Summarise The Aspects Of Corporate Governance Finance Essay - Free Essay Example

Sample details Pages: 8 Words: 2311 Downloads: 7 Date added: 2017/06/26 Category Business Essay Type Research paper Did you like this example? INTRODUCTION The present stage of economic cycle we will see more companies to get delisted from ASX due to corporate failure and due breach of duty from director side. With amid fear from global recession Director must be worried that their duty will be scrutinised and they have to perform their duty with proper and intelligent manner. Australian Security exchange acknowledged the best governed companies and according to Australian Security Exchange company who lack in corporate governance or in performing director duties can collapse any time. Don’t waste time! Our writers will create an original "Summarise The Aspects Of Corporate Governance Finance Essay" essay for you Create order In this project Im summarising an aspect of corporate governance and legal provision which are necessary for the control of corporation. Here I will provide information about two companies which were listed with Australian security Exchange. One of the companies is Cazaly Resources Limited and other one is Clive peeters . Cazaly is still listed with Australian Security Exchange, but Clive peeters is now delisted due to corporate governance failure. Therefore we will summarise the aspect of corporate governance in this report and analysis the importance of director role their duties. COMPANY OVERVIEW https://t2.gstatic.com/images?q=tbn:epnu1WF9JrHSgM:https://www.cazalyresources.com.au/images/cazaly_resources.gif Cazaly Resources Limited is an Australian based diverse mineral resource company which was listed with Australian Security Exchange in October 2003. Company controls the large number of Gold, Iron ore, Uranium and base metals which are grounded in Western Australia. Cazaly Resources Limited in total control 1500 square kilometres of ground and successfully performing the project which they think will be significant in the future. According to Cazaly there company Key assets include; PARKER RANGE IRON ORE PILBARA IRON ORE WESTERN KALGOORLIE GOLD THERE POSITION IN ASX LISTED COMPANIES THERE MANAGEMENT TEAM AND CORPORATE GOVERNANCE There Equity position in ASX listed companies There for according to Cazaly following the Corporate Governance is significant to achieve the objectives in future. CORPORATE GOVERNANCE Corporate Governance does not have any legal term, but it describes the rule and practices put in place within the company to deal with its board of directors. The main aim of corporate governance is to ensure Board accountability towards its Shareholders and management accountability towards its directors. PREAMBLE OF CORPORATE GOVERNANCE Incentives for board and management Economic monitoring within the company To encourage lower capital in company Resources can be used more effectively Cazaly resources limited are following good corporate governance wit in their company. CORPORATE GOVERNANCE PRINCIPLES RECOGNISE AND MANAGE RISK Cazaly resources limited are performing the principle of Recognise and manage risk in proper manner. Financial internal controls are managed in such a manner that company can cope with financial crisis in 2009. They are so strong from the point of view of their fund handling and performing it really well. Company has made Insurance such as: Worker Insurance Liability Insurance Travailing Insurance IT sector is also protected by backed up functions and can be solved by backed up files. LAY SOLID FOUNDATION FOR MANGEMENT AND OVERSIGHT Operational Management The company has such a project that if there is any problem the managing director is approachable at any time to solve the problem. Safety in standing items will be addressed by managing director to the board. This report is review by board of directors every year. Management is given the power to overcome any non profit making objectives and to make decision which will take company towards future benefits so that they can give their opinion to the directors about what future changes should be done to make Cazaly resources limited toward profit making company in future as well SAFEGUARD INTEGRITY IN FINANCIAL REPORTING Financial status of Cazaly resources is not complex; Equity funds have been raised and exploited for the project they are performing or project them will perform in future. With these funds they will perform the business development in future. The managing director monthly report includes details of monthly spends, companies actual spend to budget and show month end cash balance, Board handles all major projects and calculate their expenditure. Financial reporting should also give the clear picture of benefits being derived from current money making project and future money making projects. RESPECT THE RIGHTS OF SHAREHOLDER Cazaly resources limited says that the right of share holders are being the most important aspect of their company and directors are the one who are liable to answer the shareholders. Disclosures of balance sheet or future projects or market criteria are being address to shareholders by the board of directors. Directors are also giving the current market criteria and share market as share holders are depends upon the share of the company. MAKE TIMELY AND BALANCED DISCLOSURE Management in Cazaly resources limited make timely disclosure to board about the projects which are going on or about the market criteria, what changes showed is done to overcome the problem. Board has a duty to tell their stakeholder about the current situation of the company. STRUCTURE THE BOARD TO ADD VALUE In Cazaly resources limited the board has an effective composition and the discharge their duties in proper manner company director Mr David McMahon has adequate responsibility toward the company. He makes joint venture with other companies to make company pillars more solid. Mr Jones managing director operation is making such adequate role in company which is helping Cazaly resources limited to grow. He is the one who help Cazaly resources limited to get listed with Australian security exchange. PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING Cazaly resources limited have made such environment in the office that there management act with due care and responsibility and that their management should comply with law and work with in standard of law. The management of comply share trading rules in proper and respective codes of conduct. The best part of this company is that there is never a conflict between the management and the board of directors. Directors of this company are obliged in their judgement to be independent and they also ensure steps to be taken reasonable to ensure soundness to board of directors. REMUNERATE FAIRLY AND RESPONSIBLY Executive directors receive fixed remuneration such as salary, even superannuation are given to directors. Board set the salary for management within the aggregate limit approved by shareholders. Reward for performing work with time and well manner is also given to the management by the directors. CORPORATE GOVERNANCE FAILURE Clive peeters was first listed with ASX in 22 /09/2005.Clive PEETERS is the company which got suspended from Australian Security Exchange On Wednesday 19th May, 2010 Steve Peteers was suspended from ASX due to fraud. COMPANY OVERVIEW See full size image Clive Peeters opened their first store in Melbourne in 2003 they where retailers in electrical and computers. After opening their store in Melbourne they opened their store in Brisbane and Sydney they were ash rival to JB HI FI and HARVEY NORMAN. Clive peeters stores carry more than 140 brands and having model of each product once they were having more than 20000 models in their store. The chairman of Clive Peeter was Mr Brain Pollock and Mr Greg Smith was appointed as managing director of the company. Company operates under two names Clive peters in Queensland, Sydney, and Melbourne, Victoria and in Western Australia as Rick Hart. The staff work for Clive Peeters was around 1300, and revenue of $535 million FY 2008. Success behind Clive Peeters is their innovation in products, commitment towards customers, customer satisfaction and growing brand recognition. Buying power of this company was very strong which was their biggest plus point. Their warehous es were located across whole Australia there for the delivery time was minimum. Their main business was building industries, Government, Education, Hospitality, Real Estate and many more. If we take their sales revenue it was $457.2 million in 2007 and gone up +17% in 2008 to $534 in 2008, and gross profit from $120.5 in year 2007 to $141 in year 2008. REASON BEHIND CLIVE PEETERS COLLAPES The reason behind collapse of Clive Peeters was its failure to cope up with corporate governance. In the year 2009 it was discovered that the Clive Peeters payroll manager, Sonya Causer has inflated company payroll expense falsely to her account. She had done this by using company online banking system. Sonya has stolen around $20million from company account and by that money she purchased 43 properties and 3 cars. Under ASX corporate governance Clive peeters failed the duty of corporate governance which was structure the board to add value Structure the board to add value means: Companies should have board of an effective composition, size and commitment to adequately discharge its responsibilities and duties. In this board was failed to cope the duties of there. As the fraud was done this should not done as directors should perform their duties well. Each principle of corporate governance is important in his on aspect. DUTIES OF DIRECTORS Directors have fiduciary relationship with their company and their management there for any fraud is being in company in any level director of the company is responsible for that. Directors has power to solve any problem related to management and company. The duties of directors come under sec 180-184 of corporation act and this sec also imposed to the officers of the company. Employees of the company also come under sec 182. SEC181 of directors duty GOOD FAITH AND PROPER PURPOSE The main aim of this duty is that director should follow the duty of their in good faith and in best interest of the company and proper purpose. With good faith directors should take into consideration that stake holders of the company which specially are share holders are dependent upon their good faith and company is working well due their good faith. Bribes should not be taken or given for the purpose to increase the profit of the company. SEC182 OF DIRECTORS DUTY IMPROPER USE OF POSITION This sec states that officers and employees should not take advantage of their position to gain profit. They should not take advantage of their lower rank officer or employees. Therefore it is very important that this duty should be performed by officer in proper and legalised manner. SEC183 OF DIRECTORS DUTY IMPROPER USE OF INFORMATION Directors should not use information against the company, as any important material of the company should not be given out to its competitors. Therefore it is important that companies should follow the proper criteria of this sec. SEC 180 OF DIRECTORS DUTY DUTIES OF CARE, SKILL AND DILIGENCE Directors should exercise the duty of care and diligence, this means that directors should in this sec 180(1) should be taken into consideration will performing the duty of care. If we take a case example of Daniel v Anderson of (1995) 37B NSWLR 438, this case makes it clear that directors should perform their duties in care and diligence. SEC 184 OF DIRECTORS DUTY DUTY TO PREVENT INSOLVENT TRADING By this we mean that director should not indulge with any traction if he thinks that company is going toward insolvency. Sec 588 says insolvent trading is against the ASX rule and the director of the company is liable for insolvent trading even if he knows the company will be liquidised at any stage. Unsecured creditors ask director of the company about the compensation for the damaged suffered by the company. And directors are liable for the civil penalty order pursuant to Pt 9.4 B or criminal offence under Sec 588 G(3)and director at time of insolvent trading is liable for penalty. Clive Peeters case comes under section 182 of directors duty In this Clive Peeters manager Sonya causer made a fraud of $20 million as she made improper use of her position, there for she is liable for the delisted of company from Australian Security Exchange. CASE REFERENCE IN REGAL HASTING LTD V GULLIVER In this case directors made use of their position to make profit from the company for there personal use there for it was a breach of the sec 182. Court in this suggested that directors or any officer working for the company cannot make profit from organisation for its personal use. MISUSE OF COMPANY FUNDS Even in Clive peeters case misuse of company funds was also there. In this director cannot use the company funds for their personal use, officer of the company cannot mix company funds with their own fund. But Sonya Causer mix the company fun with her own funds even she use the funds for her personal needs like purchasing of the property and cars. CASE REFERENCE: IN TOTEX-ADON PTY LTD V MARCO (1982) 1 ACLC 228 In this case directors uses the funds of company for their personal use and even mix company funds with their own funds. IN PAUL A DAVIES (AUST) PTY LTD V DAVIES [1983] 1 NSWLR 440 The directors makes fraud and use money for their own interest and from the company funds made assets for themself. CONCLUSION From this case study we have discussed the importance of corporate governance. Importance to learn lesson from both the companies why it is necessary to work according to the corporate governance. ASX rule and regulation should be followed to insure that company is going towards right path and direction. If we take Cazaly resources limited it is an Australian based company which work as company with all corporate governance acts and directors duties are also being followed by board of directors as well as the directors of the company, manager and officer perform their duties with good faith and due care which is necessary for a good corporate governance. In case of Clive peeters, one of the biggest retailing company was for Electronic and computers got liquidised due to improper communication. The corporate governance of the company lacked in many ways and breach of duty from manager was the main issue which lead the down fall of the company. One of the manager of Clive Peeters once said that Drop of price of product in Clive Peeters lead to drop of salary of management in the company.