very important that the organization thinks about the
betterment of the whole company and its stakeholders along with the society as whole. This
can be achieved by adopting the corporate governance principles which will help in achieving
the objectives of the organization and also to add value through its operations. If the
organization fails to adhere to the corporate governance principles the repercussions of this
are very bad and may lead to the closure of the business. Therefore, it is very important that
the organizations adopt good corporate governance with the help of available standards given
out by the Australian Stock Exchange. This will help the company to attain competitive edge
in the international market. ANZ is a leading international organization and hence, it is very
important for the company to follow and abide by the corporate governance norms in order to
maintain its competitive edge in the market.
Theories of Corporate Governance
Agency Theory: this theory discusses about the relationship between the principals that is
the shareholders and the agents that is the executives or the management of the company.
This theory states that the principal that is the owners of the company appoints the agents that
are the management in order to undertake the operational activities effectively. This theory
states that the principals of the organizations believe that the agents will work in the benefit

of the organization. But, the agents on the other hand may not take decisions in the favour of
the principals. The organizations that have this kind of environment are believed to have
applied the agency theory of corporate governance. In this theory the agent that is the
managerial posts of the organization may develop self-interest and may work in his own
favour by ignoring the interest of the organization. Because of this reason the separation in
ownership and control was practiced within the organization so that, the organization can be
saved from fraudulent activities. In this theory the agents give emphasis to only those projects
that have right returns and do not care about any social responsibility (Ebary, 2018).
Business Ethics Theory: It is believed that the business is working ethically when the
organization takes care of what is wrong and what is right for the company as well as its
stakeholders. This theory emerged because of the concept of corporate social responsibility
concept. After the adoption of this concept by the organizations an ethical angle was given to
the operations of the businesses. The operations of the business were started to be viewed
from the viewpoint of adding value to the business and whether it is harming or not to any
stakeholder or the society. Morality, transparency and accountability are some of the main
aspects of ethical theory of corporate governance. This theory is adopted by almost every
organization as today the value created by the organizations is considered to be the ultimate
goals of the organization (Abdullah & Valentine, 2009).

References
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