A Team Production Theory Of Corporate Law Essay

Question:

Discuss About The A Team Production Theory Of Corporate Law.

Answer:

Introduction:

The current report is based on analysing and discussing operational functions of Nine Entertainment Co Holdings. The report would outline the industry in which the company operates, its primary activities and current performance. A detail outline of board of directors including the name, age, educations, career history and other relevant details would be provided. An evaluation of the composition of the board and board expertise of Nine Entertainment Co Holdings would be provided. Emphasis would be paid on the investment and financial decision made by the NEC Ltd throughout the year. Furthermore, the report would cover the corporate governance of Nine Entertainment Col Ltd and recommendations would be provided concerning the ASX Corporate Governance Council.

The study would cover the external audit functions of Nine Entertainment Co Holdings with key measures taken by the company in making sure that the business operations are carried on with ethical means. An identification of the top five investors for NEC would be identified and comment on the ownership stake in the company would be presented. The analysis of financial statement through relevant ratios would be covered in the study as well.

Brief Company Overview:

Nine Entertainment Co Holdings Ltd is regarded as the publicly listed Australian media organization. Initially the company is the 50/50 joint venture with the consolidated media holdings (Nineentertainmentco.com.au 2018). The strategy of the company is to establish a great content, to distribute it widely and indulge in audience or advertisers. Since Australia is the home of the most trusted and loved brands ranging from news, lifestyle, sports and entertainment. The company takes pride in creating the finest content that is accessed by the consumers when and how they want, while celebrating its ability to provide the shared experiences among the audience.

The business functions of the company are engaged in the operations of four divisions, free to air television, digital publishing, on demand video and production of content. The company has the long standing strategic relations with the Microsoft, for selling their suite of advertisement products while leveraging their world-leading technology data insight, innovations together with the data relations with some Australia’s leading technology providers such as Red Planet and Data Republics (Nineentertainmentco.com.au 2018). The wide investment includes 50% interest in Stan and interest in Rate City with ASX-Listed financial service company in Yellow Brick Road.

Board of Directors:

Name

Age

Gender

Education

Career History

Remuneration for FY 2015 ($):

Peter Costello

58

Male

Bachelor of Arts and Bachelor of LLB Hons and Doctorate of Laws LLB (Hons)

Mr Costello was the member of the Audit and Risk management committee. Mr Costello served as the member of the House of Representative. Before entering into the parliament Mr Costello was the barrister

$850,000

Hugh Marks

55

Male

Bachelor of Commerce and Bachelor of Laws.

Mr Marks has the 20 years’ experience in content productions and broad casting and Pay TV. Prior to joining the board Mr Marks was the authority member of Australian Communications and Media Authority for more than two years.

$1,400,000

David Gyngell

52

Male

Bachelors in Marketing and Communications

Mr Gyngell was the chief executive officer for the company and earlier served as the CEO of the nine network. Mr Gyngell was also the director of the International Management Group.

$869,307

Janette Kendall

45

Female

Bachelor of Business and Marketing

Ms Kendall was appointed as the Non-Executive Director of the Board and was the Member of the People and Remuneration Committee. Ms Kendall worked in wide range of industries such as marketing and technologies, advertisement and arts.

$730,000

Samantha Lewis

38

Female

Bachelor of Arts (Hons)

Ms Lewis has more than 20 years of experience in Touche Tehmatsu including 14 years as the partner. She also worked as the auditor in several number of listed companies in Australia. Ms Lewis worked in Deloitte and provided accounting advice as well as due Diligence.

$425,000

Catherine West

35

Female

Bachelors of Laws (Hons) and Bachelor of Economics.

Ms West has more than 20 years of experience as the business and legal affairs in the media industry both in the Australia and UK.

$434,654

During the year nine reviewed and amended the charter of board and the charter relating to the People and Remuneration Committee as this would enable the board to be responsible for considering the nominations of the new directors. The change in responsibilities is reflected into the corporate governance of the nine entertainment (Arjoon 2017). The corporate governance statement of the Nine Entertainment Ltd reflects the degree to which the company has adhered with the ASX Corporate Governance principles and the corporate governance best practices. The board of directors of Nine Entertainment Ltd plays an important part in discharge of their responsibilities.

For instance, committees such as audit, risks management, obedience, nominations, people policy and sustainability committees. Each and every committee is chaired independently to carry-out the functions of attaining the overall organizational goals (Nineentertainmentco.com.au 2018). The board members represent the organizations by acting as the ambassadors since the charter of the company demands the members to be loyal and remain committed to the organizational functions (Aguilera et al. 2015). These board of directors are required to report directly to the shareholders and held accountable for organization’s growth and development.

Investment Decision:

Over the period of last twelve months Nine Digital has strengthened its position in the certain number of targeted customer facing verticals with investment in Nine now, Honey and Car Advice. The current restructuring of the sales team has also commenced to render the positive restructuring of the sales momentum and would continue to remain focussed in the year ahead (Soltani and Maupetit 2015). The financial report of Nine Entertainment has been prepared in accordance with the historical cost except on the circumstances of the derivative financial instruments and investments in the listed equity firms that are measured based on the fair value.

The makes investments in the associates that are accounted based on the method of equity. Investment in the listed securities are based on the non-derivative financial assets, principally in the equity shares that meets the concept of equity instrument (Nineentertainmentco.com.au 2018). The company determines the fair value of the investment that are traded actively in the organized financial markets that are determined by referring to the quoted market prices upon the closure of the business on the reporting date (Crane and Matten 2016). The company has made investment in the associates and joint ventures and are accounted in terms of the equity method of accounting in the consolidated financial statements.

Corporate Governance:

S.NO

Principle

Recommendations

1

Laying down the solid foundations for management and oversight

Listed entities must establish and disclosing the roles and responsibilities of the management and how their performance assessment is made (ArAs 2016).

2

Structuring the board to add value

To efficiently discharge their responsibilities, the board of directors of the companies must be of the appropriate size and skills.

3

Acting responsibly and ethically

Companies listed under the ASX are required to discharge their duties ethically and responsibilities (Garc?a-S?nchez et al. 2015).

4

Safeguarding the integrity of corporate reporting

The listed companies must have the formal and the rigorous procedure that independently protects the integrity of corporate reporting.

5

Making disclosure in timely manner

The companies that are listed in the ASX are under obligations of making timely disclosure of all the matters relating to the price of securities and shares (Davies 2016).

6

Respecting the rights of the shareholders

Companies listed under the ASX are required to be the security holders by offering them with the correct information’s and enabling the shareholders to exercise their rights.

7

Identifying and managing risks

Companies listed under ASX should create a strong risk management framework and reviewing periodically the effectiveness of the framework.

8

Remunerating fairly and responsibly

Companies that are listed under the ASX are required to pay the directors remuneration fairly in order to maintain the motivation of the higher quality management.

Auditors:

Earnest and Young was the independent auditor for the Nine Entertainment Ltd for the financial year ended 2017. The Earnest and Young have conducted audit for the company and its subsidiaries that consist of the consolidated statement of financial position. The auditor statement stated that the financial report of the company and its group is in adherence with the “Corporation Act 2001” (Abbott et al. 2016). The financial report of Nine entertainment Co Ltd provided the true and fair view of the consolidated financial performance during the year ended. Furthermore, the company complies with the Australian Accounting Standard and the “Corporations Regulations Act 2001”.

Key audit matters of the company refers to the professional judgement that were most significant in its audit of the financial report in the present year. The auditor of the Nine Entertainment Co Ltd was independent and in accordance with the auditor requirement set down under the “Corporation Act 2001” (Lenz and Hahn 2015). The total amount of the auditor’s remuneration paid to the auditors stands $1,355,031 (Nineentertainmentco.com.au 2018). The audit functions carried out by the Earnest and Young includes the performance process that is designed to respond to its assessment of risks of materials misstatement stated in the financial report.

Business Ethics and Ethical Judgements:

Being the holder of the commercial television licence Nine is bounded by the Commercial Television Code of Practice that prohibits certain forms of programs and advertisements. This requires classifying the program and broadcasting appropriate slots of time by putting limits on the extent of advertisement and other non-programming materials that can be broadcasted (Pizzini, Lin and Ziegenfuss 2014). The company has created certain number policies that supports reward and governance along with the code of conduct. The company has implemented the policies to promote the ethical behaviour and responsible decision making. The company adheres with the ethical requirement of the Accounting Profession and Ethical Standards of APES 110 code of ethics for the Professional Accountants (Mat Zain, Zaman and Mohamed 2015). The code of ethics of the company is relevant to its financial report and fulfils other ethical responsibilities in compliance with the code.

Investors and Significant Ownership of Stakes:

The list of top five investors for the Nine Entertainment Ltd are stated below;

Names of Shareholders

Total Units

Percentage of Total Shares

HSBC Custody Nominees (Australia) Ltd

285,508,984

32.79%

JP Morgan Nominees Australia Ltd

125,942,531

14.46%

Citicorp Nominees Pty Ltd

122,943,851

14.12%

Birketu Pty Ltd

99,677,718

11.45%

National Nominees Ltd

57,743,485

6.63%

As evident from the above stated tabular representation it can be stated that HSBC Custody Nominees Australia Ltd holds significant amount of shares. The total share holdings for HSBC Custody Nominees Australia Ltd stands 32.79%. While JP Morgan Nominees Australia Ltd total shareholding stands 125,942,531 with total percentage of shareholdings stands 14.46% (Nineentertainmentco.com.au 2018). Citicorp Morgan Nominees Australia Ltd stands 122,943,851 units and total percentage of shareholdings stands at 14.12%. Birketu Pty Ltd stands fourth in the line of the major shareholdings as the total shareholdings stands 99,677,718 with total proportion of shareholdings stands 11.45%. Finally, the National Nominees Limited stands fifth in the line total shareholder as it holds 57,743,485 of the total shareholdings with 6.63% of the Nine Entertainment total shareholdings.

Analysis of Financial Statement:

Under the liquidity ratio current ratio is computed for Nine Entertainment Ltd. During the year ended 2016 and 2017 the current ratio for Nine Entertainment Ltd stands 1.36 and 1.90 respectively. While the quick ratio for the company during the year 2016 stood 0.81 which subsequently increased to 1.03. The primary reason for increase in liquidity ratio for 2017 is because NEC reported an increase in free cash flow with cash and cash equivalent increased to $66,700.

Asset Management Efficiency:

The asset management ratio makes an attempt to assess the success of the firm in administering its assets to derive sales. For NEC the asset management ratio for 2016 stands 0.55 while in 2017 it increased to 0.61. The rise in ratio signifies that the NEC has improved the efficiency of its small business in managing its assets to generate its sales. Additionally, the total asset turnover ratio stands 0.60 for 2016 while in 2017 stands 0.65. The total asset turnover ratio has improved in the subsequent year primarily because of the increase in the total assets.

Capital Structure:

The capital structure ratio refers to the mixture of the organizations long standing debt as well as the short term debt, common equity and preferred equity. As evident the debt ratio for NEC is computed to measure the extent of company’s liquidity. The debt ratio for the company during 2016 stood 0.43 while in the subsequent year of 2017 the debt ratio for the firm increased to 0.49. The rise in debt ratio is primary because of rise in debt to 224.5 million as while in 2016 it stood 177.6 million. The debt equity ratio on the other hand is computed for NEC to measure the proportion of debt it uses to finance its assets comparative to the sum of shareholder’s equity. The debt to equity ratio for NEC during the year 2016 stands 0.74 while in 2017 it stands 0.95. This signifies that a larger proportion of shareholder’s fund is used to finance the assets of NEC.

Profitability Ratios:

Profitability ratios represents the class of financial metrics that is used to determine the business ability of generating earnings in comparison to its expenditure. The net profit ratio for 2016 stands 0.25 while in 2017 the ratio stands negatively at -0.16. The primary reason for decline in net profit ratio is because of fall in sales revenue by 4%. Simultaneously, the return on assets for NEC stands 0.14 in 2016 while in 2017 the return on assets for the company stands negatively at -0.10. The lower return on assets is due to the decline in the profit margin as well as the fall in the average total assets.

Market Value Ratios:

The price earnings ratios are employed to assess the present share price of publicly-held organizations stock. The price earnings share of NEC stands 0.08 in 2016 while in 2017 it stands 0.10. The increase in price earnings ratio is primarily because rise in the earnings per share by 4%. Similarly, the dividend pay-out ratio for NEC during 2016 stood 0.88 while in the subsequent year it declined to 0.67 primarily because of 20.8% variance in NPAT.

Cash Management Ratio:

The cash management ratio during the year ended 2016 stood 283.10 while in the subsequent year of 2017 it stood -18.65 similarly operating cash flow ratio computed stood 0.012 for 2016 while in 2017 it stood 0.009. This represents that operating cash flow is sufficient for NEC to pay-off its current debts.

Conclusion:

On a conclusive note it can be stated that the NEC in accordance with the ASX code of principles has adhered with the principles. Additionally, the report provides that management and operations of NEC creates a direct influence on the composition of major shareholders. Furthermore, the audit functions are attained through the independent auditors in order to evaluate and express the opinions of the fair presentation of the financial report.

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