Eni Corporate Governance and Sustainability Practice - Case Study Example

Eni Corporate Governance and Sustainability Practice Name Institution Name Date Introduction Organisations operate in different environments and the driving forces on the organizations means that effective corporate governance should be in place. In the recent past, corporate governance continues to gain traction and reasons behind the traction include an increase in institutional shareholders, checking powerful executives, address insufficient controls, review and approve executive’s remuneration, globalization of the economy, financial crisis, and demands for diversity. Sustainability responsibility is formulating and implementing measures targeted at protecting and making the environment to be sustainable. The definitions and frameworks of corporate governance raise important issues relating on how companies should operate relative to other stakeholders. Some Directors and Managers argues that the focus should be on the shareholders while others believe the responsibility to non-shareholders stakeholders is crucial. The premise is based on the impact of any decisions made, and the wider impact of the decision relative to numerous reasons and factors such as shareholder theory, and other theories that try or tend to support one of the perspectives. The aim of the paper is to analyse Eni in reviewing the approach the directors and managers of the company employ in addressing the debate on discharging responsibility to the shareholders and non-shareholder stakeholders. Overview of Eni Eni S.p.A (Eni) is a multinational oil and gas company with its headquarters in Rome. The company is considered as a super majors corporations because it operates in 79 countries. The company operates in energy, petroleum products, natural gas, and petroleum. The company employs more than 80,911 employees across the 79 countries and the company continues to grow (Eni, 2017). The company has effective corporate governance and sustainability measures, which continuously guides the business operations and other activities associated with the business (Eni, 2017). The oil and gas industry creates numerous climate change related issues and sometimes conflicts with the local community, meaning effective structures should be in place to advance the requirements. Corporate Governance and Sustainability The boards of directors play an important role in ensuring that shareholders have reliable information, ensures the managers are accountable to shareholders, and ensuring the different activities within the company are interlinked and champions the expectations and needs of the shareholders (Klettner, Clarke and Boersma, 2014). The shareholders are integral to any establishment and ensuring the shareholders are informed and satisfied with the processes improves their perceptions towards the management of the company (Epstein and Buhovac, 2014). The role of Board of Directors has to assist in formulating and implementing projects and other business related deliverables, which are possible through focusing on the interests of the shareholders. Apart from the shareholders, the company has to consider the expectations of other players in the industry. According to Eni Corporate Governance Code, the company adopted the interests of other stakeholders in 2006 (Eni Corporate Governance Code). The framework incorporates collecting information from different stakeholders and utilizes the information on directing the company to success; for example, the Eni Code policy. The Eni Code requires delegated bodies to report to the Board of Directors once every two months to inform on the developments and processes of the company. In addition, Eni continues to create and implement measures that support corporate governance such as assigning an external consultant to review and evaluate processes that the Board of directors and committees tasked (Eni Corporate Governance Code). It includes collecting information on the experience, professional competence, and other data, which influences Eni operations. Therefore, focusing on external bodies to complete the internal bodies and policies are aimed at ensuring the organization fulfills operational objectives. It means consideration of internal and external forces are crucial in ensuring the needs and requirements of different stakeholders are fulfilled. These fundamentals are also contained and championed through the Code of ethics. Eni has clear goals/objectives that are tied to Code requirements in which it requires Board of Directors to utilize the Corporate Governance Code in fulfilling statutory objectives, and this requirement extends to other areas including the committees and Eni different levels of management. All these activities have to be managed and controlled by the Board of Directors (Eni Corporate Governance Code). The formulation and guiding the different committees are aimed at ensuring the shareholders are satisfied while the needs of external parties are also considered. It provides a mechanism for win-win situation across different stakeholders. Eni Board of Directors understand the importance of sustainability issues and established the Sustainability and Scenarios Committee. The Sustainability and Scenarios Committee is tasked with furthering and enhancing strategic value of sustainability. It operates in an advisory and consultative function that aims to address sustainability issues and provide platforms to uphold sustainability objectives (Tricker and Tricker, 2015). The sustainability should not be focused from the perspective of the environment but other entities that form the organisation and drives the business activities of the organisation. It provides a framework in which different entities are grouped and used to advance the requirements of different stakeholders. The aspect of accounts and financial matters and other risk management solutions influences the operations at Eni, and the company created the Control and Risk Committee to advocate these issues (Neubauer and Lank, 2016). The Board of Directors guided the formulation of different guidelines such as Internal Audit Charter that supports Control and Risk Committee, which is integral to the corporate governance (Eni Corporate Governance Code). In addition, Eni Company continues to implement numerous measures including integrating various legislations such as the Sarbanes-Oxley Act that implemented internal rules addressing whistleblowing and information from external parties. These frameworks are aimed to incorporate different stakeholders into creating and championing a transparent institution, which acknowledgment of different stakeholders. According to Eni Sustainability Report 2015, Eni continues to create value for stakeholders, the society and the company as a whole. Eni understands that operating in a socially responsible approach means the creation of opportunities and promotion of respect for the different stakeholders including the protection of the environment. Hence, the focus is not on shareholders alone but also to non-shareholders in ensuring the society develops as the company continues to expand. These different fundamentals are contained in the governance and sustainability framework. In implementing any governance and sustainability issue, Eni analyses the impact to the company and the decisions to determine the direction of action was based on the materiality of the information which identified six relevant items (Eni Sustainability Report 2015). These items guide the operation requirements and other fundamentals of sustainability and governance requirements. Eni sustainability strategies do not focus only on the environment but overall development and success of Eni. To advance sustainability measures, Eni has grouped the entire sustainability measures into material topics. These topics include business management integrity, people safety, and asset integrity, equal opportunity for all people, fighting for environmental protection and against climate change, local development, and technological innovation. In 2015, Eni formulated a 10-year action plan that aims to address the sustainability requirements and address the climate change objectives. The Board of Directors formulated the plan and received support from the Sustainability and Scenarios Committee. Some of the factors integrated into the 10-year plan include Artic, COP 21, renewables source, HSE performance, and climate change debate and carbon bubble. These factors are aimed at improving the overall objectives of the project and guide the sustainability and corporate governance issues. The plan illustrates the company has a clear framework, which it has to employ in furthering the objectives and requirements of the companies, and also the wider social and environmental conditions. The premise of effective corporate governance system is incorporating the views of different stakeholders in advancing its strategic objectives. The local community plays an important role (Eni Sustainability Report 2015). In advancing sustainability and corporate governance, Eni implements an operating procedure that includes local stakeholder engagement, analysis of the local context, community investment plan, monitoring, reporting and audits, local content, and land acquisition and management (Eni Corporate Governance Report 2015). These activities indicate Eni collects data and information from the local community before deciding to invest, and also the local community contributes to guiding the business to the right direction (Prno and Slocombe, 2012). Incorporating the local community in processes is crucial because of the positive support the company can obtain and the goodwill associated with advancing the requirements of the business. Eni engages in numerous awareness programs to discuss and support sustainability objectives both at the local communities and national level. For example, in 2015, Eni supported the Sustainability Initiatives in African Countries (Eni Sustainability Report 2015). For instance, in Nigeria, it supported agricultural development in the Niger River Delta, in Congo Eni supported the improvement of cooking stoves while in Mozambique, Eni supported “Theatre So Good Project.” Partnering with the local community is advantageous for any organization because it supports sustainability which translates in receiving goodwill and positive image from the local communities. Eni understands the requirements of corporate governance is to create a conducive working environment in which the requirements of different stakeholders are considered (Eni Sustainability Report 2015). Eni promotes equal opportunity policy and is guided by integrity values with the development of processes towards enhancing professional development and diversity pathways. Advancing diversity and providing appropriate frameworks to guide the corporate governance framework is crucial and contributes to the sustainability of the establishment (Michelon and Parbonetti, 2012). It creates a win-win situation for the different stakeholders, which is important for any establishment. Eni acknowledges the importance of corporate governance and the company has created numerous policies towards championing corporate governance. Some of the integral aspects of Eni corporate governance includes transparency, integrity, trust, sustainable value, excellence and transparent communication with different stakeholders (Eni Corporate Governance Report 2015). The initiatives and frameworks that Eni implements considers the different stakeholder's requirements, and customize the system depending on the dynamism within the industry (Eni Integrated Report 2015). Other principles that Eni champions include governance measures and diversity requirements. The Eni Corporate Governance structure considers the contribution of minority shareholders and allows these shareholders to elect members of the board through a slate voting mechanism (Eni Integrated Report 2015). The structure includes different boards and committee to ensure the aspects of corporate governance are championed, and mechanisms in place to advance corporate governance. To ensure the requirements of the shareholders are considered and integrated into the management and operation of different Eni activities, the shareholder’s meeting votes for different personnel or teams to advance the shareholders requirements (Crane and Matten, 2016). For instance, the shareholder’s meeting elects or determines the Board of Directors, Board of Statutory Auditors, and Audit Firm (Eni Integrated Report 2015). The aim of these numerous branches of management is to champion corporate governance while limiting the ability of management to participate in unethical business approaches. The running of the company is tasked to the Chief Executive Officer who is required to oversee any development of the business and ensure the business upholds the corporate governance frameworks and policies (Eni Corporate Governance Report 2015). To advance the requirement, CEO is required to engage and collaborate with different committees and other employees and been the Guarantor of the Eni Code of Ethics (Eni Integrated Report 2015). The different management levels are required to uphold the remuneration policy, the internal control and risk management system, and other strategies required in improving the business operations. Conclusion In conclusion, managers and directors have to consider the requirements and needs of both shareholders and non-shareholders. However, the focus should be on shareholders who provide the resources while incorporating the corporate governance and sustainability frameworks. Without the shareholders, the company would not exist meaning the non-shareholder has limited contributed to the success of an entity. A win-win balance should be created between the different stakeholders and continuous consultation and engagement processes are crucial to ensure the success of entities involved. References Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. New York: Oxford University Press. Eni Corporate Governance Code available online at: https://www.eni.com/docs/en_IT/enicom/company/governance/corporate-governancecode/corporate-governance-code.pdf. Eni Corporate Governance Report 2015 available on line at: https://www.eni.com/docs/en_IT/enicom/company/governance/corporate-governancereport/Corporate-Governance-Report-2015.pdf. Eni Integrated Report 2015 available online at: https://www.eni.com/docs/en_IT/enicom/publicationsarchive/publications/reports/reports-2015/Integrated-Annual-Report-2015.pdf. Eni Sustainability Report 2015 available online at: https://www.eni.com/docs/en_IT/enicom/sustainability/eni_for_2015_report_eng_.pdf. Eni. 2017. Homepage. Retrieved from https://www.eni.com/en_IT/company.page Epstein, M.J. and Buhovac, A.R., 2014. Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. London: Berrett-Koehler Publishers. Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability: Empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics, 122(1), pp. 145-165. Michelon, G. and Parbonetti, A., 2012. The effect of corporate governance on sustainability disclosure. Journal of Management & Governance, 16(3), pp. 477-509. Neubauer, F. and Lank, A.G., 2016. The family business: Its governance for sustainability. California: Springer. Prno, J. and Slocombe, D.S., 2012. Exploring the origins of ‘social license to operate’in the mining sector: Perspectives from governance and sustainability theories. Resources Policy, 37(3), pp. 346-357. Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. London: Oxford University Press, USA. Read More