Analysis Of Commonwealth Bank Essay

Question:

Discuss about the Analysis Of Corporate Governance Of Commonwealth Bank.

Answer:

Introduction

The company that has been selected for the purpose of the analysis is – Commonwealth Bank. The Commonwealth Bank is the Australian based company and has been founded by the government of Australia itself in the year of 1911. Since then it has been regarded as one of big four banks operating in Australia and as of now it has been regarded as the first largest banking company which is providing an integrated financial services to their customers. In the year of 1991, it has been listed on the Australian Stock Exchange and in the year of 1996 it has been privatized by the government. The company is providing various products to their customers including funds management service, insurance investment service, business banking and other share broking products and services. The company has expanded its operations across the globe including Asia, Europe, New Zealand and North America. The major aim of the company is to work for the survival of the company and the best services to the customers. The report has been prepared with reference to the Corporate Governance of the company as mentioned in the Annual Report for the year ending 30th of June 2017. (Commonwealth Bank official website, 2017)

Corporate Governance Disclosures

In the beginning of the Corporate Governance Statement for the year ending 30th June 2017, it has been mentioned that the company has been and is committed to high standards of the good corporate governance and has the framework which details that the company in actual is working for long term sustainability and performance which can in turn enhance the value of the shareholder and other stakeholders of the company.

The company has disclosed the following as per the ASX corporate governance disclosure requirements:

  • The first disclosure that has been made is regarding the shareholder engagement. The company treats the shareholder as the owner of the company and it gives values to any information that is communicated to the shareholder. It is because of this the company has facilitated the two way communication where the shareholder also has the right to share their views in the separate meetings held with them. It has been disclosed that the company has been arranging the meeting on the regular basis as annual general meeting.
  • Second disclosure is regarding the role and responsibilities of the board of directors have been made. The first responsibility is to define the strategy and approve the same. Second responsibility is to monitor the risk framework that has been developed by the company. Third objective is to approve the financial statements of the company on the quarterly and half yearly and yearly basis and ensures that the company has maintained the integrity of the financial information delivered to the shareholders of the company. The other responsibilities that have been disclosed is the approving initiatives which exceeds the authority limits as delegated to the Chief Executive Officer of the company, appointment and selection of the chief executive officer of the company, planning for the remuneration to be paid to the chief executive officer of the company and the succession planning for the major key managerial personnel.
  • Next disclosure that has been made is the information about the board committees. The list of the members with their designation in the various statutory committees has been disclosed like in Nomination Committee, Audit committee, Risk Committee and the Remuneration committee.
  • The next disclosure has been employment terms that has been set out in the employment agreements entered into with the key managerial personnel.
  • The next major disclosure that the company has made is ways to manage the risk identified in the business and the assurance thereof.
  • Thereafter, the ethical practices adopted by the company have been detailed.
  • The last disclosure has been given in relation to the diversity that has been the integral part of the organization. The diversity includes the diversity in leadership and their recognition.

Compliance With The Corporate Governance Principles

ASX Corporate Governance has prescribed the eight essential principles that are required to be followed and duly complied by the listed companies. As per the Corporate Governance Statement of the company for the year ending 30th June 2017, the companies has followed all the below listed eight principles.

  • Governance Structure
  • Structure of the Board and the other committees
  • Appointment procedures of the Directors
  • The duties of the Directors, Remuneration and Performance
  • Governance of Risk and Internal Control
  • Integrity reporting
  • Audit
  • Relationship with the Stakeholders including the shareholders (Council, A.C.G., 2007, Dyck, 2001, Iu, and Batten, 2001 and Tricker and Tricker, 2015)

Reason For Compliance Or Non Compliance With The Corporate Governance Principles

The company has fully complied with the eight principles of the corporate governance. The reason for the said statement if mentioned below:

  • The company has defined the structure of the governance including the board of directors and the key managerial personnel in the corporate governance statement. It has been mentioned that the Board of directors consists of the majorly independent directors.
  • The structure of the board has also been defined with the names and the composition of different committees. It includes Nomination Committee, Audit committee, Risk Committee and the Remuneration committee.
  • The company has disclosed the procedure for the appointment of the director and its election. It has been mentioned that Director appointed at the must stand for election in the general meeting of the company and shall again stand for re election at every three year of the general meeting of the company.
  • The company has disclosed the duties and role and responsibilities of the directors along with the plan for the payment of the remuneration to the directors of the company.
  • The company has mentioned that the board of directors is required to evaluate the financial performance of the company on regular intervals so as to corroborate that the company provides the financial information with integrity.
  • The company has mentioned and detailed the procedure as to how the company will manage the risk and assure that the risk will be mitigated for future years.
  • The statement contain the statement that defines the relationship of the company with the stakeholders of the company and also the company has mentioned in the beginning of the statement that the company’s central focus is to maximize the shareholder value in long term. It indicates that the company has clearly defined the relationship (Commonwealth bank official website, 2017).

Recommendation And Conclusion

As the annual report of the company and the corporate governance statement details that the company has strictly followed the principles throughout the year, it is recommended that the company shall maintain its internal control system as it is so that the company’s competitor like Wesfarmers Limited will not find it place.

To conclude, the corporate governance plays important role in the survival of the company.

References

Council, A.C.G., 2007. Corporate governance principles and recommendations.

Dyck, A., 2001. Privatization and corporate governance: Principles, evidence, and future challenges. The World Bank Research Observer, 16(1), pp.59-84.

Farrar, J., 2008. Corporate governance: Theories, principles and practice. Oxford University Press.

Iu, J. and Batten, J., 2001. The implementation of OECD corporate governance principles in post-crisis Asia. Journal of Corporate Citizenship, 4(Winter), pp.47-62.

Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.

Commonwealth Bank official website, “Annual Report 2017” available on accessed on 05/09/2017.

Commonwealth Bank official website, “Corporate Governance Statement 2017” available on accessed on 05/09/2017.

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