Corporate Governance Assignment Apply principle and recommendation on Kimono and Buzzer Ltd
Question 1 (Word Limit = 500 words)
The board of directors of Kimono Ltd is alarmed by record low shareholder attendance at the Annual General Meeting. The company always meets its legal requirements for providing sufficient notice of meetings but suspects the shareholders are finding it increasingly difficult to travel to Perth, where Kimono Ltd is based, to attend shareholder meetings in person and cast their votes. The board seeks your advice on an appropriate corporate governance solution to address their concerns.
Advise Kimono Ltd on how they should apply Principle 6 and Recommendation 6.3 of the ASX Corporate Governance Council’s Principles and Recommendations
Question 3 (Word Limit = 500 words)
The board of directors of Buzzer Ltd suspects that the company’s current processes for managing risk are inadequate. Specifically, the directors fear there is insufficient transparency, focus and independent judgement to oversee the company’s risk management framework.
The board has seven directors. Maud and Sybil are the only two independent directors. The board does not currently have a risk committee. The board seeks your advice on an appropriate corporate governance solution to address their concerns. Advise Buzzer Ltd on how they should apply Principle 7 and Recommendation 7.1 of the ASX Corporate Governance Council’s Principles and Recommendations
According to the ASX Corporate Governance Council’s principle, any listed business should provide adequate facilities and information to its shareholders. They must facilitate the shareholders with the adequate environment so that the shareholders can easily cast their votes or be able to practice their rights being the main security holders of the business or company. The board of directors of the company Kimono ltd. could consider the recommendation 6.3 of the section that belongs to principle 6 of the ASX corporate governance principle and recommendation in order to increase the engagement of the shareholders (Shimeld et al. 2017). According to the recommendation 6.3, the business should properly disclose the various ways that the company encourages and facilitates the involvement of the shareholders at the company meetings. The shareholders of any company are considered to be the security holders of the business. Thus, their involvement in the business meetings of a company is very important as it provides a two way communication between the two entities. The involvement and engagement of the shareholders in meetings helps the company to keep the shareholders updated on the current position of the business (Czernkowski et al. 2019). It enhances the shareholders’ involvement and maintains their interest as they feel included in the whole process of business management. The increased involvement of the shareholders helps them to understand the financial performance and the governance prospects of the company. They can also put forward different ideas and suggestions that might be related to some growing concerns about the business which might help to improve the overall performance of the business. As Kimono ltd. is facing difficulties in engaging more shareholders during their meetings due to the increasing difficulty to travel to Perth, the company can use technology to help their cause. Shareholders of the company belong to a diverse geographic location and few of the times it is not possible for each shareholder to attend the meeting due to various reasons but it ultimately leads to missing out on important inputs from these security holders about the topic. Kimono ltd. can use webcasting or digital conferencing during these meetings. This is an innovative use of technology that can help the company to overcome its location barrier and ensure the involvement of the shareholders during important business meetings. Live telecommunication can help to hold meetings across different locations and will thus enable the shareholders to be able to listen and see the proceedings of the meeting online. Thus, live telecommunication could help the shareholders to be present at these important meetings even without the hassle of travel and cast their votes on important topics. Kimono ltd. can also provide the chance to the shareholders, who might not be able to be present at the meeting, to provide their opinions and suggestions about a particular topic way before the meeting is to be held. It will also provide these shareholders the opportunity to ask any question that they might have about the topic that is to be discussed in the meeting (Kamalnath, 2018). These questions and suggestions that would be acquired from these shareholders are then to be discussed during the meeting. Thus, including these few strategies can help Kimono ltd. to overcome their current inconvenience and would help them to engage more shareholders. They would thus be able to obtain all types of suggestions and questions that might prove to be helpful which would otherwise be missed due to the absence of these security holders during important business meetings.
According to the ASX Corporate Governance Council principle 7, any business entity must have a strong risk management committee within the business. And the effectiveness of the committee must be reviewed at regular intervals to keep a check on its activities. Currently Buzzer ltd.’s risk management procedures are not adequate as the directors of the company think that there is a lack of transparency within the risk management framework (Shimeld et al. 2017). They also fear that the risk management committee in their company also lacks independent judgement and focus. This can be overcome by building an effective risk management committee within the business. According to principle 7 of the ASX Corporate Governance Council, to recognise the threats and to be able to manage the risks of the business, the business must have a risk management committee which comprises at least three members of the organisation (Poulton et al. 2017). The majority of the committee members should be independent directors. The chairperson of the committee should also be an independent director. Buzzer ltd. currently has seven directors out of which only two directors are independent. Thus, the risk committee of the company should consist of only three members to maintain the principle which states that the majority of the members of the committee should consist of independent directors. Buzzer ltd must also appoint a chairperson for the committee among Maud and Sybil who are the current independent directors of the company. The principle also states that the risk management committee should also disclose the charter that is related to the committee, and also disclose the information about the members of the committee (TOOL, 2016). They should also disclose the total number of meetings of the committee and the attendances to maintain the transparency within the committee. If Buzzer ltd. considers to include more members or to elect another chairperson or a committee that does not comply with the above principles then, the committee should disclose the fact to maintain transparency. This risk management committee of Buzzer ltd. can then look over the performance of the management. They can also monitor the audit reports of the company, and can review any fraudulent activity or the breakdown of the company’s risk control systems. They can help to manage new risks and suggest strategies to deal with new emerging risks. They can also monitor the insurance program of the business and can suggest changes within the risk management framework to ensure effective risk management. Thus, Buzzer ltd. can tackle their on-going problems with the adaptation of these strategies.
Czernkowski, R., Kean, S., & Lim, S. (2019). Impact of ASX corporate governance guidelines on sustainability reporting. Accounting Research Journal.
Kamalnath, A. (2018). Defining Diversity in Corporate Governance: A Global Survey. J. Legis., 45, 1.
Poulton, E., Barnes, L., & Clarke, F. (2017). The labyrinth of international governance codes: The quest for harmonization. The Journal of Developing Areas, 51(3), 425-435.
Shimeld, S., Williams, B., & Shimeld, J. (2017). Diversity ASX corporate governance recommendations: a step towards change?. Sustainability Accounting, Management and Policy Journal.
TOOL, C. G. (2016). Corporate governance, corporate responsibility and law. Corporate Governance (3rd ed, Cambridge University Press, 2015), 7(13), 32-5