Corporate Governance and Social Responsibility Australian Conglomera

Question: Discuss about the Corporate Governance and Social Responsibility for Australian Conglomerate. Answer: Part A Wesfarmers Limited is an Australian conglomerate which is mainly does business related to fertilizers, safety products, chemicals, coal mining and industry. It is headquartered in the city of Perth which is in Western Australia. It has expanded its business in entire Australia and New Zealand. Wesfarmers limited is a leading producer of metallurgical coal and thermal coal for generation of domestic power. Operation of the company is done in Curragh Coal mine located near Blackwater in the basin of Queenslands Bowen (Wesfarmers.com.au 2016). The company also owns its shares in the Bengalla mine located in the Hunter Valley of New South Wales. Wesfarmers have strong belief in delivering reasonable returns in favor of its stakeholders. The company focuses on revenue performance of the business as well as on other areas of sustainability which are people, community support, economic contribution, environment, governance, carbon and energy (Tricker 2015). In recent years the company has b een focused on providing sustainability reports covering the five agendas. In the following year, the focus will not only be on the performance but also on the opinions and interests of the stakeholders which they hold very dear to themselves (Wesfarmers.com.au 2016). The report will be in consensus with the Global Reporting Index (GRI) which inspires other organizations to report on issues which are important to both the company as well as the stakeholders. This type of reporting standard is new to Wesfarmers and the company is willing to evolve to new standards such as G4 guidelines (Westphal and Zajac 2013). It is imperative for the business of the company that all the stakeholders take active participation in the business and operations of the company and they are notified about the actions taken by the firm. Since the stakeholders of Wesfarmers belong to the group of business people who get affected by the decisions taken by the company (Denis 2016). Wesfarmers Comparison Since the company is keen in declaring their sustainability report every year it becomes important to compare the report of two consecutive years of 2014 and 2015 to identify the changes made in the decisions of the company. The sustainability report contains certain features such as people, sourcing, community, environment and governance (McCahery, Sautner and Starks 2016). In the following report, the discussion of three aspects which are economic environmental and social will be done in compliance with the G4 guidelines. Aspects 2014 2015 Conclusion Social Aspect Wesfarmers makes an impact on the community in several ways. It helps the community in fooding, tools and clothing. Provides employment opportunities to the local people with the ratio of one in fifty five eligible citizens who pay tax to the Australian government (Acharya et al. 2013). It also supports the non-profit organizations. In the year 2015, Wesfarmers have contributed to the welfare of society in the same way by providing food and clothing to the citizens. But the ratio of employment generation has reduced to one person employed among 59 people. Rest of the community service such as government taxes, supporting the non-profit-organizations all is done with same intensity (Nini, Smith and Sufi 2012). Australian economy is strongly affected by its revenue contribution as out of 98 percent of its revenue 75 percent is used to benefit the Australian people. The revenue earned by the company which is around 98 percent of which 80 percent share is accounted in the service of Australian citizens. It makes an important impact on the economy of Australia as well as of other countries. Economic Aspect Wesfarmers has been more than generous to grant salaries to their employees in the year 2014. It has paid almost $8000 million to almost 200,000 employees as wages and salaries for the wellbeing and development of the family of the employees. It has also paid around $ 1800 million in taxes and royalties (Wesfarmers.com.au. 2016). In the respective year 2015, additional amount of $43,000 million was paid to the suppliers of the company. Another about $7800 million was paid in salaries and wages without any change in the number of employees (Hermalin and Weisbach, 2012). The company also thinks about the welfare of its stakeholders as it has paid $2300 million to its shareholders as dividend amount. Amount of $1500 million was paid in taxes and royalties. The dividends of stakeholders were levied around $2200 million among 500,000 shareholders. Environment Aspect Climate change has been a deciding factor for the business of Wesfarmers. Reduction in carbon emission during the operations and business of the company and understanding the associated risk of climate change has been listed as a priority task in sustainability report (Wintoki et al. 2012). For this purpose, Wesfarmers has tried to improve their efficiency of energy and has aimed to reduce direct emissions where possible. Risk management assesses the variety risk associated with climate change and takes steps to mitigate that risk. It has been observed that there has been a reduction in the emissions at Fertilizers, Chemicals and Energy is because of the cut catalyst in the plants of nitric acid (Harford, Mansi and Maxwell 2012). There have been certain innovations in the working of nitric acid plants so that no nitrous oxide leakage is possible. The reduced level of emissions was also due to the reason that one of the nitric acid plants was offline for almost three months due to the failure in mechanism. Some of the reduction measured in the report has been due to the accurate measurement done by the experts. In the recorded year 2014, energy use has enhanced by 4 percent which is mainly due to the increase in coal production of the resources section which has been around 15 percent (Claessens and Yurtoglu 2013). Taking into consideration, the climatic risks generated by the manufacturing units of the company, there are certain factors which are to be kept in mind. Risk of climate change and its effect on the business need to be mitigated in two ways. At first monitoring of the greenhouse gas emissions should be done with the aim of reduction wherever possible. Secondly, the risk assessment of the climate change which can be created by the business and operations of the company. It is imperative that climate is changing due to human actions and Australia is also responsible for mitigation of its effects (Bell, Filatotchev and Aguilera 2014). Wesfarmers is committed to Federal Governments work for limiting global warming in the range of 2degree Celsius or less. Some long term policies are also devised to decarbonization to happen effectively. Wesfarmers is determined to implement some policies which reduce costs and risks of greenhouse gas emissions. Wesfarmers made a deal with the Business Co alition Climate Change in September 2015. Since the company emits poisonous gases both indirectly and directly, having its source from industrial plants which includes diesel, natural gas and other emissions coming from coal mining. The company manages its emission intensity with the help of technological improvements or through industrial processes. The company has aimed at improving its potential of risk management of environmental nature. Wesfarmers have focused on research and development of testing methods to find robustness of supply chain and business operations to mitigate the climate change (Michael and Goo 2015). Wesfarmers division have a variety of divisions dealing with efficiency of energy which is under development such as LED lighting projects situated at Blackwoods and Kmart. The company has created an internal shadow price of carbon use in the allocation of capital expenditure from the period of July 2015. This is designed to encourage marginal emissions projects to ensure that the regulations of standards are followed and maintained. In consensus with the risk factors are also considered in the investments which are emission intensive. Prices of the services are revised annually. Part B Fuji Xerox Australia is the company which offers printing solutions and document printing technologies. Market and technology has changed in the recent years which has brought drastic changes in the documentation methods which are generally used in the corporate and other business operations. To have a developed and up to date document management solutions gives an edge in the working of any organization. Fuji Xerox provides all kinds of solutions within the business framework. With changing demands of business and technology, the company has also evolved. It hosts the leading technological advancements to work smarter and business goal oriented. The company believes that it understands the document business as they are the key factor to influence business decisions (Fujixerox.com 2016). This understanding helps its clients to use the potential of electronic media and paper simultaneously. Fuji Xerox are experts in workflows and documentation which guides any firm to streamline their business processes. The company issues its annual sustainability report which comprises of the value of chain of work ranging from suppliers to the customers. It provides sustainable solutions with the growth and development of its business. The report of sustainability mainly focuses on the material benefits to the business as well as to the stakeholders. Fuji Xerox Comparison A comparison is being made of the sustainability report of two consecutive years 2014 and 2015 based on the GRI guidelines. The discussion is mentioned below: Aspects 2014 2015 Conclusion Social Aspect Every person has the right to work in an atmosphere where there is no bias or harassment and gives a positive vibe to the workers. Fuji Xerox believes that diversity is good for business. Even government organizations have started monitoring work in the company to avoid gender biasness and other practices of discrimination. Fuji Xerox aims to attract, preserve and develop talented people who hail from different places and bring with the experiences and knowledge of various fields and innovative ideas, perspective and different leadership styles. This requires the organization to have a cultural base where the workers feel respected and supported (Erkens, Hung and Matos 2012). Fuji Xerox comprises of employee assistance program which helps other staff to develop a tendency of managing and accomplishing tasks of various nature. Fuji Xerox has recognized various issues of society which the firm should rectify as being a responsible corporate citizen. The company aims to solve these issues by creating a value of its customers and stakeholders in the eyes of business system. This is done by providing both value services to its customers of top quality through its entire business process. There are certain issues in which Fuji Xerox should take steps to mitigate them. These issues are increase in complexity of social issues at the time of globalization and diversity of needs. This program is supervised by the skilled and trained staff of the company. In this year the company has started a program to develop peoples mental health and skill so that correct management steps are taken at the right time. The company realizes that it can be stressful for employees to work at a certain stage of business and that state of mind needs to be taken care of. Realization of full potential of ICT and harnessing information from it. To build a society this is completely robust from disaster risk. And lastly improving the quality of working environment for the development of workers. Governance Aspect Strategic management decisions are taken between Fuji Xerox Australia and Fuji Xerox Asia Pacific. Operational plan is discussed between both the managements before reaching to a conclusion (Brown et al. 2012). Before commencement of a financial year, all the operational plans of development and expenditures are agreed within the management of both companies headquarters. The Asia Pacific branch heads all the governing decisions and powers of board of directors. Whereas, the Australian branch consists of the Chief Executive Officer, President, Chief Financial Officer and the Chairman. There have been certain modifications in the governance of Fuji Xerox Australia in one year. But the belief of the company in contributing to the welfare of society remains same. It aims to create new values for its customers and stakeholders. It has the tendency to constantly evolve its business processes to remain competitive in the market. Fuji Xerox has built mechanisms to be ever evolving with the need and requirement of its customers to provide the best service available in the business. One of such mechanism is the policy of plan-do-check-act (PDCA) which is a continuous improvement cycle. Fuji Xerox has a high priority for communication and monitoring systems to help its management to include the stakeholders for evaluation so that they can give feedback to the management. The company has also incorporated Corporate Social Responsibility in its governance mechanism to achieve higher goal of sustainability. Fuji Xerox went under major structural changes in its operating model in March 2014. The changes were brought in five sectors which are Sales and Marketing, Customer Operations, Finance and Technology, People and Culture, Governance, Risk and Assurance. In the annual report of Fuji Xerox on sustainability, it works on providing the CSR information to the stakeholders. Other systems such as websites and channels are also used to publish this report. The sustainability report is kept in higher esteem for both stakeholders and customers for information gathering. It enhances the awareness and transparency of policies and activities conducted by the company among its stakeholders. Business Aspect Fuji Xerox has a comprehensive portfolio of supplies, document technology, software and services to offer its customers. The company also provides back-end support which allows its clients to focus more on their main business. The customer base of this company is very wide which covers the medium, small and large non-profit, public and private enterprises all across Australia. Fuji Xerox believes in monitoring and accomplishing the expectations of its stakeholders. By including them in the business processes the company receives feedback from the stakeholders which is incorporated in the business decisions in the upcoming development projects. To get proper feedback the company holds meetings and discussion sessions with the top officials such as CEO and directors with the stakeholders so that their inputs and suggestions are distributed in a fair manner and with much importance (Liu and McConnell 2013). Some business techniques applied by Fuji Xerox are survey for customer satisfaction, survey of brands, self-evaluation for ethical procurement from suppliers, discussion with CSR experts, survey for employee satisfaction and CSR questionnaire. Since the technology is changing at a rapid pace, to cope up with the advancements of technology, products and services provided by Fuji Xerox should be unique and personalized. This gives its users an edge over comp eting companies in the business. It has been endowed with many awards of leadership and environmental sustainability which has made this company famous and popular among its users. The services provided by Fuji Xerox in different sections of business can be termed as: Office Solutions: Printers, multifunctional devices and other documentation solutions. Production Services: Commercial services of printing, software services and other solutions of workflow. Global Services: Print services which are managed, strategies of documentation and digital communication, creative services, mailing services, production infrastructure management in printing and even business process outsourcing. Other global services are human resource record keeping, application processing, content publishing, storage and imaging. The company has targeted new countries for expanding their business and customer base. Now they are helping customers across the world in developing their documentation process with support and solutions of Fuji Xerox . Part C As it has been discussed, above in the Part A of the report about Wesfarmers Limited that it is a company based on safety products and minerals and other natural resources. It can be concluded here that the company has a streamlined corporate governance structure with a social responsibility towards its customers and stakeholders. It issues annual sustainability report which is in consensus with the G4 guidelines derived from the GRI standard. Based on these guidelines the above report illustrates three aspects of sustainability report which are economy, society and environment (Bushee, Carter and Gerakos 2013). It has been established here that the company aims to follow every regulation which makes it more responsible for its sustainability in the process of its business operations. The main aim of this report is to encourage stakeholders of the company to get indulged in the business and decision making. It is done by informing the stakeholders and inviting them to participate in the core business of the company. Moreover, other aspect of the report shows that the company also prioritizes the social and environmental impacts that are created by its business operations. For that purpose, Wesfarmers take preventive steps to make the most out of their available resources towards a sustainable future. It can be observed in the above discussion of Part B, Fuji Xerox is a company related with the document technology and services. It has its branch in Australia as well as in Asia Pacific. It manages its business from the both the places with proper distribution of responsibilities. This company also releases its annual report on sustainability. Mention of two annual reports of the consecutive years 2014 and 2015 is made to compare the changes that have occurred in the respective years. It can be observed that there have been significant changes in the business process of the company regarding the sustainability. Although G4 guidelines have been followed to the word, there are certain changes that are visible in the report. The company is technologically driven and aims to keep evolving itself with changes and advancements in its technical feature. With same attitude it provides adequate facilities to its stakeholders and customers in business aspect as well as in the governance aspec t of the company. There has been a proper CSR evaluation of the company by experts with inputs and suggestions from the stakeholders who have keen interest in the decision making process of the company. Part D Reflective Journal of Personal Development In the process of making this internal report, I have been through the sustainability reports of both the companies Wesfarmers Limited and Fuji Xerox Australia. The referred reports were of the years 2014 and 2015 from which all the information and conclusions are derived. After going through the annual sustainability reports I have gained knowledge about the structure of corporate governance and social responsibility of two organizations hailing from different fields and having a completely different customer base. It has come to light that operation process of business is not the only factor responsible for smooth functioning of a company. But the consideration of Corporate Social Responsibility and other factors which comes under the ambit of corporate governance hold equal importance in the business. I have often seen business firm sacrificing their social value in order to achieve financial goals but after getting through this report it is quite imperative that financial achieve ments are just ways of establishing a market of the business. To stay in the business for long and to succeed in it with full potential any organization has to fulfill its sustainability roles. The value of stakeholders and their benefits are quite clearly depicted in the report which signifies that their role in smooth governance of a firm cannot be ignored. I have understood clearly that if one compares the annual sustainability report of a company of two consecutive years he can easily analyze the type of business operations which is done by the company. This internal report has been an eye opener for me regarding the importance of proper framework of corporate governance and social responsibility of any organization. I have learned the process of business and its operations which is done for the mitigation of risk factors involved in the business. Some of these concepts were confusing at first and I was not able to figure it out completely about the factors of sustainability rep ort and its influence on business process but now it has been clearly defined in my mind. The concept of sustainable business model is easy to understand and implement in a given circumstance. Further, I have gained an understanding of the total impact a company has on environment, society and economy of a country and how much that impact can affect the lives of citizens living in that particular country. References Acharya, V.V., Gottschalg, O.F., Hahn, M. and Kehoe, C., 2013. Corporate governance and value creation: Evidence from private equity.Review of Financial Studies,26(2), pp.368-402. Aebi, V., Sabato, G. and Schmid, M., 2012. Risk management, corporate governance, and bank performance in the financial crisis.Journal of Banking Finance,36(12), pp.3213-3226. Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D. and Larcker, D.F., 2015. Corporate governance, incentives, and tax avoidance.Journal of Accounting and Economics,60(1), pp.1-17. Bell, R.G., Filatotchev, I. and Aguilera, R.V., 2014. Corporate governance and investors' perceptions of foreign IPO value: An institutional perspective.Academy of Management Journal,57(1), pp.301-320. Brammer, S. and Pavelin, S., 2013. Corporate governance and corporate social responsibility. Brown, R., Gao, N., Lee, E. and Stathopoulos, K., 2012. What are friends for? CEO networks, pay and corporate governance. InCorporate Governance(pp. 287-307). Springer Berlin Heidelberg. Bushee, B.J., Carter, M.E. and Gerakos, J., 2013. Institutional investor preferences for corporate governance mechanisms.Journal of Management Accounting Research,26(2), pp.123-149. Chen, C.X., Lu, H. and Sougiannis, T., 2012. The agency problem, corporate governance, and the asymmetrical behavior of selling, general, and administrative costs.Contemporary Accounting Research,29(1), pp.252-282. Claessens, S. and Yurtoglu, B.B., 2013. Corporate governance in emerging markets: A survey.Emerging markets review,15, pp.1-33. Denis, D.K., 2016. Corporate Governance and the Goal of the Firm: In Defense of Shareholder Wealth Maximization.Forthcoming in the Financial Review. Erkens, D.H., Hung, M. and Matos, P., 2012. Corporate governance in the 20072008 financial crisis: Evidence from financial institutions worldwide.Journal of Corporate Finance,18(2), pp.389-411. Fujixerox.com., 2016.Corporate Profile : Company : FUJI XEROX. [online] Available at: https://www.fujixerox.com/eng/company/profile/ [Accessed 14 Oct. 2016]. Harford, J., Mansi, S.A. and Maxwell, W.F., 2012. Corporate governance and firm cash holdings in the US. InCorporate Governance(pp. 107-138). Springer Berlin Heidelberg. Hermalin, B.E. and Weisbach, M.S., 2012. Information disclosure and corporate governance.The Journal of Finance,67(1), pp.195-233. Jo, H. and Harjoto, M.A., 2012. The causal effect of corporate governance on corporate social responsibility.Journal of business ethics,106(1), pp.53-72. Khan, A., Muttakin, M.B. and Siddiqui, J., 2013. Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy.Journal of business ethics,114(2), pp.207-223. Larcker, D. and Tayan, B., 2015.Corporate governance matters: A closer look at organizational choices and their consequences. Pearson Education. Liu, B. and McConnell, J.J., 2013. The role of the media in corporate governance: Do the media influence managers' capital allocation decisions?.Journal of Financial Economics,110(1), pp.1-17. Masulis, R.W., Wang, C. and Xie, F., 2012. Globalizing the boardroomThe effects of foreign directors on corporate governance and firm performance.Journal of Accounting and Economics,53(3), pp.527-554. McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate governance preferences of institutional investors.The Journal of Finance. Michael, B. and Goo, S.H., 2015. Corporate governance and its reform in Hong Kong: a study in comparative corporate governance.Corporate Governance,15(4), pp.444-475. Nini, G., Smith, D.C. and Sufi, A., 2012. Creditor control rights, corporate governance, and firm value.Review of Financial Studies,25(6), pp.1713-1761. Sapra, H., Subramanian, A. and Subramanian, K.V., 2014. Corporate governance and innovation: Theory and evidence.Journal of Financial and Quantitative Analysis,49(04), pp.957-1003. Tricker, B., 2015.Corporate governance: Principles, policies, and practices. Oxford University Press, USA. Walls, J.L., Berrone, P. and Phan, P.H., 2012. Corporate governance and environmental performance: is there really a link?.Strategic Management Journal,33(8), pp.885-913. Wesfarmers.com.au., 2016.Home. [online] Available at: https://www.wesfarmers.com.au/ [Accessed 14 Oct. 2016]. Westphal, J.D. and Zajac, E.J., 2013. A behavioral theory of corporate governance: Explicating the mechanisms of socially situated and socially constituted agency.The Academy of Management Annals,7(1), pp.607-661. Wintoki, M.B., Linck, J.S. and Netter, J.M., 2012. Endogeneity and the dynamics of internal corporate governance.Journal of Financial Economics,105(3), pp.581-606.