ACCT20080 - HT&E Corporate Governance and Ethical Outlook Analysis

This case study provides an in-depth analysis of HT&E's corporate governance structure and ethical outlook. It begins with an introduction to the company, highlighting its core business, leadership, and recent financial performance, including both successes and challenges like tax disputes. The study then delves into HT&E's corporate governance, examining the composition of its board of directors, the roles of executive and non-executive members, and the functions of key committees. It assesses the company's board orientation through the lens of agency, stewardship, and stakeholder theories, concluding that HT&E primarily follows an agency-oriented approach with some consideration for stakeholder interests. Furthermore, the case study interprets HT&E's communication patterns using legitimacy theory, suggesting that the company is motivated to disclose social and environmental information to maintain its legitimacy. The report concludes with an overall summary of the analysis, providing insights into HT&E's governance practices and ethical considerations.

Running head: ETHICS AND GOVERNANCE OF HT&E
ETHICS AND GOVERNANCE OF HT&E
Name of the student
Name of the university
Author note

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Executive summary
The main aim of the report was to analyze the corporate governance structure and ethical outlook
of the company HT&E. the report made use of some theories to understand the corporate
governance structure of the company. Prior to that, the report first introduced the company and
provided a brief detail about the company. Then, the report provided a summary of the corporate
governance of the company followed by its board orientation. The summary found that the
company follows a shareholder or agency inclined board orientation although some inclinations
towards stakeholder (ethical branch) have also been found. In determining its ethical outlook, the
report analyzed its communication patterns and found that the company is motivated by the
legitimacy theory to disclose its social and environmental reporting. The report concluded with
an overall summary of the analysis.

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Table of Contents
Introduction......................................................................................................................................3
Corporate governance summary......................................................................................................4
Board orientation.............................................................................................................................6
Interpretation of company communications using Legitimacy theory............................................9
Conclusion.....................................................................................................................................10

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Introduction
HT&E (Here, There and Everywhere) is one of Australia’s leading media companies that
owns several radio networks and has several other investments in the emerging media. Found in
1988, the company listed on the ASX as an operation radio, audio and digital business that
operates within Australia and outdoor as well especially in Hong Kong (Htande.com.au, 2019).
The core business of the company however, is the Australian Radio Network (ARN). Hamish
McLennan is the current Chairman of the company with Ciaran Davis as the CEO and Managing
Director. The company is reputed in the media industry in Australia and it was formerly known
as APN News & Media. In the diverse media industry in Australia, HT&E holds a significant
position in both traditional and digital media. The Australian media industry caters to the need of
millions of English-speaking population. The industry stays as one of the most flexible sectors in
the Australian media from the perspective of both audience engagement and advertiser
perspective. The industry is further expected to remain resilient in the coming future as well.
ARN achieved one of its best ratings as a media company in 2018 especially after it launched
new shows in the previous year. In 2018, the company also earned big after selling Adshel to
oOh!Media for 570 million Australian dollars thus producing a significant value result for its
shareholders (Htande.com.au, 2019). Furthermore, ARN also integrated Conversant Media fully
that resulted in good positioning of Conversant and cost savings as well. The Cody, one of the
company’s outdoor channel and one of the weak links in the past few years, also delivered a
positive result in 2018. Gfinity Esports, one of the other significant businesses of the company
also saw huge success after launching the Elite Series in 2018 that saw over 9 million viewers in
the first year itself. The company’s revenue for the year 2018 increased by 3% whereas the
overall growth of the market was 3.5% (Htande.com.au, 2019). In the coming years, the

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company is looking forward to perform better and stay on top within the sector. However, the
company also landed in some disputes especially with the Australian Taxation Office (ATO)
concerning its sale of some of its New Zealand assets. The company had to pay 50.7 million
Australian dollars to the ATO with regard to the tax dispute.
The purpose of the report is to discuss the corporate governance of the chosen company
HT&E based in Australia. The report will first provide brief introduction of the company
followed by the industry it belongs to and its recent history. Then, the report will discuss its
corporate governance including the company’s board composition, the directors – independent
and dependent – the chairperson and CEO’s report and the reports of remuneration. Further, the
report will discuss the board orientation that will include the review of the company’s annual
report and the media releases that are important. Lastly, the report will use the Legitimacy theory
to interpret the communications of the company related to its corporate governance.
Corporate governance summary
Hamish McLennan leads the company as the Chairman and non-executive director who
has been in the office since 30 October 2018 (Htandelimited.gcs-web.com, 2019). Ciaran Davis
is the Chief Executive Officer and the Managing Director of the company who is mainly
responsible for looking after the operational and strategic part of the business. He has been in the
office since 24 August 2016. Belinda Rowe is the second Non-Executive Director after
McLennan and has held the office since February 2019. Paul Connally and Roger Amos are the
other two Non-Executive Directors of the company. As evident from the company’s board of
directors, the ratio of non-executive or independent director is more than that of independent
directors. A non-executive director is the director of the company who has the responsibility to

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help in the improvement of the company’s corporate governance. Therefore, a non-independent
or executive director is the one who looks after the corporate and strategic issues of the
company. In HT&E, there are more non-executive directors and hence, it could be stated that the
company lays much emphasis on corporate governance. The Chairman is also an independent
director is role is to focus on the corporate governance of the company. He also leads various
committees and offices related to corporate governance such as Audit and Risk, Nomination and
Governance and Remuneration Committees.
The Chairman in his report for the company’s annual report talked about the positioning
of the company and the future plans. Mr. McLennan announced that the focus of the company
would be more on its radio and audio assets. The Chairman expressed gladness over the booming
radio industry in the country and stated that his company is determined to perform stronger and
better especially with its core business – ARN. He further stated that the priority for the company
is to provide best quality content to the audiences and restrict the costs to make sure that ARN
stays as the leading radio network. The report presented by the CEO, Ciaran Davis focused
mainly on the financial performance of the company in its various units and expressed better
scope for better performance in 2019.
In terms of remuneration, the company has a set of policies and framework for the
remuneration of the directors and other non-executive directors. The Remuneration Committee
has been set up for overlooking the remuneration policies of the company. The CEO and CFO of
the company in 2017 offered a reduction of 15% in their salary in order to manage a steady
financial performance of the company. When there is negative performance from the company
financially, the Total Fixed Remuneration (TFR) deduction of 15% from the CEO and CFO
salary helps. When there is profit, the compensated remuneration foes to shares deferred in more

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than three years. The current TFR of the CEO is 43%. The Total Incentive Payment (TIP) for the
CEO and other executive members was more than 100% in which, the CEO forfeited 20% of the
remuneration.
Board orientation
According to the various theories of corporate governance, board orientation differs
according to the different companies. The orientation of the board determines whether the
company is focused on shareholders or stakeholders or it follows a mixed approach. Agency
theory is one theory that most clearly explains corporate governance. This theory refers to the
disintegration of management and ownership and the shift of management responsibilities from
the owners or principals to the managers or agents. This disintegration results in agency cost –
costs that come up owing to the agency relationship. The theory assumes that managers or agents
are self-interested focusing only on maximizing wealth and hence carry out activities on their
won without thinking about the shareholders or the principals. The agency theory also states that
including corporate governance within the company helps in the reduction of the agency costs
through better transparency and accountability. Therefore, an agency board could be stated as a
board that emphasizes on the remuneration Report in its annual report. Apart from the agency
theory, other theories also help explain board orientation and the consequent corporate
governance. The stewardship theory states that the managers are not just wealth-oriented as the
agency theory explains but they also focus on other non-economic factors like performing better
and proving a steward for the company. To view from the corporate governance perspective,
stewardship theory proponents argue that the company does not have the need to have
independent directors for the reason that executive directors and managers are motivated enough
to carry out all the responsibilities. Therefore, a board with inclination towards agency theory

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will have majority of the members as independent directors that powerful shareholders appoint.
On the other hand, stewardship theory proponents will have a board that might have non-
independent directors in majority that are aware of the ways to grow and maintain the assets. In
terms of board focus, that is, priorities, an agency board will give priority to the objectives such
as profits, growth and dividends that the shareholders give whereas a stewardship board will
prioritize the business’s growth on the shareholders’ behalf. In contrast to this, a stewardship
board would focus not on the objectives but on the needs of the shareholders but with a different
approach. Stewardship boards work like democratic systems where the shareholders act as voters
who have the power to confirm of dismiss a board in the general meetings presided over by the
shareholders. However, a stewardship board also focuses on the growth and care of the assets of
the company from the shareholders’ behalf. To put it simply, although the shareholders have
ownership over the company, they do not run the company but the board does for the benefit of
the company. In doing so, the board enhances assets for the advantage of the shareholders.
It has however been seen that in Australia, there is little adherence or inclination towards
a stewardship board. In fact, the Australian Stock Exchange or ASX demonstrates clear
preference towards an agency board that is evident from the preference for the independent
directors. In its recommendations for the companies listed in it, the ASX states,
“The board of a listed entity should have at least three members, a majority of whom are
independent directors and, is chaired by an independent director” (Asx.com.au, 2019, p. 14)
Thus, as evident from the recommendation of the ASX above, it is clear that the
Australian economic structure demands businesses to have agency boards rather than
stewardship boards.

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Apart from the shareholders’ theory, another theory that has gained prominence in the
sphere of corporate governance is the stakeholder theory. As per this theory, the entity or firm
has a relationship with not only the shareholders but the stakeholders as well. When a company
identifies with the broader stakeholders, it has to cater to the needs of the various groups of
stakeholders. In the views of Deegan (2014), the stakeholder theory has two branches – the
ethical and the managerial branch. According to the ethical branch, the board must focus on the
needs and demands of all the stakeholders. The managerial branch on the other hand states that
the needs of the most influential stakeholders be met first.
After review the annual report and the reports of the Chairman and CEO of HT&E
Company, it is clear that the company follows agency board orientation. Independent directors
dominate the board composition of the company that has been installed by the shareholders
heavily. The focus of the board is on the shareholders’ needs that is, profit, growth and revenues
or dividends. This is evident in the report of the Chairman as well as the CEO. The Chairman
mentions in his report about the “solid performance” of the company in terms of profit, growth
and dividends only. Similar is the case with the CEO who provided an extensive report on the
financial result of the company for the year 2018. The plans for 2019 detailed by the CEO also
focus on the needs of the shareholders – “We have put plans in place for 2019 to deliver
increasing value for shareholders by driving and delivering operational performance and
reducing corporate costs”. The company majorly communicates using Remuneration Report, as
it is evident from the annual report. Furthermore, it has also used balance sheet and cash flow in
its annual report as part of its communication. The media releases also indicate that the company
majorly focuses on fulfilling the objectives of the shareholders. In one of its media releases, the
company announced changes in its corporate structure with a view to simplify its corporate

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division and ARN. On the change in the corporate structure, the Chairman stated that this was
done in order to “optimize the cost structure, reduce corporate costs and ultimately set the
business up for ongoing operational effectiveness and further growth” (Htande.com.au, 2019).
This clearly indicates that the board is more inclined towards completing the shareholders’
objectives and hence, the board orientation could be said to be inclined towards agency theory.
From the stakeholder theory perspective, the company seems to incline partially towards
stakeholder (managerial branch) where it focuses on fulfilling the needs of the influential
stakeholders first. Another instance of the company having some inclination towards stakeholder
theory is its key communication pattern. HT&E has some voluntary disclosures and it is focused
on CSR that is evident from its annual report.
Interpretation of company communications using Legitimacy theory
Legitimacy theory rests on the notion that a firm should seek to make sure that it
functions within the boundaries and norms of the societies in which it operates to ensure that the
activities it conducts are seen as legitimate. Although these boundaries and norms are not the
same in every society and in every era, it does have an impact on the working of the
organization. The legitimacy theory emerged in the 17th century from the concept of ‘social
contract’ (Milne & Patten, 2002). Thomas Hobbes reinvigorated the idea of social contract in
England when he emphasized on the idea that there should be a civil government, which is for
the people and by the people. The legitimacy theory is based on this idea only although the
context is different. In terms of business, the legitimacy theory states that a company that wants
to be considered legitimate must give up all those rights that it has in favor of the society to
demonstrate that it is working for their wellbeing. In return, the company is granted legitimacy
by the society that results in the gaining of capital and resources for the company (Milne &

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Patten, 2002). It is the responsibility of the boards to take steps to decide what is considered
legitimate by the society. Further, it also has the responsibility to look into the things that it
should be doing to be accountable to the society. Hence, disclosures are important for the
company to assure the society that it is working for their interests.
In case of HT&E, the company discloses its Corporate Social Responsibility (CSR) in its
annual report elaborately. The company engages in both social and environmental disclosures
that provide it the legitimacy it needs from the society for its operations. In its CSR report, the
company discloses the initiatives it has taken for the society and the environment. As Deegan
(2002) states, social and environmental reporting (SAR), plays a crucial role for the company to
create organizational legitimacy. The company further discloses the initiatives it took in the year
2018 for the community, society and the environment. The ARN Goodness Project, the Gold
Appeal and OzHarvest collaboration are the three initiatives that the company took to
demonstrate its legitimacy to the society. The communication of these initiatives in the annual
report shows the influence of the legitimacy theory on organizations. Deegan, Rankin and Tobin
(2002) conducted a study on the social and environmental disclosures of one of Australia’s
biggest companies BHP Limited and found that legitimacy theory was a big force behind these
disclosures. Similar could be said about HT&E, which engages in elaborate disclosures
motivated by the legitimacy theory.
Conclusion
To conclude, it could be stated that the HT&E Company has a good corporate governance
structure with roles and responsibilities being divided within executive and non-executive
directors. The report did an analysis of the company’s annual report and its overall structure and

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found that it has a strong ethical outlook. Furthermore, the analysis also found that with a board
orientation inclining towards agency and stakeholder theory (ethical branch). The evidence for
this could be seen in the emphasis on Remuneration Report and balance sheet in its annual report
and the disclosures regarding social and environmental initiatives in its CSR report. In addition
to this, the analysis also found that the company follows the legitimacy theory in its
communication patterns because it includes its CSR report in the annual report to communicate
its societal and environmental activities. The analysis revealed that the company is motivated by
the legitimacy theory to disclose such information so that it becomes legitimate to the society.
This was proved by the use of numerous scholarly evidences that talked about the companies’
use of legitimacy theory.

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References:
Asx.com.au. (2019). Corporate Governance Principles and Recommendations, 3rd Edition.
[online] Available at: https://www.asx.com.au/documents/asx-compliance/cgc-principles-
and-recommendations-3rd-edn.pdf [Accessed 22 May 2019].
Deegan, C. (2002). Introduction: the legitimising effect of social and environmental disclosures–
a theoretical foundation. Accounting, Auditing & Accountability Journal, 15(3), 282-311.
Deegan, C. M. (2014). Chapter 8: Unregulated corporate reporting decisions: Considerations of
systems-oriented theories. In Financial Accounting Theory (4th ed., pp. 338-400)
Deegan, C., Rankin, M., & Tobin, J. (2002). An examination of the corporate social and
environmental disclosures of BHP from 1983-1997: A test of legitimacy
theory. Accounting, Auditing & Accountability Journal, 15(3), 312-343.
Htande.com.au. (2019). MARKET ANNOUNCEMENT HT&E Management Changes.
Retrieved from http://www.htande.com.au/media/1229/1878178.pdf
Htande.com.au. (2019). Welcome to HT&E - HT&E - Here There and Everywhere. Retrieved
from http://www.htande.com.au/
Htandelimited.gcs-web.com. (2019). Board of Directors | HT&E Limited. Retrieved from
https://htandelimited.gcs-web.com/board-of-directors
Milne, M. J., & Patten, D. M. (2002). Securing organizational legitimacy: an experimental
decision case examining the impact of environmental disclosures. Accounting, Auditing
& Accountability Journal, 15(3), 372-405.

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Psaros, J. (2009). Chapter 1: Practical and theoretical foundations of corporate governance. In
Australian corporate governance: A review and analysis of key issues (pp. 1-22). Frenchs
Forrest, NSW: Pearson Education Australia.