Introduction and summarization of the company

The purpose of this report is to evaluate the corporate governance and other aspects of top-level management in an Australian business organization. The business organization selected for the purpose of top management evaluation is ASX Limited. ASX Limited is a business organization that is responsible for operating stock exchange in Australia. All the business organizations listed on the stock exchange are being managed by this organization and the primary focus of this organization is to ensure proper management among all the listed organizations. The main focus of this report will be on corporate governance board orientation and communication strategies used by the business organization under consideration (Williams & Dobelman, 2017). Corporate governance of the organization will be evaluated by identifying the composition of the board and general practices undertaken by the organization. Board orientation will be focused on evaluating the focus of the board of directors in relation to long term growth and development of the organization. This type of evaluation can be made with the help of annual reports issued by the organization at the end of every financial year. Secondary research has been conducted in this report in order to identify important aspects of ASX Limited. Secondary research is used as management has published different public documents at the end of every financial year that will help in satisfying the needs and requirements of the assignment (Vu & Turnell, 2019). An important outcome of this report is to evaluate the efficiency of different aspects of management undertaken by ASX Limited.

As it is already discussed that the company under consideration of this report is ASX Limited. ASX Limited is a governing authority that helps in the management of the Australian Stock Exchange. This is a public company that was established on 1st April 1987 under the legislature implemented by the Australian power limit. The main objective of this organization was to merger and amalgamation of 6 state securities in order to provide centralized support to the stock exchange. The overall market capitalization of this organization is around AUD 1.9 trillion and it is ranked among the top 16 listed stock exchanges all across the world (ASX Limited, 2019).

Three of the most important function of this organization are market operator, clearinghouse and payments system facilitator. Any transaction undertaken by any business organization or individual in the stock exchange is required to be governed and operated by this organization. For example, if a particular individual has sold all its shares with respect to a particular organization then ASX Limited will be responsible for ensuring that this transaction has been completed within the allowed time period. Another important aspect of this organization is to educate retail investors about the general practices of the stock exchange. The primary focus of this business function is to ensure that these retail investors are aware of their rights and obligations (Miglani, Ahmed & Henry, 2015). In this manner, business organizations will not able to cheat the retail investors and it will help in the growth and development of the economy a stock exchange plays a very important role in the developing the economy of a country.

Summary of corporate governance

In Australia, the Australian Securities and investments Commission is responsible for overseeing the functions of trading in the country. Therefore Australian security and investment commission is also responsible for overseeing whether ASX Limited has been complying with its own rules and regulations. In addition to that this authority also examines whether general practices undertaken by ASX Limited are in accordance with the rules and regulations. In addition to the Reserve Bank of Australia is also responsible for overseeing the facilitator function as well as the clearinghouse function of ASX Limited. It can be said that there are various governing authorities that are responsible for overseeing different functions undertaken by ASX Limited (Williams, 2017). It is very essential for these regulatory authorities to ensure the proper functioning of ASX Limited as functions undertaken by the organization are very essential for maintaining effective and efficient functioning of the stock exchange.

There is only one organization in Australia that is responsible for managing Australian stock exchange and it is ASX Limited. It can be said that there is no specific industry in which this organization is operating as this organization is the entire industry. Therefore it can be said that there is no competition as there is a monopoly of ASX Limited in the industry. This is one of the prime reasons that strict rules and regulations are applicable to this organization in relation to its general operations.

Corporate governance can be defined as different rules and regulations according to which a particular business organization is operating. Corporate governance helps the business organization to provide a particular direction to operations and satisfy the needs and requirements of different stakeholders. It is very essential for an organization to ensure that an effective and efficient corporate governance structure has been developed over a period of time in order to ensure your satisfaction with every stakeholder. Information will be collected in this report with respect to corporate governance practices in ASX Limited from the annual report issued by the organization at the end of 2018. It is the general practice of ASX limited to describe corporate governance structure and practices undertaken in a particular accounting year in annual reports of every financial year (Yermack, 2017).

Composition of board

There is 10 board of directors in this organization and 9 out of these 10 directors are independent directors excluding managing director/ chief executive officer of the organization. It can be set the management of the organization has been able to maintain the effective ratio of independent directors in the composition of the board of directors. Around 90% of total Board members are independent directors and it will help the business organization to ensure a transparent decision-making process throughout the functioning of the board (ASX Limited, 2018). The importance of maintaining the significant number of independent directors in the board of directors is very essential as it helps the business organization to insured the interest of all the stakeholders rather than the personal interest of directors (McCahery, Sautner & Starks, 2016). In addition to that, all the independent directors are skilled and experienced in the field of the stock exchange which will also help in the long term growth and development of the company.

Composition of board

Reports from the Chairperson and the CEO

General practices in governance undertaken by the business organization have been described by the chairman in “letter from the chairman” issued by the organization in their annual report. In this report, the chairman has expressed that the overall return on the investment made to shareholders has increased by 10 7.0 % in the last 5 years which is higher as compared to 50. 9% return provided by the index. In addition to that financial profitability of the organization has also been described by the chairman as after-tax profit has increased by 7.2 % as compared to the previous financial year which provides effective and efficient management practices of the business operations (ASX Limited, 2018). The chairman has also ensured that general practices of operation in the Australian Financial Market by ASX limited have been the effective and primary focus of these practices was to gain trust and confidence of stakeholders (Tricker & Tricker, 2015). General values of the organization have also been followed throughout the day to day practices of the organization in addition to following external rules and regulations applicable to the company.

The chief executive officer of the organization has also provided some details regarding the financial success of the organization in 2018 such as an increase in total revenue by 7.7 % compared to 2017 (ASX Limited, 2018). The opinion provided by the chief executive officer is focused on long term growth and development of the company by adopting a vision of becoming the world’s most respected financial market place. The use of effective and efficient technology in the future is also proposed by the chief executive officer for increasing the efficiency and success rate of operations undertaken by ASX Limited.

The remuneration report has also been issued by the organization at the end of the accounting period 2017-2018. According to the description provided in the remuneration report, all the rules and regulations with respect to remuneration to be paid to Executive and non-executive members have been followed effectively by management. For executive members, three-component of remuneration has been maintained by the organization as prescribed by ASIC i.e. fix remuneration short term incentive and long term incentives. Short incentives are calculated on the basis of group incentives, individual performance, and target STI (Dimopoulos & Wagner, 2016). In addition to the remuneration committee has been developed by the organization with the primary focus to ensure that all the rules and regulations prescribed to ASX limited have been followed while distributing remuneration to executive and non-executive directors.

Reports from the Chairperson and the CEO

Board orientation can be described as a Process that is used by the board of directors in a particular organization to take certain decisions. It can be said that the overall efficiency and effectiveness of the decision making process of the board of directors can be described with the help of analysing the board orientation (Ekara Helfaya & Moussa, 2017). Different aspects of board orientation can be analysed on the basis of board composition, the focus of board and communication strategies used in the decision-making process. The main focus of this section will be to identify different orientations i.e. focus of the board of directors in relation to effective and efficient management in business.

The primary focus of the BOD in conducting an analysis of this orientation in the organization is satisfying the needs and requirements of stakeholders. This orientation is focused on agency theory in the business of which states that the board of directors and management are operating as agents of stakeholders such as customers and shareholders (Arzubiaga et.al, 2018). Therefore the primary focus of every board of directors should be to satisfy the needs and requirements of stakeholders and provide them with the required information. Financial statement of the organization can be analysed for identifying shareholder-agency theory. Chairman of BOD and CEO of the company has provided description of business strategies in their report which has been included in the annual reports. In addition to that financial statements are also provided by agents of company i.e. management to owners i.e. shareholders.     

Board composition- This organization has included 90% of the independent directors in the board of director which will help in ensuring that the interest of shareholders is protected.

Board focus- The focus of the board will be to ensure that every requirement of different stakeholders is identified in satisfied until the end of the financial year. For example, shareholders will be satisfied by providing returns higher as compared to the previous financial year (Wang, 2017).

Key communication- communication with these shareholders will be maintained through different reports issued at the end of the accounting period such as an annual report, financial statements, remuneration report, etc. 

Stewardship theory is referred to as the effective and efficient management of day to day operations as well as long term development of the company.

Board composition- Chief executive officer and chairman of the body will be focused on providing effective and efficient management to the organization so that overall objects can be achieved.

Remuneration report

Board focus- The focus of the board in this scenario will be to develop internal growth strategies and effective capital management strategies in order to achieve success with cost-efficiency (García-Sánchez, Rodríguez-Domínguez & Frías-Aceituno, 015).

Communication- Communication to satisfy effective and efficient stewardship in the business will be done through profitability statements and balance sheets at the end of every financial year as they provide the current financial position of the company.

This theory in management is focused on identifying important and critical stakeholders from the perspective of the business. For example, investors will be considered as a most essential stakeholder as they are providing financing for day to day as well as long term operations.

Board composition- One of the primary functions of the independent director is to ensure that critical stakeholders are satisfied in their interest is protected.

Board focus- The focus of board members is to ensure that management is able to categorize all the stakeholders into critical and non-critical stakeholders (Entwistle, 2015). After such categorization needs and requirements of such critical stakeholders will be identified and strategies will be prepared for their satisfaction.

Communication- communication with critical stakeholders will be undertaken through voluntary disclosures and reports like corporate social responsibility report.

Board orientation in this element will be focused on whether the organization is following all the ethical rules and regulations or not. For identifying shareholder- branch orientation sustainability and CSR reports has been provided along with annual reports. Primary disclosure of ethical orientation has been provided in the voluntary disclosure statements such as employee’s code of conduct, safety policies of employees, insurance policies etc.  

Board composition- Responsibility of ethical consideration in any business organization falls on independent members of the board of directors. 90% of the board members are an independent director and it will help in following is rules and regulations.

Board focus- The focus of the board in this scenario will be to develop the regulations as well as continuous monitoring for evaluating whether these regulations are actually followed or not.

Communication- Will be done with the help of voluntary disclosure such as publishing ethical rules and regulations on the official website of the company (Robinson, Henry, Pirie & Broihahn, 2015).

Legitimacy theory is concerned with the mechanism of voluntary actions taken by business organizations for disclosures of social and environmental activities. The primary focus of lit images with the theory is to ensure that business organization is fulfilling its social contracts (Cheng, Ioannou & Serafeim, 2013). Therefore communication of social and corporate governance of business organizations can be identified with the help of voluntary actions taken by the organization in order to communicate social and environmental activities to the stakeholders (Wahlen, Baginski & Bradshaw, 2014). Mode of communication used by the organization with respect to fulfilling a social contract are as follows-

Annual reports- Annual reports are issued by the organization at the end of every financial year. The primary focus of annual reports is to provide the financial viability of the organization. In addition to financial viability, various aspects of Management are also disclosed by an organization in different sections of the report. For example, corporate governance structure and activities are disclosed under the section “corporate governance”. This section helps business organizations to ensure that corporate governance has been undertaken while performing different functions. In addition to that of remuneration, reports are also issued in order to provide information regarding the quantum of remuneration paid to the directors including non-executive directors.

Disclosures regarding the corporate social responsibility of the organization have been provided on the official website of the company. Such information can be extracted from this link i.e. https://www.asx.com.au/about/corporate-social-responsibility.htm. Various objectives of corporate social responsibility have been provided by the organization that includes making a positive impact on the community and environment.

Code of conduct- Management has also provided rules and regulations with respect to the code of conduct to be followed by every employee working in the organization. The primary focus of this code of conduct is to ensure that ethical and professional standards are followed (Palepu, Healy & Peek, 2014).

Values of business- values of a business are also described voluntarily on the official website of the organization (Carraher & Van Auken, 013). Values of ASX Limited is described as “Be Open, Be Trustworthy, Be Original, Be the Example”

Other disclosures- In addition to above mentioned voluntary disclose there are various other disclosures made by an organization such as whistle-blower protection policy, diversity policy gender equality policy employee wellbeing policy, prevention of harassment and discrimination policy, etc.

Conclusion

The main focus of this report will be on corporate governance board orientation and communication strategies used by the business organization under consideration. For achieving learning outcomes in this report, different public documents issued by the organization on the official website of the organization have been evaluated. On the basis of such valuation, it can be said that management has been very effective in following rules and regulations with respect to corporate governance.

References 

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