Corporate governance

Table of contents

Executive summary………………………………………………………………………..3

Introduction…………………………………………………………………………4

Definitions………………………………………………………………………….4

3.0 ASX’s Corporate Governance Principles and Recommendations and How the Principles Relate to Business Ethics……………………………………………………………………5

3.1 Principle 1: Lay solid foundations for management and oversight………………5

3.2 Principle 3: Promote ethical and responsible decision-making…………………..6

3.3 Principle 7: Recognize and manage risk…………………………………………6

4.0 How effectively the GPT Group corporate governance statement communicates information in relation to the principles selected…………………………………………………………7

4.1 Principle 1: Lay solid foundations for management and oversight……………….7

4.2 Principle 3: Promote ethical and responsible decision-making……………………7

4.3 Principle 7: Recognize and manage risk…………………………………………..7

5.0 Conclusion……………………………………………………………………………8

6.0 References……………………………………………………………………………9

Executive Summary

Corporate governance has continued to tremendously develop rapidly over the past decades, as a consequence, attracting a significant public interest owing to its apparent significance for the economic good of companies and the society as a whole. For this reason, it has become a vital aspect for many companies. The report generally highlights corporate governance as an important aspect of organizations/businesses and its relationship with business ethics.

1.0 Introduction

Purpose

Corporate governance, the system through which corporations/companies are controlled as well as directed, has undoubtedly continued to spread out rapidly throughout the globe, as a result, becoming a significant aspect for many corporations to consider owing to a number of recent high-level corporate failures. Consequently, businesses are currently employing the corporate governance statement as means through which to communicate their governance practices in addition to promoting their respective ethical credentials to the concerned parties. This particular report will therefore describe what corporate governance and business ethics is including their relations. Besides, it will also elucidate the three principles selected from the ASX’s Corporate Governance Principles and Recommendations explaining how these principles relate to business ethics.Finally; it will evaluate how effectively the GPT Group’s corporate governance statement communicates information in relation to the principles selected.

2.0 Definitions

Corporate Governance: A framework of practices and regulations through which a corporation’s directors ensures not only accountability, transparency but also fairness in terms of its relationship with all the corporation’s stakeholders (ASX Corporate Governance Council,2007). It is basically a mechanism/means through which a corporation’s policies and decisions are monitored. Issues of ethics are not only relevant to every corporate governance aspects but to every decision or action made by the board. According to Felo (2011),the decisions made by a corporation’s board right from its discretionary decisions when carrying out its duties as laid down by the law, or ordered by the shareholders to the various choices followed in pursuit of significant business strategies, all these choices bring about significant consequences that directly affect the corporation’s workers and other shareholders.

Business Ethics: As highlighted by Demidenko & McNutt (2010), business ethics basically refers to the type of professional or applied ethics that examines or scrutinizes ethical principles as well as moral/ethical issues that crop up within the business environment. Business ethics are relevant to all aspects of corporate governance as well as every decision or action made by the board. The behavior of a particular board member or the type of leadership displayed by a corporation’s board is, for instance, capable of developing integrity issues in it or even being significant in as far as the organization culture is concerned all together (Schwartz, 2013). A corporation’s type of leadership thus reflects various ethical values including integrity, fairness, honesty, and respect (Schwartz, 2013).

Relationship between Corporate Governance and Business Ethics: Business ethics are no doubt relevant to all the aspects of corporate governance as they have significant consequences that directly affect the corporation’s workers and other shareholders hence key to the long-term success and welfare of all the corporation’s stakeholders.

3.0 ASX’s Corporate Governance Principles and Recommendations, and how the Principles relate to Business Ethics

3.1 Principle 1: Lay solid foundations for management and oversight

This principle holds that corporations ought to establish and make known the relevant board and management roles and responsibilities. The principle also offers various recommendations including the company’s need to establish and disclose the various functions set aside for the board as well as those entrusted to the senior executives; the company’s need to make known the performance evaluation process of the senior executives as well as the need for a company to providing information guiding on this particular principle (ASX Corporate Governance Council, 2007). This principle relates to business ethics in the sense that it supports openness in terms of the various choices made by the company’s senior leaders (Dando, 2013).

3.2 Principle 3: Promote ethical and responsible decision-making

This particular principle encourages the need for ethics and responsible decision making within companies while offering various recommendations majoring on the establishment and disclosure of the code of conduct and the establishment and disclosure of a policy relating to diversity (ASX Corporate Governance Council, 2007). This principle relates to business ethics in the sense that it facilitates ethical behaviours and ensuring proper accountability in terms of suitable board compositions and decision making procedures within the company (Dando, 2013).

3.3 Principle 5: Make timely and balanced disclosure

This particular principle holds that companies ought to not only promote timely but also a balanced disclosure or revelation of all the material matters relating to the company. The principle also offers various recommendations including the need for companies to develop and disclose written policies aimed at ensuring compliance with the ASX Listing Rule on disclosure requirements in addition to ensuring accountability at the senior executive levels (ASX Corporate Governance Council, 2007). This principle relates to business ethics in the sense that it not only facilitates ethical behaviours but also fights for the need for accountability in terms of creating a transparent attitude (Dando, 2013).

4.0 How effectively the GPT Group corporate governance statement communicates information in relation to the principles selected

4.1. Principle 1: Lay solid foundations for management and oversight

The GPT Group corporate governance statement facilitates not only ethical behaviours but also ensures there is proper accountability in terms of appropriate corporation board composition and decision making procedures. This is made clear through its provision of a list of the board’s responsibility that oversees the entire group’s business as well as having a formal charter that sets out the major roles and functions on the website, an action that clearly relates to the above principle that advocates for the establishment and revelation of the relevant board and management roles and responsibilities, as result, avoiding unethical behaviours such as conflicts of interests.

4.2 Principle 3: Promote ethical and responsible decision-making

The GPT Group Corporate governance statement articulates while also ensuring the implementation of standards of behaviors that are expected for the business practice. Other than this, it offers the basis for ethical behaviour that enables the corporation entrust confidence and trust among all its stakeholders. Corporate governance definitely advocates for meaningful values as well as policies and mechanisms that the corporation leaders and employees in making ethical choices (Schwartz, 2013). The GPT Group corporate governance statement therefore undoubtedly relates to this principle (Principle 3) that encourages the need for ethics and responsible decision making within companies.

4.3 Principle 5: Make timely and balanced disclosure

The GPT corporate governance statement is effective in terms of setting the major purpose for their establishment including what the company or business stands for (Dando, 2013). This disclosure is important as it reflects the company’s core values, a factor that relates to the above principle (principle 5) which holds that companies ought to not only promote timely but also a balanced disclosure or revelation of all the material matters relating to the company.

5.0 Conclusion

The report has clearly highlighted the significant relation between corporate governance and business ethics. In order to influence the company’s ethical culture, the directors ought to not only set up meaningful values for the organization but also come up with policies/mechanisms and controls to support them and their workforce in making ethical choices.

References

ASX Corporate Governance Council, 2010, Corporate Governance Principles and Recommendations with 2010 Amendments, 2nd Edition

Dando, N, 2013, “The right way to govern”, Keeping Good Companies, ICSA International, Pp.605-608

Demidenko, E, & McNutt, P, 2010, ‘The Ethics of Enterprise Risk Management as a Key Component of Corporate Governance’, International Journal of Social Economics, Volume.37, No. 10, Pp. 802-815.

Felo, J, 2011, Corporate Governance and Business Ethics, Pp.281-296

Schwartz, M, 2013, Developing and Sustaining an Ethical Corporate Culture, Business Horizons, 56, Pp 39-50

The GPT Group 2013, Annual Financial Report 2013, GPT, Sydney.