Domino's Pizza LTD and Super Retail Group LTD - Case Study Example

University> Assignment 1T1 2014 By Domino's Pizza LTD and Super Retail Group LTD 3. Should the ASX Corporate Governance Council Principles and Recommendations be made mandatory for large private companies? Discuss with reference to theory studies in this course. The principles and recommendations inclusive of 2010 amendments therein by ASX Corporate Governance Council need to be adapted. This is together with the Corporation Act 2001 that needs to be a mandatory requirement as they work towards improving the well-being of an organization and stakeholders. Notably, the principles should be reviewed on regular basis in line with the corporate governance in order to ensure consistency of the charter as per the objective of the board of management, existing law and good law practices in the world. The charters and policies for these principals can be accessed from the corporate governance section on the website of the company. The Principles and Recommendations of ASX Corporate Governance is formatted with specific references to a number of principles that include: 1st Principle: It help to set foundations for both management and oversight The Board of Directors works in conjunction with senior level management of the company and they are answerable to shareholders in overseeing the daily running of the business activities. They include some overriding objectives that ensure that shareholders value is increased within the proper framework which safeguards the interests and rights of the shareholders of the company whilst making sure there is proper management of the group. The board of management has various duties which include a contribution to and approval of the goals and strategic direction of the company is to observe application of business strategies and goals. They as well assess financial well-being of the business, approving annual financial budgets and adopting the annual company’s financial reports. The board also approves and monitors the continued fluctuations of acquisition, divestitures and capital management expenditure. Since the board of directors are chief executive officers, they ensure adequate systems of controls within and risk mitigations so as to protect the business. They appoint and remove the Managing Director, any other executive officer(s) and secretary of the company. Their roles also entail approving the nomination of the Chief Finance Officer in addition to scrutinizing the performance of the senior level management. Other roles of the board comprises of ensuring transparency is evident to shareholders and well encourage them to participate in general meetings and in instituting code of conducts. Consequently, the board deputizes responsibilities of daily management of the company to the managing director. Its form of operation is stipulated in broad principles outlined in the company’s charter and is readily accessible on the website of the company. The Managing Director delivers a report summarizing the performance of the company’s senior executives to the Human Resources and Remuneration Committee. The report consists of performance evaluation details that have taken place during a given financial period (1975-1976 salary survey: staff report on fringe benefits, 1976). 2nd principle: It structures the Board to to ensure more efficiency. The constitution of the company requires that the minimum number of directors is three and maximum number of directors should be eight. The board is currently has six directors out of which five inclusive of directors are non-executives. The chairman of the board chairs all board meetings and he/she first brief the other board members as per their responsibilities. Besides he/she is supposed to facilitate discussions during board meetings (1988 Maryland wage & salary survey: report, 1988). ASX Corporate Governance Council Principles and Recommendation dictates that the Board nomination committee renew the board annually. This ensures there is available and enough pool of skills to safeguard the interest of shareholders. The Board of Directors include six Directors, of whom four, including the chairperson, are autonomous non-executive directors. The pre-control of self-determining non-executive directors distances the board of management from the executive level of management in order to ensure independence of the board. The structure as well ensures that the company in question accrues benefits of diversity in terms of experience, professional qualifications and skills. The Board is also mandated to seek for autonomous advice from professionals at the company’s cost as long as they are doing what they are required to do by the company (Stegeman, 2000). 3rd Principles: Set to ensure ethical and responsible decision making The Company has created a statement based on good code of conduct and values that has been endorsed by the board in totality and it is implemented across fairly. This code is revaluated on its suitability on need basis to ensure maintenance of the company’s integrity. 4th principle: help to maintain integrity in financial reporting ASX Corporate Governance Council Principles and Recommendation direct a company to form an Audit and Risk committee, which is considered be the core constituent of its corporate governance program and part of the company’s commitment to good practices of corporate governance. The Audit and the Risk Committee fully supports the Board and on regular basis advises the board. It is regarded as efficient while in a forum with the board by having concentration on specific issues relating to verification and safeguarding of the financial reporting methods of the company inclusive of financial assessment (Armstrong and Murlis, 2007). 5thand 6thprinciples :Ensure timely, balance disclosure, and respect on the right of shareholder The company has laid out procedures and policies for disclosing information relating to the company and its subsidiary entities. In this policy, a person of reasonable mind expects having an effective material regarding the price of the company’s security (Stegeman, 2000). These plans and policies disallow them from entering into a transaction that would otherwise limit invested entitlements and economic risk options. 7th principle: Ensure that risk management is put into consideration The Audit and Risk committee has an oversight role and is involved in directing the Risk management committee of the company in terms of internal control and compliance systems; these are for instance internal controls, legal compliance, risk management and oversight. 8th principle: Ensures Faire and responsible remuneration. The Human resource and Remuneration Committee include Independent non-executive directors. Every member within the executive team enters into a contractual obligation upon his appointment. The contract puts into consideration responsibilities, duties, rights, entitlements on expiry of the contract. In conclusion, all the aforementioned principles are good in the best interest of a company and other stakeholders. They are, therefore, worthy to be made mandatory for large private companies (Krannich and Krannich, 1990). 4. For the two companies your group was allocated, provide a summary of the short term and long term salary and performance benchmarks for the executives of the companies over the period June 30, 2008 to June 30, 2013. Comment on the changes in the basis of remuneration and the nature of the disclosure. Give your opinion as to whether (i) the performance benchmarks for remuneration are clear and appropriate and (ii) the extent to which remuneration and performance are linked. Long-term salary and performance benchmark of super Retail Group Limited: This includes Director’s for the year to 29 June, 2013 and was approved on 25 July, to fees for the year to 28 June, 2014 approved on 22 July, 2013. Note that, the director’s fees are inclusive of committee fees. 2013 2014 $ $ Chairman 200,000 280,000 Other non-Executive directors 105,000 125,000 Chair of Human resource and Remuneration committee 10,000 20,000 Committee Member n/a 10,000 Senior Executive remuneration structure The senior Executive Remuneration structure is revised every year by the Committee and Human Resource Manager. The Committee ensures that the structure of remuneration is in lieu with market practice. Senior executive remuneration comprises of three elements; basic salary, short term and long term incentives. The mix of remuneration between variable and fixed components is different with seniority level, roles and responsibilities. This facilitates in driving business and implementing its strategy (Stegeman, 2000). Performance The vesting of performance Rights is subject to cumulative compound yearly growth earning per share of at least 10%, and Return on capital of at least 15% over a period of three years ending 30th June 2013. If the Company accomplishes the hurdles in performance in a three-year-period, its can attain earnings by a rate of 33% as contrasted to 9% anticipated market growth rate. As such, the company would be able to generate a return on capital of about 4.5% which is higher than its initial capital cost. Failure of the company’s performance Right to expire and satisfaction of its condition, the former is vested as per the following. For the second company, accumulated compensation made to main executive management of the consolidated company and entity. 2013 /2014 $ $ Short-term employee benefits 3,863,304 4,612,805 Post-employment benefits 198,046 163,184 Other long-term benefits 79694 73,183 Termination benefits - - The remuneration committee sets out the compensation of every key personnel in management of the combined entity in full regard of the personal performance and market trends. An autonomous consultant is hired by the Remuneration Committee to make sure practices of reward and senior level management are in lieu with market practice. Son as to make sure that remuneration is independent of undue member influence of senior management personnel, to whom reference is made to; the board ensures that the consultant on remuneration has no close relations with any member of the management personnel. Therefore, the board is satisfied that the member or members of the key management personnel to whom the recommendation relates made the remuneration recommendation free from undue influence (The WetFeet insider guide to negotiating your salary and perks, 2003). References 1975-1976 salary survey: staff report on fringe benefits. (1976). Olympia?: Joint Ways and Means Committee, Washington State Legislature. 1988 Maryland wage & salary survey: report. (1988). Annapolis, Md.: The Association. Armstrong, M. and Murlis, H. (2007).Reward management a handbook of remuneration strategy and practice (Rev. 5th ed.). London: Kogan Page. Krannich, R. L. and Krannich, C. R. (1990).Salary success.Woodbridge, VA: Impact Publications. Stegeman, H. (2000). Individual remuneration.The Hague: CPB Netherlands Bureau for Economic Policy Analysis. The WetFeet insider guide to negotiating your salary and perks (2004 ed.). (2003). San Francisco, CA: WetFeet, Inc.. Read More