Analysis of Telstra's Corporate Governance and Social Responsibility

This report provides an executive summary and in-depth analysis of Telstra's corporate governance and social responsibility practices. It examines Telstra's adherence to the ASX Corporate Governance Council Principles and Recommendations, including aspects such as board structure, ethical conduct, corporate reporting, and stakeholder rights. The report evaluates Telstra's approach through the lens of agency theory and stakeholder theory, offering a comprehensive understanding of the company's governance framework. It covers Telstra's declared approach to corporate governance, its framework, and an evaluation based on the eight principles of ASX. The analysis includes an examination of various aspects like over sighting and management, board structure, ethical acting, corporate reporting, disclosure, security holder rights, risk management, and remuneration. The report concludes with a theoretical analysis and references.

Corporate Governance and Social
Responsibility
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Executive Summary
This assignment has played a vital role in helping to understand the importance of the ASX
Corporate Governance best practices and how it is helping the business establishments in
Australia to conduct their business operations in a socially responsible and ethical manner.
The ASX Corporate Governance Council Principles and Recommendations had been
incorporated in the y ear 2003 and they have been further amended and updated in the year
2007. The assignment would provide an in-depth explanation of the diverse aspects of the
ASX corporate governance practices and how it is eventually helping the Australian
companies to ensure a high level of transparency and accountability in their business. The
aspect of corporate governance mainly deals with the complex structure of rules and
regulations that helps in binding the diverse systems, processes and working relationships at
the workplace. By maintaining strong corporate governance within their organisational
domain, the business establishments are able to streamline their business operations in the
market. This helps them to improve their accountability towards their customers and other
stakeholders in the market and as a result business establishments are able to enhance their
brand image and reputation in the market.
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Table of Contents
Executive Summary...................................................................................................................2
Organisation declared approach of corporate governance.........................................................4
Evaluation of Telstra’s corporate governance on the basis of eight principle of ASX..............6
Over sighting and management related solid foundation.......................................................6
Board structure for the value addition....................................................................................7
Responsible and ethical acting...............................................................................................8
Corporate reporting integrity safeguarding............................................................................9
Balanced and timely disclosure............................................................................................10
Security holder’s right respecting........................................................................................10
Recognition and management of risk...................................................................................10
Responsible and fair remuneration.......................................................................................12
Theoretical analysis..................................................................................................................12
Analysing through Agency Theory......................................................................................12
Analysing through Stakeholder Theory.............................................................................13
Conclusion................................................................................................................................13
Reference..................................................................................................................................14
Appendix..................................................................................................................................15
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To,
The Directors,
Telstra Corporation Limited.
Dear Sir/Madam,
The current report is developed on the subject of Telstra’s corporate governance and also
business responsibility. The corporate governance practices are developed in the business
organisations for the direction delivering and controlling mechanism (Wintoki et al., 2012).
The growth and the profitability of the company are highly impacted by the corporate
governance activity of the business. The corporate governance is not a uniform approach of
the businesses and varied because of different factors like the ownership structure of the
business, economic and banking system of the region, corporate structure, and capital market
structure, circumstances of the business, market completion so on and so forth (Tricker and
Tricker, 2015). In Australia the ASX guidelines of corporate governance is one approach of
corporate governance process simplification. In the current report of Telstra’s corporate
governance the eight principle of corporate governance would be evaluated on the basis of
the company’s published approached for corporate governance. The analysis would try to
understand how those principles are followed in the business and Telstra’s position as strong,
weak or semi strong corporate governance following organisation.
Organisation declared approach of corporate governance
Telstra is focused in their corporate governance activity. The organisation wants to deliver
the accountability and transparency through their operational approach to the different
stakeholder especially the shareholders. This approach is essential for the long term
sustainability and performance of the business (Tricker and Tricker, 2015). Telstra in its
entirety follows the corporate governance recommendation and principle developed by ASX.
At the time of development of their corporate governance approach the organisation conducts
proper deliberation on the regulation, different expectations and market principles
(Telstra.com.au, 2018). Considering all of these principles Telstra follows the following
communicational approach in developing the corporate governance framework to be followed
in the organisational activity.
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Telstra’s corporate governance framework approach
As their first priority Telstra communicates with their shareholder in a timely, clear and open
or transparent approach. The next approach is the development of board which would have
the independence, diversity, experience and skilled personnel to be most effective for the
corporate governance (Telstra.com.au, 2018). The structure of the Board committee is
developed in such a way which suites Telstra’s needs. The organisation also develops focused
frameworks for the accountability, better decision making process and appropriate delegation.
The assurance and management of risk is done through a robust systemic approach in the
organisation.
Most of these processes are developed on the basis of the explicit guidelines of ASX
guidelines. Then there is some implicit aspect of the corporate governance that is followed by
Telstra’s value and purpose in their operation (Wintoki et al., 2012). As part of their core
value the organisation follows the approach of proper care showing, better and coordinated
working approach, proper delivery based working approach, applying simple approach to a
complex processes and also follow courageous steps. These value based working approach is
there to influence the wilfully accepting responsibility, exercising choice, following humility,
learn continuously and have courage to change for better (Telstra.com.au, 2018).
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Evaluation of Telstra’s corporate governance on the basis of eight principle
of ASX
In this section of the report the analysis of the corporate governance of Telstra is done
through evaluating the company on the basis of the ASX eight principle for the corporate
governance and its recommendations.
Over sighting and management related solid foundation
The 1st principle state that listed organisation must properly develop and disclose the
responsibility and role for the management and board (asx.com.au, 2014). This would also
include the evaluation and monitoring approach of their performance.
In this context the corporate governance statement of Telstra’s operation clearly defines the
responsibility of the board and states that the board would have the business management
responsibility and their accountability lies to the shareholders. The next responsibility of the
board is approving, monitoring and assessing performance against the corporate plan and the
strategy of the business. The appointment, remuneration and performance assessment of the
CEO, senior management is also the responsibility of the board. In their working process the
board would work for the risk and financial management through financial position
overseeing, monitoring internal control and audit activity and system of reporting, external
audit activity overseeing, risk reviewing and its material impact assessment, monitoring risk
management framework. At the governance, diversity and compliance section of their
responsibility, the Board would influence and monitor organisational culture and ethics,
framework for corporate governance (as mentioned earlier), legal compliance. In this part of
responsibility the role of the board would extend to monitoring and overseeing the workplace
health & safety, the sustainability, diversity objectives, shareholder communication. The
Board through the exercise of their delegation authority would rest the responsibility of the
business day to day work on the CEO of the business.
In this principle the first recommendation of ASX for this principle is the establishing and
reserving proper function for the board and also delegate functions to senior management
(asx.com.au, 2014). This recommendation is met in Telstra’s corporate governance. The
second recommendation of senior management’s performance evaluation is also done by the
company and in their annual report for 2018 the ‘remuneration report’ provides the details of
this matter. The third recommendation is the reporting principle guide. The corporate
governance report of the organisation mentions the responsibility of reporting principle but
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does not clearly disclose the principles. Last recommendation is fulfilled as the corporate
governance report of Telstra reports requirements of this principle at the end of the report in
table format.
Board structure for the value addition
The next principle takes about the effective commitment, size and composition of the board
for proper discharging of the duty and responsibility of the board member’s (asx.com.au,
2014). Telstra’s approach is to develop proper expertise, experience, skill and diversity for
discharging the roles and responsibility properly. The selection of the board member is done
through the following criteria based table. The Charter for ‘Nomination Committee’ is the
developed framework in the organisation for the board composition and size development.
There is proper approach for the determination of the renewal and tenure of the board
member. The board and executive firm for the searching of the director is appointed. In
Telstra the non executive directors are all independent nature.
[Source: Telstra.com.au, 2018]
The first recommendation of this principle says the majority directors must be independent
and that is followed in Telstra. Similarly the chairman is also the independent director. The
third recommendation is also followed as the CEO and the board chairman is two different
person (asx.com.au, 2014). The nomination committee fulfils the fourth recommendation.
The performance evaluation process of the board and the committees are mentioned in the
fifth recommendation and that found mention in the corporate governance reports. In the
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2018 a structured discussion approach, review meeting of one to one types and performance
review outcome discussion are some of the new process inclusion (Telstra.com.au, 2018).
Last recommendation is fulfilled as the corporate governance report of Telstra reports
requirements of this principle at the end of the report in table format.
Responsible and ethical acting
In this principle approach the organisation should follow proper responsible and ethical
decision making approach. The responsible and ethical working approach of Telstra has
already been explained in the prevision section of this report through the organisational
culture and value positions. The same is gain represented through the graphical representation
below.
[Source: Telstra.com.au, 2018]
The diagrammatic representation of the organisational working principle is also shown
below.
[Source: Telstra.com.au, 2018]
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Apart from these the ethical working approach of the organisation also follows proper
wellbeing, health and safety approach, inclusion and diversity in work place, anti bulling and
discriminatory processes, privacy policy, continuous disclosure, reduction of conflict of
interest, approach for the anti corruption and bribery, social media policy, security trading
policy, approach to sustainability, undertaking of structural separation, policy for whistle
blowing (Telstra.com.au, 2018).
All of the above approach fulfils the first recommendation of this principle by providing
proper established code for conducting in the organisation (Telstra.com.au, 2018). The
development of the diversity policy fulfilled the second recommendation. The organisation
also provides the statistics for gender diversity as per the third and fourth recommendation
(shown below). The proper develop reporting format for this principle helps the organisation
to achieve the fifth recommendation.
[Source: Telstra.com.au, 2018]
Corporate reporting integrity safeguarding
This principle asks the organisation to safeguard and independently verify the organisation’s
financial reporting integrity (asx.com.au, 2014). The director report in the annual report of
Telstra provides the proper approach followed for the proper financial reporting. As per the
first recommendation of this principle Telstra developed an audit committee. The
committee’s responsibility and role, focusing area, composition, consultation and
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membership is clearly defined in the corporate governance report. Therefore the second
recommendation of proper structuring of the audit committee is also followed in Telstra. The
audit committee must have the charter as per the fourth principle and Telstra also have
developed the charter approved by the company board. The fourth recommendation of this
principle is also followed by proper developed reporting format for this principle.
Balanced and timely disclosure
Company related all the matter related to material aspect must be disclosed balanced and
timely manner as per this principle (asx.com.au, 2014). In this principle the ASX listing
based disclosure rule is followed by Telstra to provide the information in different format.
The senior executive through their proper role and responsibility fulfils this responsibility.
The corporate governance framework of Telstra stated that timely, clear and open
communication with the stakeholder is one of their adopted approaches. a well managed and
developed corporate governance report and annual report is developed by the Telstra. A
proper disclosure policy is not visible in the corporate governance report of the company.
Security holder’s right respecting
The shareholder’s right must be respected and the organisation must also undertake activity
to facilitate the shareholder’s right (asx.com.au, 2014). One of the important right exercising
approaches is AGM of the company and there the Telstra facilitate the shareholder in
participating meeting and also voting process. To help the shareholder in exercising their
voting rights the organisational developed ‘LinkVoteApp’ to be used from the mobile
platform (Telstra.com.au, 2018). The electronic communication is also used to facilitate the
communication process. The investor briefing approach is followed to provide the investors
relevant information brief of the company’s strategy or vision in 2017. In 2018 this process is
followed to provide briefing about the T22 strategy (Telstra.com.au, 2018). Then important
results or events are provides to the shareholder through the Webcasting approach. Therefore
the organisation follows proper policy and approach to communicate and encouraging
shareholder with the business and that fulfilled the two recommendations of this section.
Recognition and management of risk
This principle of risk management and risk over sighting is to be followed by developing
proper system and internal control approach (asx.com.au, 2014). The ISO 31000:2018
framework is followed to develop this risk management process in the organisation
(Telstra.com.au, 2018). in this risk management process the first line of defence is the risk
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management based team support for the operational management and other business
stakeholders. The second line is consisting of the function of oversight for the second line
type that is the environment or H&S functions along with the ‘chief risk officer’. The internal
audit function is the third line of defence here.
[Source: Telstra.com.au, 2018]
The above policy and structure based risk management and over sighting approach fulfilled
the first recommendation of this principle. The internal audit provides the proper information
to the management and the board of Telstra. This is also an important approach for the
internal control of risk management in the organisation. This procedure fulfils the
requirements of the second recommendation of this principle. The CE and the CFO of Telstra
declares in their half yearly and full financial report that the report is properly maintained,
proper accounting process is followed, sound internal control and risk management is the
based for the opinion expressed in the report (Telstra.com.au, 2018). This approach is as per
the third recommendation of this principle. The financial reporting approach is properly
disclosed by the company to fulfil the last recommendation.
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Responsible and fair remuneration
The composition and level of remuneration justification is provided as per this principle in
relation with the performance (asx.com.au, 2014). Considering this the Telstra board has
constructed a committee for remuneration to follow the first recommendation. All the
directors of non executive nature are independent in the organisation and that help in
fulfilling the criteria of first recommendation. The remuneration report in the annual report
provides the details of the remuneration of the executive director, non executive directors and
senior executive as per the third recommendation. In addition to all of these Telstra also
responsibly address the gender pay gap through their remuneration policy. By proving the
proper information related to this principle Telstra fulfils the lasts recommendation of this
principle.
Theoretical analysis
Analysing through Agency Theory
This theory is useful to understand the relationship of the principle and agent of the business.
Here principle is the shareholder and the agents are the management of the business (Raelin
and Bondy, 2013). Without being motivated to self interest the agent would represent the
interest of the principle. The corporate governance report of Telstra at the beginning clearly
stated that the directors would represent the shareholders. This clearly defined approach helps
in the proper serving of principle’s interest by the agent. The further roles and responsibility
development for the directors in their corporate governance policy would help to maintain
proper relationship in this regard (Filatotchev and Wright, 2011). But as per this theory the
principle and agent problem comes when the agent agents own interest gets priority and the
principle’s interest is not followed. This could lead to disagreement, miscommunication and
situation of conflict. But in the corporate governance report of Telstra the proper approach of
the director’s selection to termination to re-election, their remuneration, performance
appraisal is discussed. This would help the shareholder of have proper information about the
directors would and proper remuneration and incentives would motivate the directors to
represent the interest of the shareholders (Filatotchev and Wright, 2011). Then timely, clear
and fact based disclosure of information and shareholder’s right exercising process described
in the Telstra’s report would improve control of the shareholder (Raelin and Bondy, 2013).
The proper following of the ASX regulation for the corporate governance is also an important
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approach in reducing this conflicting situation. Therefore as per this theoretical approach the
corporate governance record would come under the strong regime of corporate governance.
Analysing through Stakeholder Theory
As per this theory the business organisation has different stakeholder who are directly or
indirectly related to the business or impacted by the business. In the corporate governance
process the senior management of the business needs to consider the different stakeholder’s
interest (Spitzeck and Hansen, 2010). There could be conflicting interest of different
stakeholder and that should also be mitigated by the senior manage. The internal stakeholder
of the organisation is the senior management and the employee whereas the other
stakeholders are the external stakeholder (Garvare and Johansson, 2010). The engagement of
the stakeholder with the business is based on their personal interest. As per the stakeholder
theory the management must follow the procedures to responsibly manage the interest of
different stakeholders. In the current discussion the approach of Telstra shows that they have
followed proper procedure to maintain the interest of different stakeholder. The ethical
approach of Telstra’s operation through their purpose of value defined approach would
safeguard the interest of the employee, shareholders, wider community, and supplier and so
on (Garvare and Johansson, 2010). The organisation has followed the proper legal procedure
like the ASX guidelines to maintain through corporate governance process and that would
satisfy the interest of the government. Extremely methodical and proper procedure based
corporate governance approach of Telstra as discussed in the earlier sector would be able to
safeguard the interest of different stakeholder (Spitzeck and Hansen, 2010).
Conclusion
The current report has been able to show the procedure and policy developed and maintained
by Telstra in their operation. In their declaration of the corporate governance process a proper
following of the ‘eight (8) ASX Corporate Governance Best practice Principles, Guidelines
and Recommendations’ is visible. In addition to that they have maintained further processes
which bring further balancing approach of operation in ethical manner. Considering all of
these it can be said that the Corporate Governance practices of Telstra is strong in nature.
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Reference
asx.com.au. (2014). Corporate Governance Principles and Recommendations. [online]
Available at: https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-
recommendations-3rd-edn.pdf [Accessed 10 Sep. 2018].
Blair, M. M., and Roe, M. J. (Eds.). (2010). Employees and corporate governance. Brookings
Institution Press.
Filatotchev, I., and Wright, M. (2011). Agency perspectives on corporate governance of
multinational enterprises. Journal of Management Studies, 48(2), 471-486.
Garvare, R., and Johansson, P. (2010). Management for sustainability–a stakeholder
theory. Total quality management, 21(7), 737-744.
Raelin, J. D., and Bondy, K. (2013). Putting the good back in good corporate governance:
The presence and problems of double‐layered agency theory. Corporate Governance: An
International Review, 21(5), 420-435.
Spitzeck, H., and Hansen, E. G. (2010). Stakeholder governance: how stakeholders influence
corporate decision making. Corporate Governance: The international journal of business in
society, 10(4), 378-391.
Telstra.com.au. (2018). Governance at Telstra 2018 Corporate Governance Statement.
[online] Available at: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf
%20F/2018-Corporate-Governance-Statement.pdf [Accessed 10 Sep. 2018].
Telstra.com.au. (2018). Telstra - Purpose & values - Our company. [online] Available at:
https://www.telstra.com.au/aboutus/our-company/present/purpose-values [Accessed 10 Sep.
2018].
Tricker, R. B., and Tricker, R. I. (2015). Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.
Wintoki, M. B., Linck, J. S., and Netter, J. M. (2012). Endogeneity and the dynamics of
internal corporate governance. Journal of Financial Economics, 105(3), 581-606.
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Appendix
Prompt 1 This assignment has played a vital role in helping to enhance my knowledge
and understanding about the 8 ASX Corporate Governance best practices and
how it is helping the business establishments in Australia to conduct their
business operations in a socially responsible and ethical manner. The ASX
Corporate Governance best practices makes the Australian companies aware
of their duties and obligations towards their stakeholders and the larger
society and as a result the companies are able to function with greater
transparency and accountability while creating wealth for their investors.
Prompt 2 This assignment has helped me to realise how the corporate governance
practices are playing a crucial role in ensuring the smooth business operations
of an organisation in Australia. I have understood how Telstra has been able
to create a solid foundation for their management and oversight which is
enabling the organisation to act more ethically and responsibly. This
assignment has shed vital light on how the management board at Telstra has
been able to create greater value for their shareholders by ensuring greater
accountability in the process of corporate reporting and auditing process and
how this has helped Telstra to enhance their brand image and reputation in the
market.
Prompt 3 Before this assignment I was really unaware about the importance of the
corporate governance legislations and I only had limited understanding about
the corporate governance practices at Telstra. However, this assignment has
really changed my perceptions towards corporate governance legislations. I
have been able to gather detailed knowledge and understanding about the
importance of corporate governance legislations in protecting the rights and
interests of the investors and how it plays a vital role in helping their business
establishments understand their duties and obligations towards their
shareholders.
Prompt 4 This assignment has played a vital role in helping me to understand how the
process of cognitive moral development plays a crucial role in the modern
day business decision making at Telstra. I have understood how the different
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aspects of Cognitive Moral Development theory promotes ethical and moral
business decision making which helps Telstra to satisfy the interest of the
stakeholders.
Prompt 5 During this assignment I have utilised a wide variety of sources to gather the
information that has been utilised and incorporated in this assignment. The
online web resources has played a very important role in helping me find
accurate and pertaining information about the ASX Corporate Governance
best practices and how they are playing a vital role in promoting ethical
business practices. The knowledge and understanding gained from this
assignment would really help me in my future professional career and I hope
to seriously implement by enabling me to ensure my future growth and
development at my respective workplace.
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