Accounting In Organizations And Society: Alumina Limited Essay

Question:

Discuss about the Accounting in Organizations and Society for Alumina Limited.

Answer:

Introduction

The company is a leading Australian firm listed on the ASX (Australian Securities Exchange) as well as (OTC) Over-the-Counter market in the United States. The company was created on eleventh December 2002 when WMC Limited’s alumina assets were demerged from the copper, nickel and fertilizer businesses (WMC Resources Limited). The demerger has allowed the investors to benefit straight from the full value of alumina as well as aluminium business.

The main strategy of Alumina Limited is the global investment in bauxite mining, alumina refining as well as selected aluminium smelting operations via its forty percent ownership of the AWAC (Alcoa World Alumina & Chemicals), the global leading alumina business. Alcoa, Alumina Limited’s partner owns the rest of the sixty percent of AWAC and remains the manager. The Company remains among the top 100 Australian companies and it delivers strong returns, consistent performance alongside ongoing growth.

Organizational Structure

Diagram:

Organizational Structure

Alumina Limited uses a limited liability company structure. It is one of the newest organizational structures for the businesses. It is considered a hybrid since limited liability companies can be formed as corporations or partnerships as in the case of Alumina Limited that partners with Alcoa. This structure provide the company owners, referred here as members, the protection from the liability alongside additional obligations identical to a corporation. It is set up in a manner that is manageable as a partnership (Burke 2017).

Degree of Alumina Limited Decentralization

A higher degree of decentralization is witnessed in Alumina Company. Due to its partnership nature, there is a clear decentralization between the partners. Moreover, the company business strategy that focus on global investment in bauxite mining, alumina refining as well as selected aluminium smelting operations leaves the company with no option but to decentralize its operations in many countries but the ownership remains for the company as seen in the diagram above.

The higher degree of decentralization is permitted due to the existence of many more decision required to be made at lower levels, and the fact that more decision connected to almost all functional areas are required to be made at lower levels (Jaques 2017). The degree of decentralization in observed in different areas including hiring of workers, employee promotion, capital equipment acquisition, raw material procurement, sales order acceptance, pay/wages increase and travel expenses approval. Because Alumina has a great dispersion of organizational units where many units are scattered over an enormous area, decentralization has been the panacea for better results (Tai and Chuang 2014).

Types of Responsibilities Centers

Alumina Limited uses the following four types of responsibility centers in its organizational structure: cost center, revenue center, profit center and investment center. A responsibility center describes an organizational unit that a manager heads and being responsible for both results and activities. Such information on accounting, revenue and cost must be collated and reported on by these centers.

Alumina Limited classifies its responsibility center by both scope of responsibility assigned alongside decision-making authority accorded to specific managers. In Alumina Limited, the cost center describes a unit within an organization whereby the managers are held accountable for the incurred cost but not for revenues. The manager responsibility in the cost center is confined to cost. In Alumina Limited, the service and manufacturing departments are categorized as cost centers.

In Alumina Limited, the revenue center describes a segment with a primary responsibility of sales revenue generation. The manager has no control over cost, investment in assets, however, he/she has control over certain expense of marketing department. The manager evaluates the performance of this center through the comparison of actual revenue against budgeted revenue, as well as actual marketing expense against budgeted marketing expenses. Examples of revenue centers in Alumina Limited include marketing manager of product line and individual sales representative (Kim, Park and Ryu 2017).

In Alumina Limited, the investment center describes a segment responsible for investment and profit. The manager controls revenue, expenses as well as invested amount in this center. Manager further formulates credit policy with straight influence on debt collection alongside inventory policy that determines investment in inventory. The manager has additional authority and responsibility accorded to either profit or cost centers. The manager controls costs and revenues in addition to investment responsibility.

In Alumina Limited, a profit center describes that segment whose manager has the responsibility for costs and revenues. The manager is accorded both authority and responsibility to make decision affecting both revenues and cost and hence profits for division or department. The profit center’s main purpose is to earn profit as managers do aim at product production and marketing. The profit center manager evaluates the performance on the basis of whether budgeted profit is achieved. Alumina Limited has a division that produces and markets products that make up profit center and the divisional manager determines the selling price, production policies and marketing programmes.

Literature Review

Environmental Responsibility

The literature review focus on the themes social responsibility and environmental responsibility by examining them in terms of management accounting in Alumina Limited. The examination and discussion of these two themes is done based on their meanings to the industry that Alumina operates and a conclusion presented discussing how the two themes impact Alumina Limited. The company acknowledges that genuine engagement of community and building of relationship remains significant to AWAC’s forthcoming business success. The joint venture (AWAC) receives both operational and growth license from local communities, associated representatives as well as broader society.

It is further the source of one of AWAC’s greatest significant stakeholder-its 5,146.0 employees who undertake the operations globally. The safety as well as wellbeing of the workers at the work remains a fundamental human right or entitlements as is the ones to collectively bargain as well as freely associate. Alcoa is working to strengthen the culture which promotes safety as a matter of priority concern in every work activity as well as supports worker dignity alongside labor rights globally.

Alumina Limited has a strong belief that the business sustainability remains reliant on the integration into business plan of, relevant as well as meaningful sustainability objectives that, in addition to other things, culminate in sensible management of environment. The company has emphasized this by the resource intensive business of the alumina refining as well as smelting. The resources-the AWAC’s chief business of producing alumina (raw material utilized in production of aluminium) calls for bauxite mining, the ore containing alumina from ecologically sensitive forested areas in the Western Australia alongside Amazon in Brazil. Accordingly, a strong sustainability emphasis is put on management of land, rehabilitation of land as well as biodiversity alongside water management (Korschun, Bhattacharya and Swain 2014)

The energy- bauxite ore refinery into alumina and subsequent smelting of aluminium needs substantial energy resources leading to substantial stewardship energy efficiency alongside emission management issues. The latest operating mine of AWAC at Juruti in Brazil began on September 2009 arising from in-depth research alongside environmental impact assessment before licensing. The assessment undertaken by Alumina Limited include but not limited to surface and underground water monitoring, mining on freshwater impacts, fishing, local farming, as well as impact on territorial alongside aquatic flora besides fauna (Ruggie 2017).

Alumina Limited clearly understands the fundamental connection between long-term profitability as well as the sustainability of AWAC’s operating performance. Both actions and decisions arrived at today impact future, environmental, economic, and social outcomes, and determine the long term profitability alongside returns for its shareholders. To undertake its social responsibility, the Alumina Limited has adopted an effective sustainability approach. The role of Alumina is to support Alcoa in the management of AWAC for effective achievement of best practice in safety community, environment as well as financial performance via strong, collaborative as well as informed governance (Lee, Cin, and Lee 2016).

Alumina Limited has a strong belief that via the demonstration of effective as well as responsible environmental stewardship, the society shall endure to provide natural resources for production of the alumina as well as aluminium. The operation of AWAC remain fundamentally resource-intensive, therefore, minimizing the end-to-end life cycle influence of alumina as well as aluminium remains essential. In this regard, Alumina Limited focuses its attention on regions with extreme material influence including management of land alongside rehabilitation, water, emissions, and energy.

Alcoa remains an experienced as globally acknowledged environmental manager, with the sophisticated system for monitoring, managing as well as mitigating environmental influences via novel technology as well as emerging operational processes. In the year 2016, there were no key environmental incidents for reporting (El Ghoul, Guedhami, Kim and Park 2014). There were substantial small spillages exceeding twenty liters, nonetheless, none of such spillages culminated in a substantial financial impacts and never constituted a substantial environmental noncompliance be it from Alumina Limited’s activities or the AWAC’s international operation that is potential to trigger substantial harm to environment.

The company engages with its own communities, especially investors alongside financial markets, the major community influence arises via the AWAC operations whereby it remains a neighbor, the economic partner alongside the employer. Nevertheless, the company acknowledges that not each impact from AWAC’s actions/activities remain positive that strengthens the significance of sustainability governance. There was no material non-compliance/fines on human rights/labor ground emanating from either activities of Alumina or via AWAC global operations in 2016.

Performance Measurement System and Rewards

The senior management in the Alumina Limited have performed successfully. The CEO, Mr. Ferraro has effectively performed his responsibility for overall management according to the strategy, policies as well as business process the Board adopted. His substantial experience in resources sector backed by more than thirty years of experience in joint ventures, acquisition, mergers, fund raising as well as regulatory matters crossways a vast array of sectors and countries have accounted to better growth and profitability in the company (Manning 2017).

The chief financial officer, Mr. Chris Thiris BA (Acc) MBA has discharged his responsibility of accounting, treasury, taxation and investor relations effectively. This saves to his vast experience in finance as well as additional management functions acquired via senior roles he has held in some other companies.

The Group Executive Strategy & Development, Andrew Wood-BA LLB GradDipACG FGIA FCIS has successfully performed his responsibility of strategy and business development alongside market analysis, pursuing strategic investments as well as developing industry relationships. His over twenty year’s resource experience in commercial as well as legal roles, primarily at WMC Resource Ltd alongside Sibelco have enabled his success (Cheng, Ioannou and Serafeim 2014).

The performance measures including the effectiveness of the strategy, accounting methods, taxation used and profitability and growth are appropriate in terms of the social and environmental responsibilities. They are consistent with strategies, key success factors as well as the organizational structure already explained in this report. The performance measures effectively align to the themes of social responsibility and environmental responsibility as addressed overhead.

Recommendation and Conclusion

It is recommended that Alumina Limited should adhere to the sustainability rules it has adopted in driving its objectives and strategies in meeting social and environmental responsibilities. Since its business is resource-intensive including energy and resource mining to obtain aluminium, it must do so with the negative impacts of its activities to both social and environmental environments.

References

Burke, W.W., 2017. Organization change: Theory and practice. Sage Publications.

Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), pp.1-23.

El Ghoul, S., Guedhami, O., Kim, H. and Park, K., 2014. Corporate environmental responsibility and the cost of capital: international evidence. Journal of Business Ethics, pp.1-27.

Jaques, E., 2017. Requisite organization: A total system for effective managerial organization and managerial leadership for the 21st century. Routledge.

Kim, H., Park, K. and Ryu, D., 2017. Corporate environmental responsibility: A legal origins perspective. Journal of Business Ethics, 140(3), pp.381-402.

Korschun, D., Bhattacharya, C.B. and Swain, S.D., 2014. Corporate social responsibility, customer orientation, and the job performance of frontline employees. Journal of Marketing, 78(3), pp.20-37.

Lee, K.H., Cin, B.C. and Lee, E.Y., 2016. Environmental responsibility and firm performance: the application of an environmental, social and governance model. Business Strategy and the Environment, 25(1), pp.40-53.

Manning, K., 2017. Organizational theory in higher education. Routledge.

Ruggie, J.G., 2017. Corporate Social Responsibility and the Global Compact1. Business, Capitalism and Corporate Citizenship: A Collection of Seminal Essays.

Tai, F.M. and Chuang, S.H., 2014. Corporate social responsibility. Ibusiness, 6(03), p.117.

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