Corporate governance is defined as the background of systems, rules, processes and relationships exercised and performed in the organization. This incorporates the mechanism through which the entities are held to account. The Principles and Recommendations are established to provide corporations listed on ASX with the recommended practices of corporate governance. This will help the firms in attaining good governance results and in meeting the realistic expectations of the potential investors in several circumstances. 8 central principles as listed in ASX Corporate Governance Principles and Recommendations are as follows –
Principle 1 - Lay solid foundations for management and oversight – There are 11 members as the Board of Directors and Telstra Corporation Limited has adopted a Board Charter that clearly mentions roles and responsibilities of the board and management and their performance is reviewed regularly (ASX Corporate Governance Council 2019). The board is basically responsible for managing the business of Telstra and is answerable to the shareholders. They are responsible for giving approval to a particular strategy, corporate plan and controls its implementation.
Principle 2 – Structure the board to be effective and add value – The Board of Telstra comprises of 11 Directors (one CEO and 10 non-executive directors). The composition of the Board has adequate mix of expertise, skills, diversity and experience that enables it to fulfil its responsibilities in an effective and efficient manner and add value to the firm (Governance at Telstra 2020). This helps the company in identifying the range of opportunities and challenges in the market.
Principle 3 - Instil a culture of acting lawfully, ethically and responsibly – Telstra is continually reinforcing its culture wide across the organization of acting responsibly, ethically and lawfully. It has launched a revised code that helps in driving balanced, fair and ethical decision making throughout the organization.
Principle 4 - Safeguard the integrity of company reports – There is a committee named as Audit and Risk Committee that has primary oversight of management with regard to the performance of specific functions including presentation, preparation and integrity of the financial reports of Telstra Corporation Limited.
Principle 5 – Make timely and balanced disclosure – The corporation value and facilitate two way and direct conversation with investors and its shareholders. It considers it important to provide all relevant information in timely and efficient manner and thus meeting its continuous disclosure and other obligations (Annual report 2019).
Principle 6 - Respect the rights of security holders – The company discloses every relevant evidence about itself and governance on its site and have investors relation program that helps in achieving two way communication with its shareholders (Telstra 2020).
Principle 7 – Recognise and manage risk – The company has audit and risk committee that recognize and manage the risks including implementation and designing of effective and adequate risk management framework (Governance at Telstra 2020). The board oversee the climate change risk and oversee the implications for misconduct and poor risk behaviour.
Principle 8 – Remunerate fairly and responsibly –Telstra has People and Remuneration Committee that helps the Board in several matters related to compensation of CEO, Board, senior management and Company Secretary and also suggest strategies, disclosures and practices related to remuneration.
Principle 3 is concerned with establishing a culture of acting ethically, lawfully and responsible in the organization. Telstra act in a lawful and fair manner with reasonable care and skills in the best interest of its shareholders and the company (Governance at Telstra 2020). The foundation of right culture and right priorities will help the corporation in achieving significant improvements in performance. Moreover, this may deliver some of the strongest value propositions that may help the company in placing itself over and above the competition (Craig 2017). It has been found that the companies with responsible and ethical culture tend to innovate better. A well – established culture generates employees and workers with effective logic of direction and helps in establishing sustainable development, therefore the corporation would able to achieve growth for all and develop as a team. A culture of acting lawfully will help in attaining better retention of employees and boosts the morale of employees to work in an effective and efficient manner. A workplace is described as a place where a large number of people gather for a common cause. When ethics, unity and kindness are set as priorities, people accept each other and celebrate diversity together. Telstra maintain a safe working environment where everyone is treated with due respect.
Principle 7 is concerned with recognising and managing of risk. It has been mentioned that the corporation must have an effective framework of risk management. The Board of Telstra Corporation Limited comprise of a committee that monitors the performance of the management and review any fraud or breakdown of risk control measures of the firm (Governance at Telstra 2020). Risk management is considered as an important process as it empowers the company with the essential tools in order to appropriately identify and deal with probable risks. Risk can be easily mitigated only after its identification. Moreover, the framework of risk management provides the firm with the basis upon which it can establish effective decision making process (Gontarek 2016). For Telstra Corporation Limited, recognition and management of risk is regarded as the best technique to prepare itself for the eventualities in the future time period that may substantially affect its growth, progress and development. Risk management can help the employees in achieving success in organizational projects. The major objective of the risk committee is to identify all the potential risks and work effectively towards preventing them or managing them effectively. It must not viewed as merely a cost centre for the company. It has been analysed that the company must develop preventive mechanisms for the risks that have been identified.
Yes, there are number of researches to suggest that improvement in the reporting of corporate responsibility results in improved financial results. The importance of CSR is continuously rising with the advent of environmental management. A firm can only expect to attain sustainable growth through the trust and confidence placed in it by the society. If a corporation performs entrepreneurial activities that are based on trust, it can establish good relationships with several stakeholders and can ultimately expect enhancement in its economic performance (Cho at al. 2019). Moreover, it has been verified that CSR is now being used as a channel by the companies to distinguish itself from other rival firms present in the industry. To undertake CSR activities have now become an obligation for the firms. Firms have started recognizing the CSR internally as an essential business strategy as sustainable management is now became an important part of the corporation. Investors are also realising the significance of investing in companies whose CSR performance is outstanding. CSR activities must not be considered as an expenditure of the company rather they must be considered as the management and investment strategies that will help in enhancing the financial value and performance of the corporation. Social service contributions are considered as the important factor for improving the short term financial performance of the company (Galant & Cadez 2017). The term CSR (Corporate Social Responsibility) provides a chance to the people working in the organization to contribute positively towards the environment, society and country. When a corporation performs for the betterment of the society, it will help in improving the image and build reputation of the firm in the market. This helps in raising in sales revenue and thus affects profitability of the firm. Production related costs decrease by the adoption of certain sustainable measures like less packaging, etc. and thus improves the financial performance of the company (Omran and Ramdhony 2015). Investors sometimes evaluate the performance of the company by looking at its engagement in social programs and the make decision whether to invest in a particular company or not. Socially responsible firm achieves the attention of large number of investors due to which the demand for its share rises and led to the rise in its share price. Therefore, it can be claimed that organizations must invest in CSR activities to attain growth and develop in the long run.
ASX Corporate Governance Council. 2019. Corporate Governance Principles and Recommendations. [Online]. Available at: https://www.asx.com.au/documents/regulation/cgc-principles-and-recommendations-fourth-edn.pdf [Accessed on: 9th September 2020].
Telstra Annual Report. 2019. Telstra Annual report. [Online]. Available at: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf%20F/2019-Annual-Report.PDF [Accessed on: 9th September 2020].
Telstra. 2020. Governance at Telstra. [Online]. Available at: https://www.telstra.com.au/aboutus/investors/governance-at-telstra [Accessed on: 9th September 2020].
Governance at Telstra. 2020. 2020 Corporate Governance Statement. [Online]. Available at: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf%20F/2020-Corporate-Governance-Statement.pdf [Accessed on: 9th September 2020].
Craig, W. 2017. 8 ways company culture drives performance. [Online]. Available at: https://www.forbes.com/sites/williamcraig/2017/08/03/8-ways-company-culture-drives-performance/#483658546ce0 [Accessed on: 9th September 2020].
Cho, S.J., Chung, C.Y. and Young, J., 2019. Study on the Relationship between CSR and Financial Performance. Sustainability, 11(2), p.343.
Galant, A. and Cadez, S., 2017. Corporate social responsibility and financial performance relationship: a review of measurement approaches. Economic research-Ekonomska istraživanja, 30(1), pp.676-693.
Gontarek, W., 2016. Risk governance of financial institutions: The growing importance of risk appetite and culture. Journal of Risk Management in Financial Institutions, 9(2), pp.120-129.
Omran, M.A. and Ramdhony, D., 2015. Theoretical perspectives on corporate social responsibility disclosure: a critical review. International Journal of Accounting and Financial Reporting, 5(2), pp.38-55.
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