The chosen company for thisparticular report is BHP Billiton Ltd.
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It is an Australian Company whoseheadquarters in Melbourne. The basic reason of choosing this company in thisparticular project is that it is regarded as the world’s largest mining companyand apart from this it is referred as the fourth largest company in Australia (BHP Billiton 2017). There are many aspects in thecompany that can be explored and the large profile of the company made it easierto choose the company for writing this assignment. The operations of thecompany are extended to the mining of minerals beside oil and production ofgas. The company owns the subsidiaries in the field of logistics and transport. It does not end here, the company reportedly made significant donation towardsthe society. It has a global impact. Theprocess of operation is carried in over 25 countries.
It is also working in thesector of mining and is using green energy in order to minimize the emissions (BHP Billiton 2017). These are the main reasons forchoosing this company. However the most important factor for choosing thisparticular company is the controversy that it faced in the recent times. It wasin the news for its poor performance according to the stock exchange inAustralia.
The transition from being a good company to a bad company issomething that can be witnessed in the report. This was an exciting area towork upon. Answer to Question2: Board Characteristics Approach Did the Company comply with the code? Explain/Provide Evidence Implications Separated roles of CEO/Chairman Yes the company has complied with the code of Corporate Governance. According to the code of Corporate governance every company should be headed by an effective board which is collectively responsible for the long-term success of the company. There should be a clear distinction between running of the board and the executive responsibility for the smooth running of the business of the company. The Chairman and the CEO should be responsible for leadership of the entire board and to ensure the effectiveness on all the aspects of the role (Keay 2014).
The company fulfills all the above mentioned factors and has maintained the code. The Chairman and the CEO directs the entire board and are the ultimate decision makers of the company. Therefore they serve a great responsibility (Filatotchev, Jackson and Nakajima 2013). The company functions properly under the leadership of the Chairman and CEO. The code of governance aids the company to maintain the decorum and it keeps pedagogy in the company. Role of Executive Leadership team Under the code of governance the ELT should be responsible for the daily management of the group and for leading the delivery of the objectives related to the strategy.
This is maintained by the Executive Leadership Team and they are well-organized in it (Dignam and Galanis 2016). Executive leadership team helps to maintain the proper track of the delivery of the products. The objectives of the strategy guides the organization in the right path. This is the major effect of this code of corporate governance. Role of operations management committee The code of corporate governance proposes the fact that the responsibility of the operations management committee is to plan, direct and control the activities of the company (Khan, Muttakin and Siddiqui 2013).
The company complies all the codes of corporate governance. The operations management committee leads all the key group strategies, decisions related to investment and operations . They also provide recommendations to the board and discloses the financial and other performance primarily by commodity (Daily and Dalton 2015). Operation Management Committee has a major implication in the company. The disclosure of the financial and other performance of the commodity provides the most meaningful vision into the nature and financial outcomes of the activities of the business. Answer to Question 3: Board Characteristics Approach Did the Company comply with the code? Explain/Provide Evidence Implications Gender diversification (percentage of female to male) The organization does not have a balanced workforce in relation to the gender diversity as they are operating in the mining industry, so for extracting minerals and ores the management recruits male individuals mostly.
The management of BHP Billiton aims to achieve a gender balance in their organization by the year 2025 and are currently working on this issue (Adhariani, Sciulli and Clift 2017). Skills and Board Knowledge (Skills, Current and previous board experiences) The management board of BHP Billiton has sustained a matrix of skills for a few years and the matrix can impact the industry along with the external environment in general. The board members of BHP Billiton are experienced enough. The majority of the board members have more than 10 years of working experience as a manager or advisor. The highly experienced and effective board members of BHP Billiton are seen to increase the productivity of the business organization. Under their supervision, the organization can aim to capture the majority of the global market within a few years. Age (Average Age of the Board) The average age of the board is 62.
As the average age of the board members is 62, it is likely that they have more experiences than any other individual working in the same sector (Olivier and Wright 2014). Thus it can be considered as an advantage of the business organization. Independence (Number of Independent board members to executives) Currently BHP Billiton has 8 independent board executives working for them who are experienced enough to run the business successfully.
Having 8 independent board members is one of the plus points of the business organization and the management can use it to increase the productivity and profitability of the organization. Answer to Question 4: Accountability Components Approach Did the Company comply with the code? Explain/Provide Evidence Implications Structure of Audit Committee (number of independent board members) Currently in the audit team of BHP Billiton there are 10 members with experience of more than 20 years in the finance sector, which helps the organization to face no issues regarding financial matters. Having a well-structured audit team the management of BHP Billiton experience advantage in the financial sector and that directly help the organization to eradicate any financial and legal issues.
External Auditors (who are the auditor of the firm, what is the time scale of their contract) At the time of merging, the management of BHP Billiton stated that they would put the external audit to tender and they appointed PricewaterhouseCoopers and KPMG along with Anderson as the external auditors. By appointing big reputed organizations as an external auditors BHP Billiton continued to show their class and that projected why they are different from any other organizations working in the same sector. Board Evaluation (when was the last time the firm took and external perspective to this) · The board will evaluate the effectiveness of the chairman, committees, and individual directors along with the process of governance. · The board will evaluate the level of performance of the directors.
· All the evaluations will be on the basis of the balance of skills, tasks performed by the board, experience and independence of the company on the board. The evaluation of the board of BHP Billiton will vastly help the management of the organization to identify the strengths and weaknesses of the governance body which can effectively improve both the productivity along with the profitability of the business organization. Answer to Question 5: Remuneration Characteristics Approach Did the Company comply with the code? Explain/Provide Evidence Implications Structure of Remuneration (Components of Pay/ Claw back/ Long-term targets) The structure of remuneration of BHP Billiton is directly related with the performance of the groups during the financial year. The remuneration policies of BHP Billiton shall be put in front of the stakeholders and the AGM for three yearly approvals (Salvioni and Astori 2015). The improved structure of remuneration will help the general workforce of the business organization to get further motivation and loyalty towards the organization . If the work force is motivated it t will positively impact the productivity and profitability of the business corporation. Structure of Compensation Committee (number of independent board members) CSR characterteristics Approach Did the Company comply with the code? Explain/Provide Evidence Implications AGM Reporting (number of meetings/disclosure of voting) · The management of BHP Billiton ensures that they will assess their CSR performance in relation with the Global Compact principles set by UN.
· The Board of BHP Billiton will arrange an annual forum regarding CSR that will bring all the senior executives and the major private business organizations together to discuss on the environmental and social issues. (Fonseca, McAllister & Fitzpatrick 2014). · By investing in the projects that favors communities, which will ensure a persistent framework to measure the tangible progress. If the CSR activities of the business organization get enhanced, eventually it will increase, the repute of the organization in global market and that can effectively improve the level of productivity and profitability of the business corporation. As the organization BHP Billiton agrees all the regulations set by UN, the organization will not face any threats in this regard at least. Communications with Shareholders (What tools are used) The management of BHP Billiton maintains a good communication with the shareholders. After conducting the general meetings or summits they provide all the necessary information to their shareholders to maintain a basic transparency.
This is a good initiative taken by the management of the organization as it improves the relation between the governance body and the shareholders of the organization. By Maintaining a strong communication with the shareholders the management of BHP Billiton can experience a transparency and loyalty of the shareholders of the organization (Pottenger and Leigh 2016). Answer to Question6: There are manyshareholders of the company and they are consistent. The biggest shareholder ofthe company is Bank of America Corp. With the marketcapitalization of 147 billion pounds it can be ranked in one of the four majormoney-center banks in the United States. This provides a full range offinancial services, investment-banking services and commercial services. Thecompany has been found to be operated through five business divisions.
The fivedivisions are consumer banking, the investment management, Legacy andservicing, Global Markets and Global wealth (Trickerand Tricker 2015). The other important stakeholder of the company is Dimensional Fund Advisors LP. It is a private investment-managementfirm whose headquarters are situated in Austin. It launches and manages equityand fixed-income mutual funds and investment portfolios for the clients.
Italso looks after the investment in real estates. This firm has many offices inareas like in U. S, Canada, the United Kingdom, Australia, the Netherlands, Germany, Singapore and Japan.
The third most important shareholder is EarnestPartners LLC. The company is a privately owned investment-advisory andmanagement firm. Its headquarters is in Atlanta.
It deals with equity andfixed-income. Apart from this the firm also deals in alternative investmentsand other assets. The other prominent shareholder is CL Investment Inc.
This company is a Toronto-based subsidiaryof CI Financial Corporation. The company offers investment management andadvisory services to a wide range of clients. This looks after fixed-incomemutual funds and it manages the portfolios of the clients. Apart from theseshareholders, other shareholders are NeubergerBerman Group LLC (Clarke 2014). The company is found to cooperatewell with the shareholders. The employees of the company make effort in reportingabout the progress of company to the shareholders (Sanalvioni and Bosetti2015). They inform their shareholders about the annul business and about theirannual progress. The shareholders are provided with detailed information.
This transparencyof the company is important as the shareholders invest money in the company(Idowu, Capaldi and Zu 2013). At the end of the year shareholders expect someamount of cooperation and some amount of profit from the company. This keepstheir relationship healthy. It’s a large organization where the shareholdershave kept their trust on the company. The decision of the company can bring thestakeholders to risky situation and therefore they are supposed to be informedabout all the situations that are faced by the company (Bushee, Carter andGerakos 2013).
Answerto Question 7: The company is found to fulfil allthe codes of the corporate governance. The company is not found to lack anymajor code which is the reason that it’s rated one of the biggest and largestgrowing company. The only drawback in the company is on the part of the dutiesof the directors.
According to the code of governance in relation to the dutiesof the directors, they should use their abilities towards the best possibleinterest of the organization (BHP Billiton. 2017). However in this case as thedirectors are not able to channelize their skills towards the company’s bestinterest they are not fulfilling the director’s duty. It can also be stated inthis case that as there is no diversity in the board with respect toeducational background they do not have the ability to bring the company out ofthe adverse situation. Apart from thisthe company is found to abide by all the code of corporate governance and thereis no chance to find any fault in the company regarding this (ArAs 2016). Part 3: CRICITAL REFLECTION: The difficulty that I faced whiledoing this assignment was to find the relevant information of the company andto study the exact code of corporate governance. The functions and the role ofthe shareholders was a huge thing to find and a difficult one.
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However from theassignment I learned the policies and the norms of the code of corporategovernance. By analyzing the pitfalls in the system I realized the ways bywhich it could be improved. I realized some problems that were there in thecompany and I came up with some way on how to improve those. In the first placethe responsibility of the managing director of the company must be separatedfrom that of the chairman. Both of them should manage their affairs separatelywithout interfering with each other responsibilities. The company shouldseriously address the need of sub committees. The committees must consist ofthe non-executive directors who are independent.
The subcommittees must be madewith respect to areas like nomination, audit, appraisal and remuneration. Irealized that it is extremely necessary to have an efficient and independentboard of directors within the company and the company maintains a good relationwith the shareholders as this is the first and foremost ethics that the companymust follow. I could extract about the necessity of the code of corporategovernance and the function of the same in any company.
This was myunderstanding of the work.