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David answered on
Dec 23 2021
RUNNING HEAD: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Student’s name
Name of the Institute
CORPORATE GOVERNANCE 2
Table of Contents
Part A .............................................................................................................................................. 3
Part B .............................................................................................................................................. 8
References ..................................................................................................................................... 12
CORPORATE GOVERNANCE 3
Part A
Corporate governance is highly essential for every organisation to align the operations,
adhere to standards and govern the employees. The issues related to corporate governance
develop within the organisation under two conditions. The primary condition is the agency
problem or differences in the interest expressed between different groups of management. The
other condition lies in the transaction costs as these costs greatly influence the functioning of an
agency (Hart, 1995). A proper corporate governance practice is meant to optimize the agency
costs, reduce the vulnerability of organisation to fraud, extend protection to the stakeholder’s
wealth and enhance meritocracy in the boardrooms.
Corporate governance in the chosen company
The chosen company for the study of corporate governance policies is National Australia
Bank. This company has been listed under Australian Securities Exchange (ASE) and the
company has strong policies and statements that demonstrate the co
ectness and appropriateness
of corporate governance within the company (Ramsay, 2006). The company’s corporate
governance policies have even contributed to the growth of the company in terms of productivity
and profitability.
The board of directors listed under the corporate governance maintenance within
National Australia Bank is meant to establish efficient committee and take care of the affairs of
the bank. The corporate governance also insists on the communication with shareholders about
the business processes (Stokes, 2004, pp 37). The board permits a high degree of independence
to the members. The directors are also liable to look into the disclosure of the valuable
information related to the company. The operations have also been listed as per the Corporations
CORPORATE GOVERNANCE 4
Act. Every director associated with the company has the right to perform personal dealings and
at the same time, look into the operations and its implications on the company’s growth.
NAB has also set ethical standards that cover conflicts of interest, trading of shares and
auditing. It is observed that the directors are responsible to gain at least 20% of the fees in the
ank shares and these shares need to last for ten years till their position in the board is no more.
There are several topics that are covered under the corporate governance policies. These include
independence, performance of the board, choice of directors, ethical standards, auditing
a
angements, shareholder communication, risk mitigation and remuneration a
angements.
Every firm has several stakeholders and the different interests of those stakeholders need
to be taken into consideration (Bernard et al, 2005). This is the reason for calling the corporate
governance as the collective group that is united under one body for power, authority and
control. Corporate governance is found to be applied in the law as well as economics and we
already know that the governance is directly related with people who are functioning within the
organisations. The most evident outcome of corporate governance, when implemented by an
organisation, is the firm value and profitability.
Corporate governance aspect
Among several aspects that are associated with corporate governance, the major aspect
covered in this paper is the independence of auditors. National Australia Bank has set a special
auditing committee to take care of the company’s operations and suggest relevant policies that
can enhance the performance of the people (Council, A. C. G, 2007). The company has granted
complete independence to the auditors involved in the auditing committee. This independence is
granted with the notion that they would create right practices that might improve effectiveness.
CORPORATE GOVERNANCE 5
The auditors involved in auditing committee are the non executive directors who are
accustomed to financial management and aware of financial accounting and reporting. While the
internal auditors enjoy freedom in preparing and evaluating the financial statements, the
company also regards external auditor’s views into consideration. The bank strictly prohibits the
auditors from involving in operations related to book keeping, advisory, appraisal, legal service
and executive recruitment (National Australia Bank, 2002).
National Australia Bank gives an option for the auditor to associate with chairman of the
oard of directors and offer independent goals and suggestions that can empower group’s
performance and mitigate the expenses. The auditor gains freedom to review the procedures and
offer audit services accordingly (National Australia Bank, 2002). However, the corporate
governance strictly prohibits auditors from sharing company assets to any third person without
the notice of the company. The management and the board of directors have the rights to review
the performance of auditors yearly and change their positions, if required.
Corporate governance as in the company’s website
National Australia Bank is known to be one of the premier banks in...