Major Assignment: Capstone
ACCT20080 Ethics & Governance: Individual Capstone Project Capstone: What, why, and how
This capstone introduces you to researching and interpreting the voluntary disclosures of a publicly listed company to determine its governance and ethical outlook. The knowledge you have gained from modules 6–9 are of high importance to this exercise. These skills are highly valued by business specialists such as: Corporate governance practitioners and consultants Business and investment analysts Auditors Corporate accountants and Investment funds looking for companies to invest in. Remember that it is a company’s stakeholders who determine what is acceptable and not acceptable for that company to do. Therefore, to determine where a company is looking to for its guidance (for example, shareholders, powerful stakeholders, all stakeholders) is an important step in identifying a company’s likely ethical outlook. A bank that is focused upon its most powerful shareholders will talk to them directly in their voluntary disclosures, and this will manifest itself in how the company conducts itself in society. In contrast, a company that is vitally concerned about how society views its actions relating to the environment will disclose information suitable to that audience and will probably conduct its affairs in a complementary manner. Investors seeking to invest in companies committed to sustainable operations may choose the latter company over the former (however, there are many other considerations such as the company’s return on investment record that cannot be ignored), while an investment fund that needs to grow its own return on investor funds might choose the former to invest in. This capstone project is not about making judgments concerning the likely ethics of a company; we simply do not have enough information on hand to make such a judgment. And remember that a company wholly focused on profits and returns to shareholders can be just a ethical (in the eyes of its stakeholders) as one who takes an interest in its environmental “footprint”. What is of interest to us is that each company is different and can be ethical in different ways. This capstone is about investigating and coming to a conclusion about a company’s likely ethical and governance outlook. You will read the company’s own disclosures, apply appropriate theories and come to reasonable conclusions, all of which you will report upon.
Executive Summary:
This assignment is focused on an analysis of corporate governance-related disclosure at the Bega Cheese Group of Companies. The company is focused on releasing sustainability reports on an annual basis. The organization has also employed a mixed board of directors such as non- independent and independent directors by focusing on the skills of the directors. Management has provided detailed information regarding the code of conduct and related policies on the official website of the company focusing on the effective implementation of corporate governance in the company. The company has been utilizing acquisition strategy successfully in order to enhance its capability of manufacturing cheese related products and to effectively compete with other competitors in the dairy industry (Brink, 2011).
Introduction:
The main purpose of this report is to investigate the corporate governance-related disclosures by the management of Bega cheese Limited. In order to investigate corporate governance-related matters, recent annual report of the company available at Australian stock exchange website was used. The official website of the company was also analyzed. The media releases section and investor section on the website of the company was also investigated. Legitimacy theory was utilized in the study to investigate the implementation of Corporate Social responsibilities by the management of the organization. Results suggested that management has been keenly implementing and developing corporate governance in the company. The acquisition strategy has been effectively used to enhance market share in the domestic market (Mitchell, 2017).
1-Introduction of Bega Cheese:
Bega cheese is an Australian public limited company doing the business of manufacturing and selling of dairy-related products. It is an agricultural company that was listed as a public company in Australia in 2011 in the Australian securities exchange. The company was founded back and 1899 and is conducting business in the industry of dairy and food processing. Shares of the company are included in Australian securities Exchange with symbol BGA. According to the report in January 2017, it is considered to be the largest dairy-related company in Australia, and the total valuation of the company, according to the report was approximately 775 million Australian dollars. Headquarters of the company are situated in New South Wales, Australia. The chief executive officer (DEO) of the organization is Paul Van Heerwaarden. The company has approximately 25% stake in Capitol Chilled Food Australia Private Limited. According to the annual report issued in 2016, approximately half of the revenue generated by the company is from the sale of processed cheese and retail cheese related products. The company is responsible for holding approximately 15% of the Australian retail cheese market. Approximately half of the shares of the company trading in the market are with Bega’s farmer suppliers. The company is expanding its business operations by implementing an acquisition strategy to enhance its share in the cheese market. In 2007, company acquired approximately 70% of the share for the Tatura milk Industries Limited. The objective behind the acquisition of this amount of shares was to expand the business operations of the company and to increase the market share of the company. In 2008, the company purchased operations and assets of the De Cicco industries to significantly in hands the cheese manufacturing capacity of the organization. This effectively enhanced the company’s ability to compete with competitors in the domestic market. In March 2009, the company was successfully able to acquire the chief manufacturing facility of one of the most famous companies Kraft food at Victoria. The newly acquired assets were considered to be one of the largest facilities of cheese manufacturing in Australia. With the acquisition of this asset, the management of the company decided to further invest in the infrastructure of the facility to further increase the capacity of the plant to increase production related to cheese and cheese related products (Bega Cheese, 2016). The acquisition strategy implemented by the top-level management of Bega cheese has helped the company significantly in increasing the capability who manufacture cheese and related products. It has also helped the management to increase the market share of the company and to compete with rivals in the domestic market effectively. Rivalry for milk in the domestic market is increasing significantly with the passage of time. Acquisition of the mentioned asset and company will certainly help Bega Cheese to compete effectively with competitors in the domestic market of Australia. Approximately 40% of the revenue generated by the company is attributed to cheese, cream cheese, and powdered milk. The company is also responsible for manufacturing nutritional products, and the product is responsible for contributing 20% to the revenue generation of the company.
2-Corporate Governance at Bega Cheese
Composition of the board:
According to the board of directors’ details in the annual report of the organization, there are seven members of the board of directors. Out of these seven members of the board of directors, two members are independent directors, while the directors of the five members are executive directors. Chairman of the board of directors Mr. Maxwell Roberts is also the executive director of the company. Barry Irvin is the executive chairman of the board of directors and is working as a director in the company since September 1989. He has been working as a director at Geoffrey Gardiner Dairy Foundation Limited. He is also serving as director of Tatura of milk Industries Limited, Capitol Chilled Foods Limited, and Giant Steps Melbourne Limited. Max Roberts is a member of the nomination and human resource committee of the company. He is also a member of the milk services committee and has been serving the company as a director since September 1983. He is also providing the services of directorship as chairman of Peanut Company of Australia Limited. Richard Cross has been working with the company as a director since December 2011. He is an active member of the nomination remuneration and human resource committee of the company. During the last three years, he has also worked as director and chairman of Murray Dairy Incorporation. Raelene Murphy is working as an independent director with the company since June 2015. She is working as chair of Audit & risk committee with the company. Terry O’Brien has been working with the company as an independent director since September 2017. He is also providing his services as member of the Audit & risk committee. He is also working as chairperson of the nomination remuneration and human resource committee for the company. Jeff Odgers has been working as director of the company since December 2011. He is also providing his valuable services as chairperson of the milk services committee. He is also working as chairman of Dairy Australia Limited during the same tenure. Richard Parbery has been working as director of the company since September 1988. He is also an active member of the Audit and risk committee. Remuneration Report: The remuneration part of the directors’ report provided detailed information regarding the fees and allowances paid to the directors of the company. Chairman of the board is receiving $184,500 annually, director is receiving $90,000 on annual-basis, chairperson of Audit and risk committee is receiving $20,000 annually, Audit and risk committee member allowance has been decided as $10,000 on annual-basis, chairperson of nomination remuneration& human resource committee is receiving $17,500 annually, member of nomination and remuneration & human resource committee receiving $8,750 annually, chairperson of Mike services committee in receiving $10,000 on annual-basis, and allowance for member of milk services committee is receiving approximately $5,000 annually.
3-Board orientation:
There are four basic aspects of board orientation, which are orientation, board composition, board focus, and key communication. As far as both compositions are concerned, there is a mixture of independent directors as well as non-independent directors in the board of directors for the organization. This clearly recommends that it is important for the management to make sure that there is an appropriate minister of skills and contacts to have appropriate resource flows in the company. Top-level management is not focused on having the majority of independent directors or majority of non-independent directors. They believe in the combination of independent directors as well as non-independent directors to formulate effective and efficient board of directors (Mandal, 2010). As far as communication is concerned, the annual report of the company has provided detailed information regarding the income statement of the company, the balance sheet of the company, equity of the company, and details regarding remuneration have been also disclosed in the remuneration report. The annual report of the company also provided a detailed report by the chairperson, and the cash flow statement was also disclosed. Voluntary disclosure was also included in the annual report of the company. Corporate social responsibility is becoming one of the most significant aspects of business operations in modern times. Corporate social responsibility helps to positively enhance the motivational level of the employees working in the firm and also helps to improve their productivity level at the workplace. By analyzing the media announcement section of the website of Bega Cheese Australia, it can be suggested that the company is keenly focused towards implementation of corporate social responsibility. It may be validated from the fact that the company disclosed its website announcement regarding the Victorian organic milk opening Milk price. Management of the company is focused on providing nutritional products and Organic products to their customers to enhance the market share in nutritional items related to dairy industry (Bega Cheese Australia Limited, 2019). The company website has also provided a section of investors in which financial reports of the company have been properly disclosed. Investor section on the website also includes the annual reports issued by the company, guidelines related to corporate governance implemented in the company, executive team of the company, details regarding the board of directors, and details regarding the shareholder contact. Being a public limited company, it is mandatory for the management of the company to disclose the annual report and financial statements to shareholders and stakeholders of the company at least on an annual basis. The investor section of the website is fulfilling this aspect of corporate governance (Begacheese.Com.Au, 2019). Corporate governance is considered to be one of the most significant aspects of business operations from a managerial perspective for the company. It can be easily validated from the fact that the company website has provided detailed information regarding the policies implemented under corporate governance in the company. Corporate governance section of the website contains detailed information regarding the corporate governance statement, policies related to corporate governance in the company, constitutions of Bega Cheese group entities, group charter of Bega Cheese, e shareholder dividend reinvestment plan, standards related to business conduct, employee share plan rules and ATO class ruling (Bega, 2019). Corporate governance strategy developed by the top-level management of the company is focused on 5 most significant aspects. These five most significant aspects related to corporate governance are leveraging the strengths of the company, developing people, understanding the needs of people, contributing positively towards the community in which the company is conducting business, and removing barriers to achieve diversity and formulated targets (Bega Cheese Limited, 2019). Providing employment opportunities to the female gender is another significant aspect of corporate governance formulated by the management of the company. According to the workplace gender equality report issued by the management in 2019, 14% of the board of directors is female, 22% of the senior executives or managerial level staff is female, 41% of the salaried staff is female, and 24% of the staff working in the complete Bega Cheese group is female. These numbers clearly justify the efforts of the company to implement workplace gender equality in the group effectively. In order to implement diversity at workplace and to achieve formulated objectives, management of the company is significantly focused on increasing the representation of women in management positions. Management is also focused on formulation of succession plans related to Executive team positions with identified successors. Management also focuses on active management of gender pay related equity imbalances. Proper policies have been formulated to make sure that external as well as internal employment practices are provided at the workplace. Management frequently utilizes an engagement survey feedback technique in order to frequently measure the effectiveness of the diversity and inclusion strategy. The company management has also formulated a code of conduct in order to make sure that employees are working ethically and responsibly. According to the key and significant codes disclosed in the code of conduct, the employees need to work with honesty, integrity, and fairness to contribute to the best interest of the group. Employees working in the organization must act at the workplace according to all applicable rules and regulations as well as policies and procedures. It is also mandatory for the employees working in the organization to utilize group resources and property most effectively and efficiently (Deegan, 2012). These are some of the most significant points mentioned in the code of conduct for the employees working in the organization. According to the communication policy of the company, the group must make sure that shareholders and stakeholders of the company are properly informed regarding all significant developments associated with the group according to the applicable rules and regulations. All the relevant financial as well as non-financial information will be disclosed to shareholders and stakeholders by utilizing the media platform of Australian stock exchange website and official website of the company. Group websites will also issue frequent media releases relevant to shareholders and stakeholders of the company (Simpson & Taylor, 2013).
4-Compnay Communication-Legitimacy Theory at Bega Cheese:
Legitimacy theory is associated with the fact that the efforts of the organization should be focused on stakeholders of the company. Corporate social responsibility and policies of the company should be focused on the employees, customers, investors, supplies, and government. According to the legitimacy theory, this theory is associated with the mechanism of the organization, which supports the implementation and development of voluntary social as well as environmental disclosures in order to meet requirements associated with social corporate responsibilities. It also helps the organization to achieve its formulated goals and objectives. Various research has been conducted in the past and for investigating the implementation of legitimacy theory in different organizations around the globe. One of this research done in the past for investigating the usage of legitimacy theory in organizations with Association with social and environmental reporting by Deegan (2012) Disclosure of social and environmental reporting is considered to be one of the most significant pieces of evidence for organizational legitimacy. As far as Bega Cheese group is concerned, the official website of the company provides complete and detailed information regarding sustainability and environmental related aspects. The sustainability section of the website provides detailed information regarding the protection of the environment, protection of environment from pollution, sustainability of the factory, sustainability of the farm, and other related aspects (Bega Cheese Australia, 2019). Bega cheese is focused on improving the sustainability-related aspects and reducing the level of negative influence on the environment in which the business operations are being conducted. Sustainability related operations of the company are divided into two major aspects, which are sustainability of the farm and sustainability of factory. One of the most significant commitments of the top-level management of the company to ensure appropriate implementation of sustainability is the disclosure of sustainability-related matters in sustainability reports on an annual basis. The official website of the company contains soft copies of sustainability reports published from 2015 till 2019 on an annual basis. The company is also focusing on utilizing the available resources most efficiently to reduce waste produced by the manufacturing process. The company is also focused on reducing the landfill to protect the environment in which it is conducting business operations. Different types of recycling initiatives have also been implemented by the management and order to increase the efforts related to recycling to protect the environment and to have sustainable influence on the environment in which the business operations are being conducted. All the data related to sustainability and Environment protection available on the official website of the company suggest that company is focused on ensuring environment protection and sustainability to have proper implementation of Corporate Social Responsibility related aspects. All these factors will positively contribute towards shareholders and stakeholders of the company. It will help the company to formulate positive image and market with reference to corporate social responsibility implementation and protection of the environment in which the company is conducting its business operations.
Conclusion:
Top-level management of the company is proactive towards implementation of Corporate Social Responsibility related activities. Annual reports of the company include proper disclosure of financial information as well as corporate governance-related information for the shareholders and stakeholders of the company. The company has successfully utilized an acquisition strategy to enhance its capability of manufacturing cheese and related products. Acquisition strategy has also significantly helped the management of the company to enhance its market share in the domestic market and to effectively compete with available competitors in the dairy industry.
References
Bega. (2019). Corporate Governance. Retrieved 10 06, 2019, from begacheese: https://www.begacheese.com.au/investors/corporate-governance/ Bega Cheese. (2016). Bega Cheese Letter. Bega Cheese. Bega Cheese Australia. (2019). Sustainability. Retrieved 10 06, 2019, from https://www.begacheese.com.au/sustainability/ Bega Cheese Australia Limited. (2019). Victorian Organic Milk Opening Milk Price Announcement. Retrieved 10 06, 2019, from https://www.begacheese.com.au/victorian-organic-milk-opening-milk-price-announcement/ Bega Cheese Limited. (2019). Corporate Governance Statement. Retrieved from http://member.afraccess.com/media?id=CMN://3A359303&filename=20110818/BGA_01208259.pdf Begacheese.Com.Au. (2019). Investors. Retrieved 10 06, 2019, from https://www.begacheese.com.au/investors/ Brink, A. (2011). Corporate Governance and Business Ethics (2 ed.). Springer Science & Business Media. Deegan, C. (2012). Introduction. Accounting, Auditing & Accountability Journal, 15(3), 282-311. Mandal, S. K. (2010). Ethics In Business & Corp Governance (1 ed.). Tata McGraw-Hill Education. Mitchell, L. E. (2017). Corporate Governance: Values, Ethics and Leadership (1 ed.). Taylor & Francis. Simpson, J., & Taylor, J. R. (2013). Corporate Governance Ethics and CSR (2 ed.). Kogan Page Publishers.
