MAF302 Corporate Finance: Sonic Healthcare Governance & Risk Analysis

This report provides a comprehensive analysis of Sonic Healthcare, an Australian firm offering laboratory, radiology, and pathology services. It examines the company's corporate governance structure, highlighting the composition and skills of the board of directors and the effectiveness of its decentralized operational model. The report also delves into the company's compensation packages and explores the various risks it faces, including financial, market, and operational risks, and the strategies employed to mitigate them. Furthermore, it assesses Sonic Healthcare's corporate social responsibility initiatives, emphasizing its commitment to ethical and sustainable practices, support for local hospitals and communities, and contributions to education and healthcare in developing nations. The analysis concludes that Sonic Healthcare has successfully promoted corporate governance, managed risks, and contributed positively to the communities in which it operates, fostering a culture of sustainability and ethical business practices.

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SONIC HEALTHCARE
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Sonic Healthcare
Executive Summary
Sonic Healthcare has been successful in providing health to people through the laboratory
services. Since it establishment, the company has developed a culture that promotes corporate
governance and corporate social responsibility. The Sonic Healthcare has effective structure that
has competent and skillful board of directors that has made the company to become sustainable.
The company has successfully managed risks, especially financial risks that have allowed the
company to be successful. Despite the challenges that the company faces, its corporate social
responsibility in education and health has enabled it to help the unfortunate members in the
community where it has operations. The strong corporate social responsibility practices have
made the company to be acknowledged as ethical and sustainable business that promotes the
interests of the disadvantaged communities where it operates. The paper will examine the
corporate governance and management or risks and corporate social responsibility of Sonia
Healthcare.

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Introduction
Sonic Healthcare is an Australian firm, which offers laboratory, radiology, and pathology
services in many countries across the world. Sonic Healthcare has been a successful healthcare
provider that has relied on its effective corporate governance. The company’s success story
began in 1992 when a Michael Boyd purchased a struggling small firm for few dollars per share
(Grünig, Kühn & Montani, 2018, pp. 57) . The firm divested its other interests and for the last
two decades, it has built a colossal international empire across the United States, Europe,
Australia, New Zealand and Asia. It constantly exceeds its encouraging financial results. The
company has expanded its growth prospects and diversified its revenue base with its moves
offshore form Australia. In 2016, the company’s revenues were estimated at 60 per cent that
were generated from business activities outside Australia (Urban, 2012, pp. 1).
Corporate Governance
The Sonic Healthcare board of directors is carries on to place great significance on the
governance of the firm that it considers to be critical to its wellbeing and achievement of the
goals. There are two main aspects for the governance of firms: conformance and performance
that plays a primary role in the success of the business. The company’s board and management
are dedicated to governance that acknowledges that all elements of the Group’s operations are
carried out responsibly, ethically, plus with the greatest standards of integrity.
Structure of the Board of Directors
The board of directors is comprised of individuals experienced in public corporation
management along with the leadership. The composition of board of directors is reliable with the

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standard of medical management and stewardship that has been the primary approach of the
company since 1993. The company had directors that have different skills that include medical,
legal, financial, management and corporate expertise (In Crowther & In Seifi, 2017, pp. 75). The
present board comprises four independent directors (comprising the Chairman) whom is a
General Medical Practitioner (GMP), plus three executive directors that include a radiologist
besides a pathologist. Mark Compton is non-executive, independent director appointed in 2014,
Christopher Wilks is a finance director and executive director, Colin Goldschmidt is the chief
executive officer and managing director and Philip Dubois is the executive director appointed in
2001 of Sonic Healthcare. The company’s federation model is a corporate structure that has
enabled its businesses to operate decentralized that reinforces the identity in addition to
management sovereignty of each local operation (Kidman & Feher, 2009, pp. 38). The effective
board has made the company to resolve many issues that could easily affect its reputation in the
healthcare sector. The board has further enabled the company acquire many business and expand
its operations in the global world.
Compensation Package
Sonic Healthcare has two compensations plans where equity-based remunerations may be
provided, the Employee Option Plan ad the Sonic Healthcare Performance Rights Plan. The
individual grants based on either plan can be subject to extra additional vesting conditions
determined by the board of directors in the company. The average Sonic Healthcare executive
compensation is £237,000 annually and the median compensation that the company pays that
include the basic salary and bonus is £235,000. The most compensated executive makes around
£700,000 yearly and the lowest compensated makes about £50,000 annually. The Sonic

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Healthcare Chief Executive Officer (CEO), Gold Goldschmidt was paid £3 million in cash in
2017. Australia operates under a free market that implies that firms like Sonic Healthcare are
able to remunerate executives whatever they like with no intervention from the government
(Roth, 2018, 2018, pp. 17).
Risks
Sonic Healthcare has many risks that have continued to affect its operations that include
market, operational, interest rate and financial risks. Financial risk is a major risk that the
company faces that is reliant on the environment of the business risk of the firm. This is an extra
risk, which stakeholders are exposed to because of the composition, as well as nature of debt that
the firm has. The company has higher debt-equity ration that exposes the company to more risks
(Zattoni & Judge, 2012, pp. 68). The company has successfully managed risks, especially
financial risks that have allowed the company to be successful. Despite the challenges that the
company faces, its corporate social responsibility in education and health has enabled it to help
the unfortunate members in the community where it has operations.
Sonic Healthcare acknowledges that risk management is an essential ingredient of
effective management along with corporate governance practices plus is essential in enhancing
shareholder value across the business. The risk management is powerfully enhanced internally
and forms part of the performance assessment of key company’s executives. Thus, the board
determines the general risk report of the business and is accountable for monitoring and making
sure the safeguarding of sufficient risk management policies, controls, as well as reporting
mechanisms (Umar, Subhan & Kimani, 2015, pp. 199). The management is accountable for the

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detection, appraisal, plus management of risks. Sonic Healthcare’s activities across all of its
operating businesses are subject to customary appraisal and constant oversight by management
team and the Board Committees. Consequently, the CEOs of the entity operating firms are
accountable for the recognition and management of risk in the business. The control systems and
policy conformity are appraised by the Sonic’s Business Assurance Program, an interior audit
role. The company mitigates the exchange rate and financial risk via its geographic in addition to
line of business diversification, through boosting diversified sources of income for its products in
marketplaces (Gardner, 2016, pp. 1).
To manage risks, the company’s pathology, imaging, as well as medical centre actions
are subject to Commonwealth plus State law in Australia, an the same regulatory control in
international locations. The regulatory laws for Sonic Healthcare covers fields like laboratory
besides the collection centre operations, workplace safety and health, radiation safety, privacy of
data, as well as the management of waste. The company’s network of pathology labs, collection
centres, plus diagnostic imaging centres are needed to comply with set of performance criteria
ascertained by state together with industry agencies.
Challenges on Corporate Governance and Risk Management
Despite the success that the company has attained in is corporate governance along with
risk management, the company still faces challenges that have become persistent in the past few
decades. The challenges that the company face in their effort to promote corporate governance
and manage risks is the scarce resources that is not adequate to identify the risks and promote
corporate governance. Despite the growing success of the company, Sonic Healthcare has

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suffered from inadequate resources to manage the risks that affect the company (Choudhury &
Petrin, 2018, pp. 383). The company also suffers from fluctuation in exchange in different
countries that the company operates that undermines its risk management and corporate
governance structures. The company’s revenue is priced on fee schedules established by the
government or quasi government entities and, particularly in the US insurance firms (Gardner,
2016, pp. 1).
Corporate Social Responsibility (CSR)
As companies have acknowledged the urgency to address the anticipations of the broader
network of stakeholders, CSR reporting has emerged to be more and more vital for the success of
the business. Sonic Healthcare recognizes the significance of corporate social responsibilities and
it has shown its commitment through diverse initiatives that target the communities that they
serve with their products (McGraw & Dabski, 2013, pp. 394).
Sonic Healthcare is committed to operating in a sustainable, ethical, as well as
responsible manner across all facets of its operations-medical, social, environment and
organizational. The company has many programs, which run locally and internationally,
designed to foster a sustainable working environment for its employees, suppliers, clients and
communities (Bazerman & Tenbrunsel, 2011, pp. 24). This is consistent with many of the
company’s Foundation Principles-respect for people, company conscience, and operational
excellence. The company’s medically-led firm, the company has an additional responsibility in
assisting to better the healthcare plus lives of individuals in some globally most disadvantaged
regions, like in the Goma region of the Democratic Republic of Congo and Sudan. The

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company’s catalyst support local hospitals plus their employees (Ferrel, Hirt, Ferrell & Ferrell,
2017). Sonic Healthcare also offer financing, materials, as well as support for different
community projects, particularly those, which focus on the welfare of children and women along
with the indigenous communities.
The strong corporate social responsibility practices have made the company to be
acknowledged as ethical and sustainable business that promotes the interests of the
disadvantaged communities where it operates. For many years, Sonic Healthcare has amplified
its sustainable practices across the world towards assisting the unfortunate people (Nagraj, Arora
& Gola, 2018, pp. 12).
Conclusions
Sonic Healthcare has been instrumental in promoting its corporate governance and
corporate social responsibility to impact positively the communities. The company has further
adequately managed the risks that could have affected their operations in different markets. The
company contributes to education, environment and support local communities and people in
developing nations across the world (In Addison & In Roe, 2018, pp. 42). The company has
created a culture that promotes effective governance, corporate social responsibility and the
management of different risks towards promoting sustainable business (Carey, 2018, pp. 1).

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List of References
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what to do about it. Princeton, New Jersey : Princeton University Press.
Carey, A. (2018). Most obscene Aussie CEO salaries revealed amid protest plans. TQ. Retrieved
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backlash-over-exorb/3551785/.
Choudhury, B & Petrin, M. (2018). Corporate governance that “works for everyone”: promoting
public policies through corporate governance mechanisms. Journal of Corporate Law Studies,
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Ferrel, O.C. Hirt, G.A., Ferrell, L. & Ferrell, OC. (2017). Business Foundations: A changing
world. New York: McGraw-Hill Education.
Gardner, J. (2016). Sonic Healthcare is facing its biggest test. Financial Review. Retrieved
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Grünig, R., Kühn, R., & Montani, M. (2018). The strategy planning process: Analyses, options,
projects. Berlin : Springer.
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driver of sustainable development. Oxford, United Kingdom : Oxford University Press.

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In Crowther, D., & In Seifi, S. (2017). Modern organisational governance. Bingley, UK :
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Kidman, M., & Feher, A. (2009). Master CEOs: Insights from Australia's leading CEOs. Milton,
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Nagraj, A., Arora, H. & Gola, S. (2018). Medical Services and Corporate Social Responsibility
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