Corporate Governance at Commonwealth Bank Company - Case Study Example

Commonwealth Bank Company Students Name Institution of learning Commonwealth Bank Company Introduction The Commonwealth Bank was established in the year 1911 under the Commonwealth Bank Act. Nonetheless, its operations began in 1912 with fortifying to lead both general banking accounts and funds forms. Today the bank has developed into a business with more than 800000 shareholders and a total of 52000 workers. The bank offers a broad range of financial assistance with an aim of assisting all Australians manage their fiancés effectively (Marshall, & World Health Organization. 2007 p 22-23). In providing integrated financial services the bank is leading in Australia that includes retail premium, businesses, institutions banking, management of funds, share broking, insurance among others (Blair, & Walker, 2006). Additionally, the bank is listed on the securities exchange in Australia and is also included in the Morgan Stanley Capital Global Index (Australia. 1996 p 20-50). They operate with a major object of having a total shareholder return in a semi quartile in its listed peers in Australia. Calculations on the total shareholder are based on the growth of the investment value of the group shares with the assumption that all the dividends are reinvested in the shares at the time dividends are paid. The bank operates on ago real-time 24/7 in Australia and the whole world. The bank has managed to establish its operations in other areas such as New Zealand, Europe, as well as in the Asia-Pacific region. Corporate Governance The Bank Corporate Affairs proclamation plots the significant issues of the corporate administration system. The obligation is to verify that a reliable and coordinated methodology is conveyed towards the bank's internal and external issues, communication, and legitimacy, corporate maintainability, Secretariat among others (Commonwealth Bank. 1998 p1-2). Under the rules of the corporate governance, the Bank is conferred towards verifying that its systems and processes reflect on an exclusive expectation of the administration. The governing body has embraced corporate governance rules system that is extensive and whose outline is made to guarantee harmony in the balance between conformance and execution (Commonwealth Association for Corporate Governance.1999 p 25). As a result the government can embark on an efficient manner; cautious, and risk taking activates which forms the basis of the banking business. In the year, 2014 the governance of the group was in conformance with the corporate governance principle, as well as, recommendations (Monks, & Minow, 2004 p 23).  The directors are responsible for the shareholder's performance and governance while the management implements the group’s objectives and strategies and day to day operations of the bank. Literature review Corporate governance is an issue that is gaining quite a lot of great deal attention in overseas and Australia in the public and private sectors. In the private division, the significance of the corporate governance has been highlighted by the corporate overseas and Australia. Again in the public division, changes have been attempted as of late with a point of enhancing the success, effectiveness, occurrence, and privatization, of government associations. Corporate governance is also becoming more of formalizing which eventually makes it consistent and apparent in organizations decision-making process (Bailey, & Australia. 1995 p 43).  An enterprise management system that is effective will facilitate help in the decision-making and delegation of accountability appropriately within and outside an organization. This move makes sure that the stakeholder’s capricious interests are balanced properly. This implies that the decisions are made in a rational, transparent and informed fashion and that the decisions made contributes to the overall effectiveness and efficiency of an organization (Marshall, K., & Marsh, 2003 p 42).  The board of directors whose responsible are clearly set in the board character is head figures in the corporate framework structure. The other figures that form the framework include the CEO, Board committee, and the executive committee. The following is a depiction of the bank’s corporate governance structure overview. The Corporate Governance Methodology The Agency approach This methodology can be scrutinized from the administration perspective. The bank management obligation is to actualize the banks destinations and strategies. They also undertake the day to day control and management of the bank affairs.’ In regard to the corporate governance statement one the employees start working for the bank they agree to a bid with the professional statement that implies that they should ensure professionalism common sense, honesty and fairness principles. The management has the responsibility to ensure that the bank protects the bank business through prom and efficient services to its customers by the Staff. In this regard all the bank instructions, directions should be enhanced in such a way that the bank reputation is maintained (Bender, 2013 p, 5-26). Therefore the bank staff should vigorously support the Bank's strategies irrespective of their peculiar views. Staff ought to abstain from putting themselves in a position where they may remain to profit, even indirectly, from an exchange between the Bank and an alternate party. Where there is any probability of such clash emerging, they are not supposed to make full exposure to the Bank. They ought to guarantee that their individual associations with clients don't impact or partiality their commitments to the Bank (Gollan, 1968 p 9).  Specifically, they should not acknowledge commissions, and to utilize common sense with respect to endowments or friendliness from clients. Recruitment and employment are part of the banks day to day operations and according to the statement from the corporate governance, sexual harassment, and discrimination in the workplace should not be practiced because they are illegal. The bank policy and programs should be adhered to accordingly. Customers are the backbone of the banking business. As a result, their affairs should with absolute secrecy. In this case, the management should prevent all instances of dishonesty among the bank professionals such as theft, money misappropriation among the staff and access to information and involvement in fraudulent actions (Hopkins, 1997, p25).  The administration team is led by the CEO, which has an ultimate accountability and responsibility to the board of daily management of the bank operations. Strategies implementation is also the responsibility of the CEO and senior management as well as the policies approved by the Council. Some of these includes, implementing and developing risk control mechanisms, and maintaining an organization structure that is useful in assigning authority and responsibility accordingly (McDowell, 2000 p 13). The CEO also has an active role to play in setting agency policy and detecting any revisions that may need the Boards attention. All these duties are explicitly stated in the corporate governance statement under the professionalism section. Stakeholder approach: Shareholder's issues are handled by the Directors whereby the board has a role in establishing the committees and oversight of the business affairs. The board oversees the overall business strategies and the organization structure. Reports on performance to the stakeholders are delivered by the board as well as compliance with applicable rules and regulations (Beauchamp, & Bowie, 1993 p 31).  Relationship among other interested parties within the governance system affects the relationship that exists between the responsible ministers and corporate governance. The stakeholders are many and have variations; however, under the corporate governance the following major stakeholders can be identified: those that pass legislation, central agencies such as fiancé and administration departments. An efficient and accountable process is enabled by corporate governance where by virtue of their knowledge the stakeholders plays a crucial role in the operations of strategic decisions made and approved by the Board Selected features of corporate governance There are numerous principal characteristics of the Bank’s corporate governance, which includes changes undertaken as a result of the review of the audit, nominations, and remuneration committees that comprise of only non-executive directors (Frost, Michelson, Laan, & Wailes, 2004 p 3-9). The CEO has not played a part in the deliberations of the remuneration once the matters could likely impact on his or her position. The criterion for appointing new executives’ is built by the nominations board. Outer experts are occupied with the quest for new directors. In a shareholders meeting before an executive is picked for re-race, the board administrator needs to counsel other board members lastly audits the reelection chief execution before support. There is a yearly meeting of the non-official executives without the vicinity of any administration. This is an expansion to the CEO compensation and execution that is attempted without the CEO. Different people take the CEO and Chairman Positions. It is important to note that this had been the case even before the bank got publically. The Boards chairman holds a meeting with the team of senior executives with an aim of discussing the opinions they have in regard to the involvement level and performances of the board (Monks, & Minow, 2004 p 9-16).  Once the directors are appointed, they undergo an induction process and a refresher program regularly. Directors’ knowledge issues challenges and trends that have relevance to the bank are updated as well. This sis session that involves local and overseas professionals particularly in fields that are relevant to the operations of the bank. There re policies governed by the corporate governance on the director’s chance to disclosing off their shares in the bank without disclosing any price sensitive information. These strategies also preclude any form of trade in bank stocks on a short-term basis. The directors are expected to make sure that they inform the Board on any intention to purchase or sell Bank shares (Mallin, 2004 p 13).  On the other hand, Directors are expected to take a minimum amount of their fees in shares in the bank and which was acquired by the market price and hold the shares for duration of 10 years until the time that they leave the board. The non-executive directors do not take part in the incentive plans of the bank at all. The stakeholders appropriated on the retirement structure for directors; however the bank decided to close it. As a result, prerogative for present Directors will be “grandfathered”, and no novel members will get admission to the system Theory integration The common wealth bank has its securities as a result it contains external influences on its operations compared to other firms in the market. One key way of indicating the corporate governance scope is by putting into consideration the obvious influences that can affect its operations. These can either be internal or external; the best way to approach these influences is integrating the shareholders theory which is a key theory linked to corporate governance. The theory states that the sole responsibility of any business is to maximize profits (Baker, & Martin, 201, p 41). The management is given the task to act as the shareholders agents to run the businesses for their benefit. The sole qualification to maximize profits is to ensure conformity to the fundamental rules of the society, both those personified in law and in ethical custom. The role of shareholder theory can be seen in the demise of big corporations where incessant pressure on the management to increase profits to shareholders led them to influence the company accounts. This is contradicts on how the corporate governance standards conforms. Ethical challenges Ethics is an essential aspect of business operations especial banks. Mounting moral crisis are on John Laws and ABA. The Bankers Association of Australia paid a large sum of money to John Laws secretly to persuade him to stop broadcasting bank criticism and endorse the bank instead. This is a high level of ethical behavior concern (Marshall, & World Health Organization. 2007 p 17). The public have lost their confidence and trust of banks in Australia following this move. It becomes hard to believe that their financial transactions are in safe hands while in these banks. This has forced some of them to look for other measures. The banks biggest challenge is to build up and retain their public figure (Yaverbaum, 2004 p 21). The action had serious ethical concerns, and the bank has succumbed to the force of the other members of the banker’s lobby group dreading it would be flung out if it failed to back the proposal. The bank manager is under pressure to explain why the bank had taken the move. This case has also emphasized the difficult struggle commercial radio need to manage, such as balancing the goals of increasing returns to its stakeholders and keeping its public informed. Conclusion This paper has highlighted in details the commonwealth bank corporate governance practices and strategies. As a result the stakeholders can have some feel on how the bank approaches its crucial bank operation aspects. In addition, the viewpoint underlying the corporate governance approach is dependable with the ethical values essential for all bank employees. 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