Corporate Governance And Ethics: The Organizations Functioning Essay

Question:

Describe about the Corporate Governance and Ethics for The Organizations Functioning.

Answer:

Introduction

The organizations functioning in the present world work under complex business strategies and require proper monitoring of all its activities from time to time. The industries require undertaking steps for the development and maintenance of the environment it functions and the society living in the surrounding. There have been several steps initiated by the companies to value and credit the environment and society so that they are satisfied and a peaceful and happy working environment is created.

This report deals with the ethical and corporate social responsibility Origin Energy, an industry functioning in the coal seam gas industry in Queensland and its relationship with its stakeholders. According to the Petroleum and Gas Act 2004, the land owned by the landholders is theirs, but any mineral under the land is the property of the State. Such a statement has created a problem in the minds of the farmers living in the Bowen and Surat basin in Queensland. These lands are thus taken as tenements by the CSG industries and have thus forced the landholders to leave their land. George Bender a farmer holding a large part of the land in Chinchilla and Valencia has denied giving his land to the CSG industries. Such an incident has created a negative CSR and ethical values between the stakeholders and the industries (Tricker 2015).

This study will analyze the ethical questions and stakeholder analysis with respect to George Bender and Origin Energy long with the corporate governance decisions with respect to the ASX 2010 principles. The Corporate social responsibility and performance along with the ethical analysis is also evaluated in the report.

Background and Ethical Question

The background of the study deals with the industries focused in the coal seam gas industries working in the Bowen and Surat basin in Queensland. It is because of the fact that the area is full of methane gas available between the layers of seams of coal. The coal seam gas is used for the creation of liquefied natural gas, which is useful for domestic and commercial use. However, the problem associated with the extraction of these gas are the owners of the land. They are mostly farmers and thus use the land for cultivating purpose. The minerals are lying beneath the land and thus the organizations need to acquire the land in order to dig and extract the gas. The Petroleum and Gas Act 2004 states that the farmers are the owners of the land but the minerals underneath it belong to the Government. The gas available beneath the land in Queensland has thus been given out as tenement to few industries to extract the same. The organizations have thus started obtaining land from the farmers by providing compensation to them. However, George Bender, a farmer holding plots in Chinchilla and Valencia has refused to give out his land to these industries. He feels that the gas extracting procedure will not only have a sentimental effect on him as he had been living there since his birth and many memories lingers around the land but also lead to financial loss as the compensation provided by the industry is not sufficient to value all the infrastructure constructed for so many years. Another factor being that the extraction method will lead to environmental pollution leading to illness to the animals and the people dwelling nearby.

George has been fighting for this cause for a long time and has obstructed every firm coming for land reclamation when most of the other famers had given out their land. However, on 13th October 2014 when he committed suicide because of all the tensions and pressures that he had to face for the past few years. The ethical issues thus arrive in this matter are the organization’s role towards the stakeholders while claiming the land from them. If proper measures and initiations were taken on the part of the firms then the land claiming process would have been smoother. The other question with respect to ethics is the measures taken to protect the environment from the extensive digging and boring of the land in search of coal seam gas (Rao and Tilt 2015). The extraction of these gases generate plenty of wastes in the form of high salted water and other gases like carbon monoxide, carbon dioxide etc, which are affecting both the animals and humans living in the neighborhood. The firms are only concerned about their profit neglecting such ethical values.

Stakeholder Analysis

Every organization has its stakeholders with whom they function their business. Stakeholders are thus groups or individuals with numerous numbers of demands, interests and expectations regarding what the firm should provide to the community. Origin Energy, a CSG industry functioning in Queensland comprises of stakeholders like government, the employees, the society, consumers and the entrepreneur. Origin Energy is primarily concerned with the community and society in this case as the they are not happy with the land reclamation and the process used for the extraction of the gas as it hampers the local environment and hygiene of the society. The other stakeholders in this case are not much of concern for Origin as the government is helping these organizations and the firm looks after the values of the consumers and the employees as they satisfying them will lead to higher sales and production of the gas.

The stakeholders can be categorized according to their importance in the organization. The primary stakeholders are the local farmers and the landholders as they have a crucial impact on the functioning of the business. The success of the business is dependent on the landholders because without their land, the organizations will not be able to perform its production. The consumers are also the primary stakeholder of the firm as the revenue of the firm is dependent on the response of the consumers. The other primary stakeholders include the employees for Origin energy. The secondary stakeholders represent the government, the competitors, trade bodies media etc as they play a special stake in the organization. Origin Energy is primarily concerned with the landholders and mainly George Bender as he has objected from giving his land for boring and digging of gas.

The stake of the stakeholders also needs proper evaluation as the stake depends upon three factors namely power, urgency and legitimacy. Such a typology was developed because attributes towards these things were found. Power refers to the ability to create an effect to get something done. Therefore, power means that the ability of a stakeholder to affect the business. Legitimacy means the appropriateness of a stakeholder to hold a stake in its hand. All the stakeholders like the customers, local community etc show a high degree of legitimacy as they have a direct connection with the organization. Urgency on the other hand means the responsiveness of the stakeholders towards the organization during the time of emergency and immediate attention. In case of Origin energy all the three typologies are present with respect to their stakeholders. But the local communities, which is of primary thought of the company falls under the legitimacy and power typology as they can affect the functions of the business as well as have a direct relation with the organization (Lee. and Fargher 2013).

With respect to the opportunities and challenges with respect to the stakeholders, a firm has a lot of analysis to be made. Both opportunity and challenges are two parts of a coin and the challenges arise from the demand, expectation and threats from the stakeholders. Origin Energy has both the two traits present as they have an opportunity through the government who provides tenement for the lands for extraction. On the other hand, the employees and the consumers are also having a good relation if all their demands and expectations are met accordingly. But the local communities pose a challenge to the firm as they are reluctant to give out their land specially George Bender. The land reclaiming method of Origin Energy is not ideal and the farmers are getting affected and thus it creates a challenge as their opposition can stop the production function of the organization.

Origin Energy holds all the features of the responsibilities like the legal, economic, ethical and philanthropic. It is necessary for the organization to value all the stakeholders according to their expectations. The firm needs to value the landholders ethically and needs to look after their expectations as well unlike forcefully reclaiming lands and affecting the economic and environmental condition of the farmers as well as the nature.

Origin Energy also needs deal with these actions directly through accommodation and negotiations through a variety of strategies so that the farmers don’t feel that they have been cheated. Proper compensation and accommodation for the losses incurred by the landholders will motivate the landholders to leave their land and will thus create a harmonious relationship with the firm (McAllister, McCrea and Lubell 2014).

Corporate Governance Discussion based on ASX 2010 Principles and Recommendations

The principles and recommendations are created to serve proper corporate governance practices for the firms listed in the ASX so that a appropriate governance is created that is according to the expectations of the situations. The council feels that every firm uses different techniques of corporate governance plans depending on various factors like corporate culture, complexity etc. therefore, these principles and recommendations are not compulsory and does not seek to prescribe any governance practice that an organization is listed in ASX. Such principles are applicable to all the firms listed in the ASX regardless of their legal form. There are some changes in the plan if the firm is managed externally. The structure of the principles and the recommendations are created to promote the core principles like establishing a solid foundation for supervision and management (Ferretti, 2016). The structure created thus adds value through the board created to discharge the decisions appropriately. The organization needs to act ethically and responsibly and should protect the corporate reporting of the firm. These principles provide disclosure of the information on time and in balance. The rights of the shareholders need to respected and needs to control and manage the risks pertaining to the business. The remuneration system of the firm needs to be on time so that the employees and the creditors get their payment enabling them to get motivated. Origin Energy thus needs to follow this method and needs to create a good governance structure so that it can function its business without injuring any stakeholders and the environment where it works. The firm thus through a this structure can create a good governance framework so that people like George Bender are satisfied and no one needs to give up their life due to tension and pressure.

Corporate Social Responsibility

Corporate Social Responsibility is a type of self organizing mechanism that integrates the business model. This model ensures that the firm works according to the spirit of law, ethics and the national and international standards. The organizations through this mechanism try to improve the society and thereby create a harmonious relationship with the local community, suppliers and customers. Through this social responsibility, the organizations generate awareness towards conserving the environment through eco-friendly activities.

From this study, it is quite clear that Origin Energy does not have a proper corporate governance framework. This sentence is true because of the fact that the firm first enters into the premises of George Bender with a polite and nice gesture just to do a seismic test on the land. George, being a layman was impressed the way the representative of the firm approached him. But after entering the premises, the organization started showing its true colors and started digging bores and wells to extract gas from the land. After a year later George Bender came to know that the bores were drying up due to extensive use of the land and thus George filed a case which asked Origin Energy to pay remuneration to along with assessing the problem. But the company delayed its assessment and when methane gas started extracting from the land it asked the George to sell the land to them at a negotiable amount. They forcibly tried to hold the land as George did not want to sell the land. Thus, it is seen that the organization concentrates only on making profit rather than caring about the society and the environment in which it operates Saeidi et al, 2015).

Ethical Analysis

The meaning of ethics is distinguishing between what is right and what is wrong. It is seen that in case of Origin Energy the ethical values are diminished as they only focus on the revenue of the firm and does not look after the benefit of the environment and the local community. The firm forcefully claims land from the landholders by providing a minimum compensation to them and sucks out the resources of the land optimally thus damaging the environment. The disposal of waste on the land after extraction is also disturbing the balance of the environment and this disposal is hampering the local hygiene as well. The extra gases emitted during the extraction of coal seam gas are also causing illness to the nearby animals and the people dwelling in the surrounding. George Bender, an old resident of that place reluctant to give land was forced to sell the land, which created a tension in his family with difference in opinion among the family members, which forced George to commit suicide. It was all due to unethical behavior of the company. The company knowing that George was not ready to give out his land forced him year after year neglecting the corporate social responsibility and the ethics. Therefore, there is no ethics of the firm (Korschun, Bhattacharya, and Swain 2014).

Recommendation

The above study reveals that there is no corporate responsibility and ethics available in Origin Energy, which is creating a revolt from all the sections of the community. The firm therefore needs to analyze its corporate governance and ethics and create new plans to improve these activities. The firm needs to focus on the welfare of the environment and the citizens and should come into a negotiation so that interests of both the parties are maintained. Proper training should be given to the employees of the firm so they are aware of how to deal with the citizens and campaigns and promotions within the company and the stakeholders need to be developed so that a harmonious atmosphere is created and the environment and the community is saved.

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