Finance & Accounting

Corporate Governance Assessment

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Word Count

2400 words

Subject

Corporate Governance

Deadline

4 Days

Assignment Criteria

Part 1 (15%)

Assessment Criteria:

  • Demonstration of knowledge of the issues and evidence of wide reading to support your analysis
  • Demonstration of your ability to apply the knowledge to identify keys issues leading to your recommendations
  • Evidence of sound reasoning and the exercise of professional judgement to support your recommendations
  • Development and statement of concise recommendations for presentation to the Chairman
  • Overall structure and professional presentation of your report to the Chairman
  • High quality written communication of concepts and terms as the Chairman can be assumed to be professionally competent in corporate governance 

'The US Securities and Exchange Commission slapped Australian mining company BHP Billiton with a $25 million fine for practices tied to gifts offered to foreign government officials during the 2008 Summer Olympic Games in Beijing.

 BHP agreed to pay the fine to settle the charges, the SEC said.

The mining company invited 176 government officials and employees of state-owned enterprises to attend the Beijing Games at BHP's expense, the SEC said in its complaint.  The sponsored guests were primarily from countries in Africa and Asia and received hospitality packages, that were valued at $12,000 to $16,000 a package, the commission said.

The SEC said BHP failed to provide employees with specific training on how to evaluate the bribery risk of an invitation … It didn't have procedures to ensure meaningful preparation, review and approval of requests … in violation of the internal control provisions of the US Foreign Corrupt Practices Act.' 

Dow Jones Institutional News, 'SEC Fines BHP Billiton $25Million', 20 May 2015

 

Required

Assume you have been employed as a corporate governance consultant by the Chairman of BHP Billiton Ltd.  Your assignment is to prepare a report for the Chairman recommending best practice corporate governance guidelines for the company to adopt so that it can manage and prevent any future issues of alleged corporate malpractice or other actions that could be classified as corrupt practices by executives or directors of the company.

Part 2 (15%)

Assessment Criteria:

  • Demonstration of knowledge of the issues and evidence of wide reading to support your analysis
  • Demonstration of your ability to apply the knowledge to identify keys issues leading to your recommendations
  • Evidence of sound reasoning and the exercise of professional judgement to support your recommendations
  • Development and statement of concise recommendations for presentation to the AII
  • Overall structure and professional presentation of your report to the AII
  • High quality written communication of concepts and terms in ordinary English as the report will be published on the AII web site and not all readers can be assumed to be professionally competent in corporate governance 

'FIFA, an enterprise worth billions, has plenty of legitimate resources to fight off the corruption allegations – some $400 million a year from sponsorship alone.  So, as the US government follows the money allegedly coming in through illegitimate channels, fans should follow the money FIFA gets from corporate sponsors, which enables its unsavoury business as usual.  The deaths of thousands of migrant workers building World Cup stadiums and other rampant labor abuse have done little to move soccer's giant marketing partners – Visa, Coca-Cola and McDonald's – so perhaps an international criminal investigation might do the trick. …

According to Transparency International poll of 35,000 people from 30 different countries, 69.2 per cent of soccer fans have no faith in FIFA. In the last year, some big-name sponsors have started to take notice, with Emirates, Johnson and Johnson and Sony ending partnerships with Blatter's group.' 

Kavitha A. Davidson, 'FIFA's Corporate Sponsors Abet Soccer's Corruption', Bloomberg View, 27 May 2015

Required

Assume you have been employed as a corporate governance consultant by the Association of Institutional Investors (AII).  The AII is concerned with the risks associated with investments in corporations sponsoring FIFA.  In order to minimise this risk the AII wants to know how the corporate governance of FIFA should be reformed to meet contemporary standards of best practice in corporate governance. Your assignment is to prepare a report to be published on the AII web site recommending the corporate governance changes required to be made by FIFA so that AII members can continue to invest in FIFAs' corporate sponsors without exposure to investment risk associated with FIFA's current alleged corporate governance deficiencies.

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Assignment Solution

Part 1

Introduction:

As a world leader in its sector, the safety and well-being of the people and the larger communities it deals with as well as aspects of adherence to the codes of good and ethical corporate practices and ensuring prohibition of corruption, 'bribery' and corporate malpractices of any kind in all the ventures the company engages in any destination of the world, constitutes one of the first and foremost priorities of the company in all its endeavors.  

The case of the Beijing summer Olympics of 2008 and providing the high level government officials of Asian and African nations where, coincidentally the BHP had major stakes,  with hospitality tickets including ticket fare in an alleged bid to influence the decisions and regulatory measures of the government of those nations in favor of the BHP Billiton (BHP, 2014).

The US Securities and Exchange Commission slapped the corruption charge with a fine of $25 million. 

This report would hence, suggest codes of good and ethical practices for the management of the BHP Billiton so as to avoid such untoward incidents in the future.  

Codes of good and ethical corporate governance practices:

The good name and transparent track record of the BHP Billiton was threatened to a great extent by the case of its alleged malpractice in inviting top level government officials of mainly African and Asian nations to the Beijing summer Olympics which was aimed at earning favors for the company in the veil of the hospitality. 

In order to devise codes of best corporate governance practices for the BHP Billiton, two things need to be borne in mind.

In the words of the management of the BHP Billiton, the essence of its corporate governance rests in its commitment to 'the highest level of governance to strive to foster a culture that values and rewards exemplary ethical standards, personal and corporate integrity and respect for others' (BHP, 2014). 

The other aspect is the corporate government requirements for NYSE listed companies. It mentions that the companies listed under the NYSE are allowed to, as contained in the Section 303A, to adhere to the rules and requirements of the law of the land of destination and the same time comply with the legal provisions pertaining to corporate governance under Rule 10A-3 of the US Securities Exchange Act of 1934 (BHP, 2014). 

To use of the tool of corporate governance to prevent the development of the vicious cycle of bribery and corruption, the codes of efficient corporate governance practices would be based on the aspects of tailoring the strategies and activities of the firms with changing circumstances as they evolve in the host destination as well as home destinations.  

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