ACCT20080: Perpetual Limited Ethics and Governance Capstone Project

This report provides a detailed analysis of Perpetual Limited's corporate governance and ethical practices. It begins with an executive summary and an introduction outlining the report's objectives, which is to check the level of corporate governance in the company. The report summarizes the company's background, including its history and services. It then delves into the company's corporate governance structure, examining board composition, CEO and chairperson reports, and remuneration policies, which include fixed and variable incentives. The report further discusses board orientation, identifying the stakeholder-ethical branch theory as the most likely orientation, emphasizing the company's focus on all stakeholders. The analysis highlights the company's adoption of a majority of independent directors to ensure diversity and its emphasis on stakeholder engagement. The report uses the annual report and official website of the company as its primary sources. The report concludes with a summary of the key findings, emphasizing the company's commitment to ethical governance and stakeholder value. The report is prepared as a capstone project to research and interpret the voluntary disclosures of a publicly listed company to determine its governance and ethical outlook.

Ethics and
Governance
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Student Name

Perpetual Limited 1
Executive Summary
The selected company is engaged in providing financial advisory services. In the first
part of the report background of the company has discussed that further lead the discussion
regarding remuneration policies and structure of the same. The company provides incentives
to its directors and executives in addition to fixed remuneration. The most likely orientation
is stakeholder ethical branch. Adopting the principles of this theory the company has
appointed a majority of directors to ensure diversity. Further, the lead focus of the company
is centered on all the stakeholders' instead of mere shareholders. At last, a conclusion
summarizing the main findings of the report has been drawn upon.

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Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Summary of company................................................................................................................3
Summary of Corporate Governance...........................................................................................4
Board Orientation.......................................................................................................................6
Company communication and legitimacy theory......................................................................9
Conclusion................................................................................................................................11
References................................................................................................................................12

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Introduction
The company selected for the preparation of this report is Perpetual Limited. The
main objective of this report is to check the level of corporate governance in the company and
practices adopted by the same in this sector. Annual report of the company and the official
website of the same has been studied and researched for this report. The report contains many
aspects related to the selected company. Firstly the summary of the company will be
discussed where the focus will be made to the background of the company, its industry and
recent history. Further, corporate governance of the company will be discussed whereas the
composition of the board, reports of CEO and chairperson and remuneration policies of the
company will be detailed and discussed. Further board orientation and applicable theory i.e.
legitimacy theory will be discussed. The essential outcomes of the report are that the same
would enhance understanding, different type of board orientation and status of corporate
governance in the selected company.
Summary of company
Perpetual Limited (hereinafter referred to as Perpetual or Company) is an Australian
company that started providing services in 1886 (Member, 2013). The company is active in
the financial sector and provides diversified financial services and products to its consumers.
Further to state that the company is listed on the Australian Stock Exchange (Asx.com.au,
2019). One who is interested in seeking financial advice as well as advice related to wealth
management, securitization & corporate trustee services or purchase of investment products
and managed funds may contact or may rely to Perpetual.
The business of Perpetual is doing well and in the past, it has received by many of the
recognition and awards including the significant and popular awards such as the employer of

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choice for gender equity, Kanganews awards, best fund manager and so on (Perpetual,
2019a). The company was established on 28 September 1886 by the virtue of a decision taken
by a committee consisting of professional and business professional people, that also
included the Honourable Sir Edmund Barton, future prime minister. Headquarter of this
company is situated in New South Wales state of Australia.
As per the latest annual report of the company, it employs nearly 1000 people. These
employees work under different teams and departments. Mainly 5 teams are there in the
company namely assets management team, institutional sales team, perpetual private
investment team, business development team, and perpetual corporate trust team. The
company focuses on integrity and excellence. Company has diverse team, where it consist
many of the experts who carries professional capabilities. Company helps investors by
providing investment related advice as the same is engaged in this business since years.
In the recent year, a significant fall down has been noticed in net profit after tax of
the company but it does not mean that the company is not doing well. Millions of
shareholders have invested their money in the business of the same. To manage and grow the
wealth of people, the company provides different services. These services include personal
financial advice, advice of medical professionals, advice to families and business owners,
nonprofit organizations and personal injury clients. By having a look after the above-
mentioned discussion, it is far clear that company is working smoothly and providing a
different kind of services to its customers. It has a long history and even after many wars and
fights in the country, the company managed to carry its operations and to keep developing
updations in the same. The company has been formed as an effort of a committee that
consisted business and professional people. In 1900s company has developed its headquarters
in middle Sydney. This premise remained headquarter of company for 90 years. In 1960,
Perpetual becomes one of the first companies to use electronic computer. In 1964, the

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company listed its shares on stock exchange. Recent history of company is also interesting as
in 2010; it became first wealth manager in Australia to develop a reconciliation Action Plan.
After that too, company is continuously doing great in related sector.
Summary of Corporate Governance
Moving the focus towards corporate governance of the company, this is to state that
the same can be checked looking after the board structure of the company and remuneration
policy adopted by the same. According to the annual report of the company published for the
financial year ended on June 2019, there were a total of 6 directors in the company in
addition to the chairman. Out of these directors, 5 are independent and one is managing
director cum CEO of the company. CEO of the company joined this position with effect from
24 September 2018. Further, the Chairman of the company is Mr. Tony D'aloisio AM, who is
also an independent director. Recently one another person named Greg Cooper has been
appointed on the position of independent director. In this manner, this is to state that almost
every director of the company is independent.
Chairperson and CEO of the company have extended their message to stakeholders
through their reports. In the report presented by the chairperson, he stated the reason for
profits that are falling in recent years and made it clear that the reason behind the same is
negative market conditions. Chairperson in his reports also provided benefits of
diversification. Further also stated the as per the recommendations made by Royal
Commission, the company developed its focus on the development of trust and
confidentiality of investors recently. Similar to the chairperson, report of CEO of the
company was included in the annual report where he mentioned the differences between the
companies from others. Similar to the chairperson, he also mentioned diversity as a strength
of the company. He stated that the company has launched it's brand positioning "trust is

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earned" which is more than an advertisement. Its shows the manner of working and values of
the company which is trust and integrity.
The company considers provisions of Corporations Act 2001 (Cth) and listing rules
prescribed by ASX while determining the remunerations of different directors. Annual report
of the company also consists of remuneration policy of the company. Company has adopted a
transparent remuneration model, where it includes fixed remuneration as well as variable
incentives in the form of cash as well as equity. Fixed remuneration used to be paid without
considering the performance of the executives whereas incentives are meant to be associated
and provided as per the performance. The company calculates fixed remuneration of
executives using total cost to company method and such remuneration includes basic cash
salary, fringe benefits tax, superannuation and packaged employee benefits (Perpetual,
2019b). If to discuss the calculation of variable incentive, this is to state that these are paid
considering the meeting of incentive targets. Equity given as variable incentives is required to
retain at least for a period of 4 years.
Company has made certain changes to the remuneration structure and as per the new
policy of the company; the performance of the same will be assessed against TSR
performance hurdle. Risk and behavioral performance play an important part in determining
remuneration and incentive outcomes. How directors are remunerated in total can be better
understood by having a look after the following table:-

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(Perpetual, 2019c)
The remuneration committee is there which approve the remuneration of directors and
executives. In addition to the approval of the same, committee review the remuneration on a
timely basis and revises the same accordingly.
Board Orientation
Before moving the discussion towards board orientation of the company first, the
meaning of the same is required to understand. Board orientation can be understood as a
process where a framework used to develop to provide precision information to members of
board members in respect of manner discharging duties and roles (Gnb, 2019). Board
orientation helps the company to properly defining its goals and also made the manner clear
in which board can achieve the same. It means board orientation ensures that the board of
directors effectively performing their duties to achieve the set organizational goals. Many of
the board members already knew what their role is or what the company expects from them.
While many of others are not able to understand the same. Board orientation helps such
directors and board members hence this is not wrong to state that board orientation is more
useful for inexperienced board members. Such orientation has its own significance as a good

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one provides great values. The reason behind the same is that every board member is required
to know the way of operation of an organization.
Different kinds of board orientation are there which are developed based on different
theories such as agency theory, stewardship theory, and ethical branch and so on. These
theories have different beliefs and approaches. Whatever type of theory board of directors
adopt for their company, they study the same and develops their practices accordingly. This
can be studied vice versa. It means by having a look after practices and approaches adopted
by the company board, the orientation of the same can be identified. By using different
criteria, a comparison can be made among different theories of board orientation. These
criteria mainly involve board composition, board focus, and key communications. Board
composition refers to the ration of independent and non-independent directors. Different
theories suggest different board composition. For instance, under agency theory company
appoints a majority of independent directors that are appointed by powerful shareholders
(Setia-Atmaja, Haman & Tanewski, 2011). Similarly, under stewardship theory on different
side suggest appointing a majority of non-independent directors who know the manner in
which assets of that business can grow.
On the different side, board focus is another criteria that can be understood as
priorities of the board. Similar to board orientation, different theories suggest different board
focus. Lastly, the third criteria i.e. key communications determine various forms of
communication priorities by different boards. Different types of orientations are given as
hereunder:-

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Now discussing the most likely board orientation for the selected company this is to
state that Stakeholder – Ethical branch theory seems to be most appropriate that this company
used for defining the role of board member and these people use while making business
decisions. The ethical branch theory emphasis on every stakeholder rather than just
shareholders (Andreaus, Costa & Parker, 2014).
If to discuss the first criteria associated with the stated board orientation i.e. board
composition, this is to state that the company has majority independent director in its board as
required under stakeholder ethical branch. The lead reason behind this ratio of independent
director is to reflect the diversification of stakeholder in the operations of the company. As
mentioned above, the CEO and chairperson also stated that diversification is important for the
company and always remain in the lead focus of the same. It shows that the company has
appointed a majority of independent directors to manage diversification. Hence, to prove that

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while developing its board composition, the company has used Stakeholder – Ethical branch
theory. Secondly, the theory also reflects under focus on board. The company develops its
focus on all the stakeholder and not just the shareholders. Company does not identofies the
most powerful stakeholder and in this manner considers every one of them equally important.
Here again one can see the application of stakeholder ethical branch. This is to state that the
company adopts a theory of corporate governance that ensures the balance among different
stakeholder groups rather than one. Company is very active in corporate responsibility and
sustainability. It shows that in conjunction with the shareholders, the company also values its
other stakeholders such as the environment and society. In the annual report, company clearly
states that interest of every stakeholder is important to it. Company is committed to
responsible investment practices. It also runs Carbon disclosure project and putting its efforts
to reduce carbon emission. Similarly, it provides safeguard to interest of investors by
complying all the laws in timely and efficient manner. Company has a good mix of male and
female participants in board as well as in employee. In this manner it ensure interest of
society by maintaining diversity.
The third and last criteria come to key communication. It states that whenever a
company adopts stakeholder ethical branch theory, the same make a voluntary disclosure and
keep it lead focus on CSR. Perpetual does the same. By looking after corporate responsibility
performance of the company one may say that the company adheres to ethical branch theory
as it provides many voluntary disclosures especially related to corporate social responsibility.
As per the beliefs of the company voluntary disclosures issues by the same raises, its
awareness in respect to climate changes and also enhance its long term sustainability and
profitability. The company uses such disclosures as its key communication strategy.
Company has adopted many steps in the sector of CSR and with the help of voluntary
disclosures; it let the stakeholders know about it. If to have a look after the website of the

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company, it contains many of the information about the company itself, directors, services
offered by the same and so on. Under the heading corporate trust, the company shows the
manner in which it acts responsibly. It can be counts as voluntary disclosures where the
company is maintaining its focus on corporate social responsibility. Hence, in this manner
this is stakeholder ethical branch theory reflects here.
Company communication and legitimacy theory
Legitimacy theory can be understood as a mechanism, which supports entities in
implementing as well as developing voluntary environmental and social disclosures to fulfill
their social contract, which enables the identification of its goals (Lanis & Richardson, 2012).
In other words to state that legitimacy theory helps in explaining the nature of disclosures that
the company uses, the reason behind such disclosures and audience for the same. The theory
helps to understand how a company implements, develop and communicate its social
responsibility policies (Zyznarska-Dworczak, 2018). This is not wrong to state that the
legitimacy theory is connected and concerned with how the board manages its stakeholder
relations. The theory believes that it is the societies, which determine what is legitimate and
what is not and not the company. According to the norms of society, a corporation that works
in the interest of the same seems to be legitimate. In this manner if a company is taking steps
in the field of environment security, customer benefits and considering interest of suppliers,
investors and other stakeholders in addition to focusing on profit taking, then it is considered
that company is following its social contracts.
As per this theory, if a company is legitimate then the same is required to
communicate its legitimacy to society by the way of social and environmental disclosures. To
check and decided the legitimacy, the communication made by this company are required to
be review using legitimacy theory. Board of directors is required to make disclosures to