Corporate Governance in Australia - Assignment Example

ACCOUNTING ASSESSMENT TASKS Prepared By (Student’s Name) Course Name Institution Date Question 1 Corporate Governance in Australia Corporate governance is the underlying system for which entities are directed and controlled. These systems, mostly present in large public firms, can either be internal or external in nature (Strydom, 2009). Internal governance is mostly attributed to the entity-level control mechanisms, which is usually conducted by independent board of directors, and implemented in the course of trying to achieve better ways of corporate governance (Strydom, 2009). Subsequently, external governance greatly attributes to possible takeovers as well as the market for corporate control and it is catapulted by mostly country laws as well as institutions, cultural norms and, also other notable monitoring aspects. The Australian corporate governance regulatory environment is distinctively developed. It is crucial to note that the present Australian governance regulation results from Corporations Law Economic Reforms Program (CLERP9) and the ASX Principles of Good Corporate Governance (ASX GCG) (Strydom, 2009). The ASX GCG is composed of 10 distinctive principles that ensure to define fundamental aspects deemed necessary for attaining good corporate governance. In essence, it constitutes recommendations on how to structure the board, CLERP9 only requires that all top 500 listed Australian public entities have an audit committee. In my opinion, Santos Ltd exercises good corporate governance since it has ensured to adopt both the updated version of Corporations Act 2001 as well as the listing principles of the Australian Securities Exchange (ASX). In fact, while it is still not to report against the 3rd edition of the ASX principles; the entity has gone ahead to allow transition in relation to its adoption hence is going to report on this 3rd Ed within the 2015 financial report. The company’s corporate governance strengths can be reflected in its ability to report on the composition of the board for which it has a total of 10 directors (a majority of 9 independent non-executive directors and one executive director); its enjoys a significant number of board committees and especially the audit committee, which is part of the 5 committees in place. Each of these committees has a limited number of members (3), which ensures that decision-making process is conducted in an expedite manner; it has established a nomination committee. Some of the notable weaknesses of its corporate governance disclosure include; first, the board was only able to meet 10 times in the year while the ASX recommendations require that these meetings to be regular in nature in order to allow easier and efficient decision-making process. Secondly, the nominating committee has 2 members and a chairman instead of the 3 minimum required members in relation to the ASX recommendations. Consequently, some of the directors are only tasked with overseeing a single committee hence being underutilized. Triple Bottom Line Accounting Triple bottom line accounting is concerned with the sustainability aspect of social, environmental and financial capacities (Slaper & Hall, 2011. It supports sustainability aspect since focuses on profits, people and the overall planet as whole. People/ Social: the remuneration policies for executives are fair and are paid in form of fixed pay, cash STI, LTI and other models. The company also provides energy to surrounding communities in order to uplift their underlying living standards. It certainly provides reliable business opportunities for these families especially in Australia and Asia as a whole (pg. 4) Planet/Environmental Practices: of the company are ineffective although efforts are made to rectify the situation at hand. For instance, in January 2014 Santos NSW Pty Ltd was fined in the NSW Land and Environment Court for failure to provide sound operations in its coal seam gas in Pilliga Forest. It was also fined in relation to infringing the Environmental Protection Act 1994 as well as Management Act 2000 (pg.49) Profits/Financial Aspect; is seen when the company has strived hard to expose its gas reserves to global markets in an efficient pricing strategy thereby resulting to maximum returns to the shareholders. Furthermore, the company has also fostered effective sales practices needed for promoting efficient sales revenues (pg.5). Company’s Performance Liquidity performance (current ratio= current assets/current liabilities) 2014 =2065/1946= 1.06 1. The company’s liquidity position is way below the recommended standard average of 2, which means that is no longer capable of meeting its immediate short-term obligations whenever the fall due. Profitability; net profit margin= net income/loss/ sales revenues 2014: (935)/4037*100%= -23.16% 2. The profitability ratio indicates unsound health situation of the company due to poor prices for products within the period. Asset Management/Efficiency; Inventory turnover= Cost of Goods Sold/Inventory 2014 = 2899/443= 6.5X 3. The management is seen to making strides to utilise the underlying resources to improve on sales revenues. Leverage Ratio; Total Debt Ratio= (Total Asset-Total Equity)/Total Assets 2014: 22,345- 9,413/22,345 = 0.57 4. The company’s leverage performance is inadequate hence it is not able to pay for its existing debts. 5. The company’s sales revenues indicate a significant increase in the two-year period from $3,602M to $4,037M in the period between 2013 and 2014 respectively. The risks associated with this performance are focused on shifting oil prices and foreign exchange fluctuations in the global markets. References List Strydom, M.2009. Corporate Governance and Regulatory Reform: Australia Evidence, Investment Management and Financial Innovations, vol.6, no.4:p.112-121 Santos. 2014. Annual Report. Retrived from https://www.santos.com/media/2172/2014_annual_report.pdf Slaper, T F & Hall, T J. 2011. "The Triple Bottom Line: What Is It and How Does It Work?" Indiana Business Review, vol.86, no. 1. Question 2 The two ethical theories applicable to this situation include; the rights theory and theory of justice. There is always a connection between ethical theories and possible ethical issues underlying a possible scenario. Research indicates that ethical judgment will only happen whenever there is a dilemma occurring between two conflicting systems of human beliefs and an individual’s rights in making decisions to adhere to these believes (Reed, 2013). In essence, each of these systems of believes can play a significant role for the implementation of ethical judgment and, also ethical reasoning. This, technically, means that each of the possible decision to be undertaken by an individual or party relating to an ethical issue could be focused and reasoned on by a distinctive form of logic attributed to ethical theory and moral principles (Hosmer, 1995). In fact, some of these decisions could be evaluated and reasoned out using more than a single theory or even principle. For this case, the dilemma exists when Instagram management went ahead to formulate, update and implement their privacy policies without a free consent of the users. In fact, photos and any other detailed content belonging to the user could now be shared to third-parties for monetary gains and without their direct consent. The scenario is fairly expounded in the discussion below 1. Rights Theory The theory of moral rights ascertains that every human being has specific and fundamental rights that should be valued and revered at all times and especially in the course of making decisions (McDevitt, Giapponi & Tromley, 2007). It posits that these rights should compel any decisions made that affect another individual human being to be respected in such notable areas as their rights to free consent, privacy, freedom of conscience, free speech as well as possible due processess (Valentine & Fleischman, 2008). It is important to note that a right is actually a capability, possession or even situation of existence that guarantees individual people to freely benefit the state of being in existence. Consequently, it is crucial to note that the moral rights theory is further expounded in relation to positive and negative rights. In relation to the negative moral rights, the underlying duty rests with allowing an individual person to execute his or her actions in a free and enjoyable state but within the confinements allowed within this right (Dreyfus & Dreyfus, 2004). Markedly, in regards to positive moral rights, the commitment rests with provision of the individual person or group a benefit of some form other the one allowed within the standard confinements. Thus, the context in question negates any of these provisions. The fact that Instagram went ahead; formulate and implemented these privacy policies without involving parties involved; who in this case are users goes contrary to the moral rights theory. The entity goes ahead to use users’ privacy information without their consent by, in fact, sharing and even selling to third parties without any form of compensation to the original user (Reed, 2013). The decision to exclude the user’s opinions and consent from the policy development process is a clear and concise indication that the social-media giant company fails to uphold other individuals or even group of people rights of consent and the ability to allow them any form of due process related to the entire undertaking. In fact, the theory further ascertains that a fair and just distribution process should strive to apportion and allocate wealth garnered from a process to a society through fair acquisition and exchange processess (Valentine & Fleischman, 2008). This is regardless of any inequalities that might arise thereafter. From this viewpoint, it can be seen that Instagram also failed to execute the policy in a just and fair manner since profits accrued from sharing and displaying users photos and other of their details in regards to paid sponsorship does not amount to these revenues being shared to the users in any way. In fact, considering the fact that celebrities and photographers use the platform to share photos and earn a living out of it; it remains unfair that these images are sold first, without their consent and, secondly, without any form of communication from their side. Notwithstanding, the decision to update their policies to include sharing of information to a significant number of third-parties has ensured that individual rights to consent and conscience remains curtailed. Following this line of reasoning, Instagram goes against the stipulation that the morally correct action lies in the notion that the user has a distinctive moral right to conduct that which does not infringe or even affect the moral rights of other parties. In subsequence, it curtails the entitlement these moral rights award to users of the social media platform. The entity’s management team seems not to be concerned with preventing possible harm that can accrue to the users and ignores any possible infringement to freely execute, formulate and implement the decision as they please. 2. Utilitarianism This theory is a representation of the most notable and influential normative teleological or ethical principles (McDevitt, Giapponi & Tromley, 2007). The theory’s different structures integrate a substantial number of concepts of utility. The preference utilitarianism structure is well-suited with the ethical issue at hand. It affirms a much stringent platform for theories that relate to utility, which focuses on people’s immediate desires, choices and attributes as opposed to the hedonistic approach that only focuses on pleasure (McDevitt, Giapponi & Tromley, 2007). It is crucial to argue that the entire theory of utilitarianism is based on the ends as opposed to the means needed for accomplishing those ends and, also on the fact that it takes into consideration all of the present and future benefits as well as harms that will emanate to a person deemed not to be affected by the underlying action in hand; and concept that might make it challenging to analyse the situation far much more accurately. Valentine and Fleischman (2008, p.162) note that utilitarian moral principle deems a specific action to be morally acceptable in the case that it generates an enormous amounts of benefits to the society so that the net social benefit is equated to these benefits less possible costs incurred in the process. For the case in hand, it can be noted that the social media company; Instagram went ahead to update its privacy policies for its own self-interest as opposed to taking into consideration the social benefits of the society, in this case being the end users of the application. Further research indicates that the utilitarian ethical theory perceives the welfare of a single person as being no more or even less crucial in comparison to that of another individual; and thus, advocates that all of these individuals should be treated in a similar manner (McDevitt, Giapponi & Tromley, 2007). Considering this analysis, it can be seen that Instagram, as an individual party, seems to favour its own welfare over that of its users, which is a breach of the requirements stipulated above. The decision to share and sell end-users’s private information to third-parties without their consent postulates that they are being treated in an unequal manner. Basically, researchers provide a distinguishing ability of the entire utilitarian theory into two concepts that include; the act utilitarianism, which ascertains the maximisation of certain benefits in regards to the overall costs incurred for a specific decision at hand (McDevitt, Giapponi & Tromley, 2007). This means that Instagram opted to maximise on the benefits that relate to the costs of losing a certain percentage of users for making the decision at hand. The company opted to maximise on company-paid adverts in order to make revenues as opposed to sustaining a large number of end users that use the platform for free hence curtailing its ability to make present and future gains (McDevitt, Giapponi & Tromley, 2007). On the contrast, the rule utilitarianism calls for the adherence to certain rules in order to accomplish worthwhile consequences over a specified period. Instagram privacy policies fail to adhere to any given rules while making the decision to share users’ information without their knowledge and consent to third-parties, who can use the detailed information to their own advantage of even cause harm to these users as a whole. Of particular interest to note, this ethical theory allows the decision makers to provide a clear and concise approximation of the overall outcomes of each provided alternatives taking into consideration the welfare of all the parties involved; who in this case is the end users, and go ahead to select the one that is able to ensure optimisation of the satisfaction of the entire persons involved at any given moment in time. In the course of executing the decision at hand, it is not clear whether there were any estimates made prior to making these decisions hence contravening the entire objective of the theory. References List Dreyfus H,& Dreyfus S 2004.The ethical implications of the five-stage skill-acquisition model. Bullettin of Science & Technological Soc, 24(3):251–264 Hosmer, L.T., 1995. Trust: The connecting link between organizational theory and philosophical ethics. Academy of management Review, 20(2), pp.379-403. McDevitt, R., Giapponi, C. & Tromley, C. 2007.A Model of Ethical Decision Making: The Integration of Process and Content. Journal of Business Ethics, vol.73: pp.219-229. Reed RC, 2013. Euthyphro’s Elenchus experience: Ethical expertise and self-knowledge. Ethical Theory of Moral Practice, 16:245–59. Valentine, S. & Fleischman, G. 2008. Ethics Programs, Perceived Corporate Social Responsibility and Job Satisfaction. Journal of Business Ethics, vol.77: pp.159-172. Question 3 i) Freehold Shop should included under the Plant, Property & Equipment heading at full amount of $176,000( since it is a form of fixed asset) ii) Goods should included in the balance sheet as inventories at the purchase value of $16,000( since these goods are current assets) iii) Delivery van should be included in the balance sheet as motor vehicles at its full amount of $12,000(since it is a form of fixed or non-current asset). iv) Include the shop fittings as furniture and fittings in the balance sheet at $3,000 (since the amount reflects the depreciation in effect) v) Record the Ford Falcon as drawings at $7,000( since the asset has been drawn for personal use). vi) Not to be included in the balance sheet.( given that it is not owned but rather rented) vii) Include the cash register in the balance sheet as Property, Plant and Equipment at its purchase value of $1,200(given that it is a form of fixed asset purchased and owned by the business). viii) Record the bank overdraft as short-term borrowings in the balance sheet at $13,000(given that it is current liability) ix) Seat belts should recorded in the balance sheet as provision for doubtful debts at $12,000(since it is inventories that cannot be translated to revenues). x) Cannot be recorded because staff wages are administrative expenses that are only reflected in the income statement. 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