Corporate Governance - Coca-Cola Company - Essay Example

Corporate Governance Table of Contents 0Factors and measures: 3 1Structure to add value 3 2Remunerate fairly and responsibly 3 3Board functions and expertise 3 2.0The coca cola company 3 2.1Structure to add value 3 1.4Remunerate fairly and responsibly 4 1.5Board functions and expertise 4 3.0International Business Machines (IBM) 5 3.1Structure to add value 5 1.6Remunerate fairly and responsibly 5 1.7Board functions and expertise 6 4.0JB HI-FI Limited 6 4.1Structure to add value 6 1.8Remunerate fairly and responsibly 7 1.9Board functions and expertise 7 5.0Lufthansa 7 5.1Structure to add value 7 1.10Remunerate fairly and responsibly 8 1.11Board functions and expertise 8 6.0Olympus 9 6.1Structure to add value 9 1.12Remunerate fairly and responsibly 9 1.13Board functions and expertise 10 7.0Reasons for choosing these factors/measures 10 References 12 1.0 Factors and measures: 1.1 Structure to add value a) Has the board established a proper nomination committee? b) Are at least 70% of the board members independent directors? 1.2 Remunerate fairly and responsibly a) Does the board have a remuneration/ compensation committee? b) Does the board monitor and review outcomes of the remuneration system in place to ensure that the remuneration system is operating as intended? 1.3 Board functions and expertise a) Does the board oversee the overall function of the company of strategic objectives, risk strategy, corporate governance and corporate values? b) Do the board members posses appropriate experience, competencies and personal qualities and qualified to hold the governance position? 2.0 The coca cola company 2.1 Structure to add value a) Has the board established a proper nomination committee? Yes, it has set out NominationsCommittee comprised of all the independent Non-Executive Directors (it does not include any Directors who are or have been associated with a related party) (Coca-Cola Amatil Limited , 2012, p. 9). The committee reviews board suitable candidates for appointment to the Board and reviews general matters of corporate governance. b) Are at least 70% of the board members independent directors? Yes, all the non executive directors are independent members which make up more than 70% of the directors (Coca-Cola Amatil Limited , 2012, pp. 5,6). A Director is considered independent provided he or she is free of any business or other relationship with CCA or a related party which could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgment. A related party for this purpose would include the Coca-Cola Company (Coca-Cola Amatil Limited , 2012, p. 9). 1.4 Remunerate fairly and responsibly a) Does the board have a remuneration/ compensation committee? Yes, the Board has a compensation committee which gives the quantum and structure of compensation(Coca-Cola Amatil Limited , 2012, p. 14). The Board (on the recommendations of the Committee) has set a remuneration strategy that supports and drives the achievement of CCA’s strategic objectives (Coca-Cola Amatil Limited , 2012, p. 19). b) Does the board monitor and review outcomes of the remuneration system in place to ensure that the remuneration system is operating as intended?Yes, The Compensation Committee (Committee) is responsible for reviewing the nature and amount of the Group Managing Directors and senior executives’ remuneration (Coca-Cola Amatil Limited , 2012, p. 19). 1.5 Board functions and expertise a) Does the board oversee the overall function of the company of strategic objectives, risk strategy, corporate governance and corporate values? Yes, the coca cola company has laid a good foundation of management and oversight which includes monitoring, reviewing and laying a strategic direction for the company(Coca-Cola Amatil Limited , 2012, p. 9). b) Do the board members posses appropriate experience, competencies and personal qualities and qualified to hold the governance position?Yes, the nomination Committee reviews the Board’s composition to ensure that it comprises Directors with the right mix of skills, experience, expertise and diversity to enable it to fulfill its responsibilities to shareholders (Coca-Cola Amatil Limited , 2012, p. 9). 3.0 International Business Machines (IBM) 3.1 Structure to add value c) Has the board established a proper nomination committee? No, The IBM has not mentioned in the report, their existence of nomination committee and most of the directors come from their subsidiaries (International Business Machines Corporation, 2012, p. 142). d) Are at least 70% of the board members independent directors? Yes, since most of the IMB directors are from the subsidiary company, at least 70% are therefore are independent (International Business Machines Corporation, 2012, p. 142). 1.6 Remunerate fairly and responsibly c) Does the board have a remuneration/ compensation committee? No, the IBM report does not disclose the compensation program used to remunerate the board members. d) Does the board monitor and review outcomes of the remuneration system in place to ensure that the remuneration system is operating as intended? No, the IBM has just mentioned the components of board and does not the compensation program operations. 1.7 Board functions and expertise a) Does the board oversee the overall function of the company of strategic objectives, risk strategy, corporate governance and corporate values? Yes, the management of IBM is fully responsible for ensuring that the comprehensive systems and control are in place (International Business Machines Corporation, 2012, p. 68). b) Do the board members posses appropriate experience, competencies and personal qualities and qualified to hold the governance position? Yes, since the board is made up of CEO from the subsidiaries, whoposses adequate experience in governance (International Business Machines Corporation, 2012, p. 142). 4.0 JB HI-FI Limited 4.1 Structure to add value a) Has the board established a proper nomination committee? No, in view of the size, the JB Hi-Fi Company was determined not to establish a nomination committee. The board is charged with the responsibility of selecting and appointing board members (JB Hi-Fi Limited, 2013, pp. 5,7). b) Are at least 70% of the board members independent directors? Yes, in reviewing the Board’s composition and in assessing nominations for the appointment of non-executive directors, the Board uses its own internal resources to identify candidates for appointment as directors. External resources may also be used if suitable candidates are not identified (JB Hi-Fi Limited, 2013, p. 5). 1.8 Remunerate fairly and responsibly a) Does the board have a remuneration/ compensation committee? Yes, the board of JB Hi-Fi has established a remuneration committee that sets out the compensation programs (JB Hi-Fi Limited, 2013, p. 7). b) Does the board monitor and review outcomes of the remuneration system in place to ensure that the remuneration system is operating as intended? Yes, the remuneration committee often reviews and makes recommendations of the policies and compensation programs by holding meetings to discuss the remuneration outcomes (JB Hi-Fi Limited, 2013, p. 7). 1.9 Board functions and expertise a) Does the board oversee the overall function of the company of strategic objectives, risk strategy, corporate governance and corporate values? Yes, for JB Hi-Fi, the board remains an integral part of the Board’s strategy to encourage innovation and diversification with new products, technology, merchandising formats, advertising and property locations in a controlled and responsible manner (JB Hi-Fi Limited, 2013, p. 2). b) Do the board members posses appropriate experience, competencies and personal qualities and qualified to hold the governance position? Yes, the Board of JB Hi-Fi seeks to ensure that its members provide an appropriate skills, background, experience and skills diversity (JB Hi-Fi Limited, 2013, p. 5). 5.0 Lufthansa 5.1 Structure to add value a) Has the board established a proper nomination committee? Yes, in Lufthansa, nomination committee consists of three members elected from among the shareholder representatives. This committee proposes suitable Supervisory Board candidates to the Supervisory Board, which can in turn put them forward for the election of new Supervisory Board members at the Annual General Meeting (Lufthansa Group, 2013, p. 16). a) Are at least 70% of the board members independent directors? Yes,The Executive Board reports regularly to the Supervisory Board, which is made up of equal numbers of shareholder and employee representatives(Lufthansa Group, 2013, p. 16).Lufthansa Group has not taken into account either directly or indirectly in determining the remuneration that the supervisory board receives from the law firm and consultancy company therefore there is no conflict of interest and no question of independence (Lufthansa Group, 2013, p. 17). 1.10 Remunerate fairly and responsibly b) Does the board have a remuneration/ compensation committee? Yes, Lufthansa has set out Appropriate Executive Board Remuneration (VorstAG) which gives general orientation andrecommendation for long-term incentive models(Lufthansa Group, 2013, p. 19). In addition, the current remuneration structure in Lufthansa has been in place since 2011 and the rules of German corporate Governance have been fully implemented (Lufthansa Group, 2013, p. 18). c) Does the board monitor and review outcomes of the remuneration system in place to ensure that the remuneration system is operating as intended? Yes, the service contracts with board members cap all the main elements of remuneration including fixed salary, the variable bonus and retirement benefits commitment (Lufthansa Group, 2013, p. 17). The remuneration system can be modified andput forward for approval in AGM (Lufthansa Group, 2013, p. 18). 1.11 Board functions and expertise a) Does the board oversee the overall function of the company of strategic objectives, risk strategy, corporate governance and corporate values? Yes, Lufthansa is jointly responsible for the management of the entire company to inform each other of significant activities and transactions (Lufthansa Group, 2013, p. 16). b) Do the board members posses appropriate experience, competencies and personal qualities and qualified to hold the governance position? Yes, the board is made up of members of high integrity who consists of counsel consultants in executive firms. 6.0 Olympus 6.1 Structure to add value a) Has the board established a proper nomination committee? Yes, Olympus have established the Nominating Committee and the Compensation Committee, which are comprised primarily of highly independent outside officers, effectively separating authority related to corporate officer nomination and compensation from management (Olympus Corporation, 2013, p. 3). b) Are at least 70% of the board members independent directors? Yes, The Board of Directors now consists of a majority of outside directors, and these and other corporate officers are appointed by the nomination committee. The members are 13 with at least 8 outside directors (Olympus Corporation, 2013, pp. 3,48). 1.12 Remunerate fairly and responsibly a) Does the board have a remuneration/ compensation committee? Yes, board has established compensation committee comprising of independent members(Olympus Corporation, 2013, p. 4). The Director’s compensation is decided by the Board of Directors in accordance with the Director Compensation Guidelines based on the recommendations of the Compensation Committee, which is comprised of a majority of highly independent outside directors (Olympus Corporation, 2013, p. 49). b) Does the board monitor and review outcomes of the remuneration system in place to ensure that the remuneration system is operating as intended? Yes and the upper limits for the monthly compensation of directors and audit & supervisory board members as well as director bonuses are decided at the general meeting of shareholders (Olympus Corporation, 2013, p. 49). 1.13 Board functions and expertise a) Does the board oversee the overall function of the company of strategic objectives, risk strategy, corporate governance and corporate values? Yes, the Board of Directors meets once per month and strives to make timely decisions regarding the Company’s business strategies and other important management matters and to exercise appropriate oversight of business execution (Olympus Corporation, 2013, p. 48). b) Do the board members posses appropriate experience, competencies and personal qualities and qualified to hold the governance position? Yes, the board has appointed 8 outside directors, representing a majority of its 13 directors, and utilizing their objective standpoint, wealth of experience, and extensive knowledge of management (Olympus Corporation, 2013, p. 49). 7.0 Reasons for choosing these factors/measures Principles and recommendations are guidelines, designed to produce an outcome that is effective and of high quality and integrity (ASX Corporate Governance Council, 2010, p. 6). Effective corporate governance structures encourage companies to create value, through entrepreneurialism, innovation, development and exploration, and provide accountability and control systems commensurate with the risks involved (ASX Corporate Governance Council, 2010, p. 3). Two other factors are based on Basel Committee on Banking Supervision. Corporate governance principles are set to enhance corporate governance frameworks and to assist supervisors in assessing the quality of those frameworks ( Basel Committee on Banking Supervision , October 2010 , p. 4). The board structure is important to enable the board discharge its duties. Board should structure itself in a way, including in terms of size, frequency of meetings and the use of committees, so as to promote efficiency, sufficiently deep review of matters, and robust, critical challenge and discussion of issues ( Basel Committee on Banking Supervision , October 2010 , p. 11). Remuneration is crucial since it contributes to the company performance and risk management. The board should monitor and review outcomes to ensure that the remuneration system is operating as intended ( Basel Committee on Banking Supervision , October 2010 , p. 25). The board functions in terms of responsibilities, code of conduct and qualifications should be directed towards improving the corporate governance of the company. The board has overall responsibility for the company, including approving and overseeing the implementation of the bank’s strategic objectives, risk strategy, corporate governance and corporate values ( Basel Committee on Banking Supervision , October 2010 , p. 7). References Basel Committee on Banking Supervision . (October 2010 ). Principles for enhancing corporate governance . Switzerland : Bank for International Settlements Communications . ASX Corporate Governance Council. (2010). Corporate Governance Principles and recommendations with Amendments. Australia: ISBN 1 875262 42 3. Coca-Cola Amatil Limited . (2012). Coca-Cola Amatil Limited Annual Report . Australia: Coca-Cola Amatil Limited ABN 26 004 139 397. International Business Machines Corporation. (2012). IBM Annual Report. Newyork: COL03002-USEN-03. JB Hi-Fi Limited. (2013). Annual report. Australia: ABN 80 093 220 136. Lufthansa Group. (2013). Annual Report. Cologne: Deutsche Lufthansa AG. Olympus Corporation. (2013). Annual Report. Japan: Vegetable oil link. Read More