CORPORATE GOVERNANCE
Instructions
1. The assignment covers content from Modules 1 to 6 of the subject materials.
2. The assignment is designed to enable you, at your own time and convenience, to reflect upon and apply the principles covered in the subject in a practical and focused manner. While not precluding additional research, the completion of the assignment does not necessitate any reading beyond the subject materials, prescribed readings and textbooks and the Online Learning Centre Resources.
3. The assignment counts for 30 per cent of your total mark in this subject.
The assignment contains three parts: (a), (b) and (c). Complete all parts.
Scenario
MoneyMaker Pty Ltd (MoneyMaker) is an ASX 200 company in the financial services sector. MonkeyMaker has been providing investment advice and funds management services to clients for many decades.
Financial commentators have described MoneyMaker as a quintessential Australian institution, which has consistently provided high returns to its clients, which include millions of everyday Australian families.
In the last three years, MoneyMaker acquired a financial planning business and commenced providing those services to its clients. The acquisition doubled the size and market capitalisation of the organisation. Financial returns since the acquisition have been strong, and the company is exceeding its financial key performance indicators. The organisation does not monitor its nonfinancial performance.
The MoneyMaker board prides itself on its corporate governance. The board is made up of eight directors, including three non-executive directors. One of the non-executive directors is the chief executive of IMP Capital, which is the investment manager responsible for managing $400 million of Global Equities for MoneyMaker clients.
Five board members are accountants, two are management consultants and one is a lawyer. Four of the accountants graduated together from the same university in 1970. The lawyer is a non-executive director and joined the board 20 years ago after providing advice to the organisation for a number of years beforehand.
Ava has recently joined the board as the other non-executive director. She is a member of the Compliance Committee and her sister is the head of the Nomination Committee. The other committees of the board are the Audit Committee and the Strategy Committee.
In Ava’s first Compliance Committee meeting, the chief investment officer explained that the company uncovered a breach a year earlier of 10,000 of its clients who did not have their identities verified before an investment was made on their behalf. An internal whistleblower told the Compliance Committee that some of the clients were suspected to be laundering money through MoneyMaker products. MoneyMaker management has not reported the breach to the board, and had decided not to report the issue to the regulator.
The board of MoneyMaker reviews its own performance every two years using a self-assessment tool. Committee performance is not reviewed. Lindsay, one of the non-executive directors in his last performance review, has suggested that directors are not involved enough in developing strategy.
Several of MoneyMaker’s competitors have recently appeared before the Royal Commission into the financial services sector. There has been intense media commentary about the culture of financial services organisations. One institutional investor has requested a meeting with the chair of the board of MoneyMaker to discuss MoneyMaker’s culture and implications for the organisation from the Royal Commission.
The chair of MoneyMaker believes the company’s culture is excellent, highlighting the lack of complaints presented to the board as evidence. However, to appease the institutional investor, the chair has asked you, the new MoneyMaker company secretary, to undertake a review of the company’s governance compliance.
Required
Note: In answering the following assignment questions, where appropriate, include:
- References to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, 3rd Edition
- Analysis, evaluation and justification for any recommendations provided in the review.
Provide advice to the chair of the board of MoneyMaker on the following:
(a) The role of the board of MoneyMaker and how the board can be restructured to better deliver value to shareholders and stakeholders. In doing so, consider the following in relation to the scenario:
- The role of the board in determining strategy and what factors can influence that role;
- The role played by the board and management in establishing the culture of the organisation;
- The composition of the board and its committees, including an explanation of how any proposed changes will improve the corporate governance, and risk and compliance culture of the organisation; and
- The effectiveness of the non-executive directors and what steps can be taken to improve their effectiveness. Include comment on the role of non-executive directors compared to executive directors.
(b) The reasons for and against developing an institutional investor engagement program for MoneyMaker, including commentary on whether institutional investors should involve themselves in the corporate governance affairs of MoneyMaker.
(c) Whether any changes are required to the board performance assessment process at MoneyMaker, and if so, provide an overview of the key steps required to be taken and why these changes should be made.