Vodafone Australia Corporate Governance Practices - Case Study Example

Vodafone Australia Corporate Governance Practices Name Course title Date Introduction Governance is paramount in all sectors and it guarantees that the right things are done in the right procedures for the benefit of all the stakeholders involved. Integrity, correspondence and adhering to all the set policies ensures that governance is enforced within and outside the organization. Moreover, governance helps see that sustainability is achieved in all the practices as well as responding to all factors that affect the running of the organization (Gompers, Joy, & Metrick, 2003, p.122). Corporate governance is involved in checking on how an organization is controlled and led on issues pertaining to relationships and distribution of responsibilities as well as rights to all stakeholders involved. Furthermore, it determines and directs how rules and objectives are set in an organization according to its mission and vision as regard to its core values. Therefore, corporate governance helps in monitoring performance and accountability in an organization for specified period to enable reporting to stakeholders on progress (Lan, & Heracleous, 2010, p.298). Over time stakeholders have been sensitized on the importance of corporate governance and how it ensures effective and efficient running of public organizations. Openness and transparency are vital in corporate governance for public organizations in ensuring that practices, procedures, structures and strategies are developed with public interest and not personal interests. Clear guideline is issues by corporate governance framework that synchronizes organization’s boards and stakeholders responsibilities to achieving set goals and objectives. These helps set priorities and utilize limited resources over a set timeframe without duplicated responsibilities on critical issues (Mainardes, Alves, & Raposo, 2011, p.229). This paper looks into at least three key features of Vodafone’s Australia corporate governance framework and how it positions the firm to engage with stakeholders on local and international levels. Moreover, in a global context, it checks on what ethical challenges this firm may or may not be addressed with its current governance arrangements. Literature Review Corporate governance frameworks viewed from both perspective of agency and stakeholders can be likened to car wheels whereby for it to operate effectively, they must be balance well. In this era of rapid changes, corporate governance must be swift in responding to issues for sustainable control to be achieved. When dealing with roles and responsibilities in an organization it is important to note that there is a difference between business management and corporate governance (Palmrose, Richardson, & Scholz, 2004, p.62). Business management deals with executive officers ensuring that daily activities are undertaken for productivity and performance to be recorded. On the other hand, corporate governance involves directors ensuring that the executive officers perform their duties appropriately according to the set rules and responsibilities for realization of increased corporate value. These directors make important and critical decisions on behalf of other stakeholders; this saves time and resources and ensures that sustainable progress of the organization is achieved (Salami, Johl, & Ibrahim, 2014, p.18). Agency Approach From the agency theory, issues related to relationship between business principals and agents of the business are addressed. The business principals being the shareholders while the business agents being the executive arm of the business. Therefore, the agency theory assists in resolving conflicts that may emerge when there are differences concerning goals and objectives of the business. The shareholders face the difficulty of verifying what the business agents are doing towards achieving the set targets. Hence, the theory helps to tackle such issues. Furthermore, the theory helps when there arise diverse attitudes between shareholders and executives on risk management in the organization. This is to help come to a compromise on what is to be done when risks arise in the running of the organization (Westphal, & Zajac, 2013, p.627). Considering the agency approach of corporate governance framework, there exists assumptions that the business principals are one entity while in reals sense they diverse ranging from individuals to families to institutions. This introduces complexity in corporate governance because each group that forms the shareholders/business principals have diverse social interests. Moreover, the agency approach shows that the corporate governance has narrowed the organizational perspective to shareholders rights ignoring the wider sociology understanding of the whole issue. The agency approach shows that corporate governance framework emphasizes more on the wellbeing of shareholders and does not consider chief factors affecting the agents of business (Salami, Johl, & Ibrahim, 2014, p.26). Shareholder Approach On the other hand, the shareholder approach towards corporate governance framework dictates that shareholders are affected positively or negatively by the running of the business. Hence, the interests of all the stakeholders must be considered when an organization is making decisions in the course of its running. The shareholders being one of chief members of stakeholders expect that the business agents utilize their capital to generate maximum wealth for them. They assert that the agents are supposed to engage in legal business activities that are competitive in the market for increased corporate value of the organization. This guarantees them higher benefits than what they invested into the organization. Moreover, it is the role of the agents to ensure that fraudulent activities are eliminated from their transactions to reduce losses in profit margins. Other stakeholders expect the organization to be sensitive to their interests, both socially and morally, when making strategic decisions (Salami, Johl, & Ibrahim, 2014, p.26). This is because organizational activities affect most of them directly or indirectly through policies, practices, regulations and strategies employed during achievement of set objectives. This approach declares that the progress of an organization depends on how it satisfies the interest of the stakeholders by being responsible in their operations. Therefore, it is important noting that this approach does not define the finer details involved in the running of the organization but perceives the big picture of reaping benefits as long as the organization is operational (Westphal, & Zajac, 2013, p.621). Company Overview Vodafone Australia, also known as Vodafone Hutchison Australia, is a telecommunication company that was formed in 2009 after a merger between Vodafone Australia and Hutchison 3G Australia. It a mobile telecom company with a subscription base of 7 million users and holds a market portion of 27 per cent. This makes it the third largest mobile phone service provider in Australia after Optus and Telstra. Hutchison Whampoa and Vodafone Group own the company on a 50-50 basis, this was after ACCC and shareholders approved the move. The chief executive, Nigel dews, as at 2009 said that their priorities were people and sorting organisational structure. This was to reduce redundancy in all operation for sustainable growth and development to be realized. This shows the organization’s commitment to corporate governance framework in its operations. The two leading telecommunication companies, Telstra and Optus, operate competitively in the market to keep Vodafone Hutchison active in their operations (Ayse & Ibbott, 2014, p.128). This helps improve customer service and increased innovation trend that is important in telecommunication sector. Vodafone Australia is a subsidiary of the Vodafone Group Plc that has operations in Middle East, Asia Pacific , Europe, United States and Africa. It operates in 21 countries and partners networks with over 40 countries worldwide (Anwar, 2003, p.282). Features of Corporate governance Vodafone Australia is committed to maintaining their corporate governance at high standards through maintained investor trust and business integrity. All the involved stakeholders are expected to ensure honesty, fairness and integrity is observed in all operations. It has set a code of Conduct that entails business principles to be observed by all individuals transacting with or for the company. Moreover, the senior financial and principal executives are guided by a code of Ethics that is in line with US Sarbanes-Oxley Act 2002. This is to ensure that their activities comply with the set guidelines in the execution if their duties and responsibilities (Ayse & Ibbott, 2014, p.135). The company has a board that is concerned with the running of all businesses. It is responsible for the final decision made relating to management and performance of business activities. Besides, it has the mandate to ensuring that all corporate matters are handled with the highest degree of accountability. Also, it is accountable to stakeholders given that it ensures there is proper conduct in business transactions. Finally the board ensures that the corporate governance is effective and efficient in additional to reporting to the stakeholders on issues pertaining the same (Adegbite, 2012, p.259). Among the agency-based corporate governance practices that includes remuneration practices, transparency and disclosure, committee composition, shareholder rights, board diversity, social responsibility, audit process and community engagement, this paper looks into at least three practices. The corporate governance practices that Vodafone Australia involves itself with are Corporate Social Responsibility, transparency and disclosure and community engagement (Ayse & Ibbott, 2014, p.135). Corporate Social Responsibility (CSR) The social responsibility is an integral practice in daily practices of Vodafone Australia. The company believes that it has the responsibility to build sustainable products and services for sustainability to be achieved in economic, environmental and social outcomes. The chief executive officer bears the responsibility of ensuring that Vodafone Australia adheres to corporate governance responsibly. Moreover, the developed corporate responsibility structure ensures that all business practices integrate CSR in their execution (Agrawal, & Chadha, 2005, p.382). Other executive members have the mandate to ensure that implementation is undertaken to all corporate responsibility commitments of the organization area of operation. The reports on CSR key performances are submitted to Vodafone Group and Hutchison Whampoa for the purposes of auditing (Lan, & Heracleous, 2010, p.304). History on its earlier years of operation, Vodafone Australia is known to be an active CSR player through its establishment of World of Difference Program where annually four Australian are granted the opportunity to work for a period of one year in their favourite charity of choice. Salaries and expenses are catered for by Vodafone. Instead of directly pumping money into charities, the company empowers people who n return empowers these charities. This was viewed as an innovative program that rewards the society as well as the charity institutions therein. This CSR campaign was extensively emphasized and eventually led to Vodafone Australia being rewarded with a Corporate Social Responsibility award. Moreover, in 2008 the parent company, Vodafone Group, was declared winner of three awards for all the CSR reports by various organizations in UK (Vodafone, 2011). On another aspect of the company’s SCR they have used their technological advancement to develop Vodafone Guardian application to ensure smarter and relevant parenting is achieved. This application helps the parents or guardians to customize their children mobile phones so that they can aces morally right information in additional to determining the circle of friends the child can interact with in the network. Therefore, this application helps to ensure children are safe from issues like cyber bullying, access of explicit information, filtering chatting sessions and barring calls from unknown callers. Hence, it is a positive CSR from the company to the families using the network. Additionally, the company provides drivers with up-to-date information about Australian Traffic Laws and educates them on what to do while driving. The main reason is to control and reduce accidents on roads. All these CSR practices are an indicator that the company is devoted to achieving a sustainable society for improved living standards and healthy living (Bertrand & Mullainathan, 2003, p.1051). Community engagement Another corporate governance practice is community engagement through its Responsible Network Deployment Policy. This ensures that as the network continues to evolve and expand it will not have negative impacts to the sustainable living in the society. Therefore, the company performs interaction programs in the society to identify effects of the network to radio frequencies, environmental challenges, legal compliance, communication issues and developing landlord relationships for installation of base stations within the community (Ayse & Ibbott, 2014, p.139). This helps improve network rollout in consideration to sensitive issues in the area to reduce conflicts with the residents. Therefore, this improves the company’s society-organization relationship that helps it to have grassroots support and allegiance (Bertrand, Duflo, & Mullainathan, 2004, p.263). Understanding the Industry Code for Deployment of Mobile Phone Base stations ensure that the company complies with local and international standards that observes social, technical and environmental considerations in their network infrastructure. This clearly demonstrates that Vodafone Australia minds corporate governance practices by being considerate in its expansion and evolvement mandate (Ayse & Ibbott, 2014, p.143). Transparency and disclosure Finally, one of the issues surrounding organization dealing with public data is its ability to protect the data to interested third parties. Companies like Google, Facebook, Yahoo and Telecommunications worldwide are under pressure to share their stored data with government agencies for surveillance and other organizations for marketing purposes. Most companies secretly trade the data and this leaves its owners exposed to unknown risks. In 2014, Vodafone published a transparency report where it revealed that most technology companies are forced by the law to allow government agencies to access customers’ data. However, most of these companies deny being involved in such practices (Vodafone, 2014, p.10Z). This practice by Vodafone shows how the company is committed to enforce transparency policies. The disclosure of how companies are forced to allow government agencies to access data on basis of fighting terrorism and improving security acts as a step being real with the users. This level of openness demonstrates that Vodafone has no hidden agenda in their operations and in handling users’ data. Hence, commendable contribution to its corporate governance practices (Ayse & Ibbott, 2014, p.133). Conclusion Finally, it can be concluded that engagement of corporate governance practices in Vodafone Australia has an impact in improving its performance in Australia. Their involvement in CSR shows that the company is mindful of positively transforming lives in societies for sustainability purposes. However, the company can engage the society in informing them on new technological advancements that can be integrated with telecommunication to improve their lives. This can be done through seminars, community days and annual conferences. Moreover, Vodafone’s initiative to engage technology innovation to improve parenting as well as providing information to drivers is paramount in this generation. Conversely, the company can take the initiative of educating parent in the community and children in schools the impacts of technology so as to raise awareness and improve decision making on such issues. Finally, transparency on user data is crucial and organization should protect it under all costs. Vodafone’s initiative to disclose unethical uses of users’ data is commendable and it shows that organizations have to be sensitive with data. There exists a challenge between governments and organizations on the best ethical practices of handling users’ data although it can only be hoped that a solution for this issue will be found soon. Contrariwise, it is unethical for companies to be involved illegal profitable transactions that serve personal interests at the expense of users’ safety. If all these of corporate governance practices are viewed in the right perception, they can improve profitability of a company in additional to its impact in the society. References Adegbite, E. 2012, ‘Corporate Governance Regulation in Nigeria’, The International Journal of Business Society, vol.12, no. 2, pp.257-276. Agrawal, A. & Chadha, S., 2005, ‘Corporate Governance and Accounting Scandals’, The University of Chicago Press, Journal of Law and Economics, Vol. 48, No. 2, pp. 371-406. Anwar S.T., 2003, ‘Cases Vodafone and Wireless Industry: A Case in Marketing Expansion and Global Strategy’, Journal of Business & Industrial Marketing, vol.18, no.3, pp. 270-288. Ayse, S. H & Ibbott C.J. 2014, Network Orchestration: Vodafone’s Journey to Globalization, Emerald Group Publishing Limited, pp. 121- 147, ISBN 978- 1-78350-9. 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