Principles of Corporate Governance

Question: What are the principles of Corporate Governance? Explain. Answer: Corporate Governance Principles For implementing corporate governance (CG) in the Woolworths, it is critical to follow and implement principles, which are suggested by the corporate governance council of Australia. These standards and principles bring uniformity in the structure and management of CG in the Australian firms. Below are the requirements of CG for Woolworths: Formulation of board: Woolworths needs to implement board committee by appointing board of directors. This firm should develop and clearly define the roles and responsibilities of directors and the processes of monitoring and apprising performance. Ensure Development of Appropriate Board Structure: This firm needs to compose board structure by appointing required number of directors with variant skills and gender. It helps board to discharge their duties effectively and to add value. Code of Conduct: For ensuing effective performance of CG, Woolworths needs to implement code of conduct and ethical behaviour. These standards promote ethical and responsible behaviour and actions among the board of directors. By defining accepted behaviour and attitude through code of conduct, the board at Woolworths promotes trust among the involved people (ASX Corporate Governance Council, 2016). Integrity in corporate reporting: The Audit and Risk Committee is the major requirement for establishing effective CG. This ensures firms to develop formal processes for the independent verification and protection of the corporate reporting. . Proper disclosure of information: Woolworths needs to follow disclosure obligations under the ASX Listing Rules and Corporations Act for making the shareholders and other related parties well informed about the affairs in which they have interest. Rights of Security holders: The major right of security holders is to get information related to the business affairs on timely manner. Woolworths needs to publish annual reports on the website and to announce market-sensitive information that may have effect on the interest of shareholders (FSC, 2016). Risk identification and management: Board of the Woolworths needs to delegate responsibilities for the better identification of existing and potential risks. It also helps to implement system to address the risks effectively. The Audit and Risk Committee of Woolworths needs to monitor the systems and policies to identify risks and to update them on regular basis. Fair and responsible remuneration: For implementing CG in effective manner, the implementation of a Remuneration and Nomination Committee is required at Woolworths. It helps firms to ensure about fair and responsible remuneration for the board of directors (ASX Corporate Governance Council, 2016). This will allow Woolworths to protect the interest of shareholders and investors. Practical Applications of CG Requirement The practical application of CG requirement in Woolworths requires effective establishment of three basic principles including transparency, accountability and control. These principles allow a firm to implement an effective compliance program for better identification of potential risk and protection of the involved parties interest. By placing this compliance programs, this firm may effectively manage market, legal, reputation and other risks with their associated outcomes (ATO, 2016). Apart from this, different committees are needed to be developed by Woolworths to implement the recommend CG principles and standards within the organisation and to ensure risk management. The committees are required to place due to their role in evaluating and monitoring the processes and systems of controlling and managing risks and to make required changes overtime (ASX Corporate Governance Council, 2016). Similarly, the practical application of CG principles requires Corporate Law and Securities Regulation as it also provides guidelines for the implementation of corporate governance. Apart from this, Woolworths needs to give quality assurance regarding the implementation of processes and products for protecting rights of investors (FSC, 2016). Directors and companys executives need to compliance with the rules and regulations to ensure practical application of CG requirement in Woolworths (ASIC, 2016). Review of Internal Control Procedures and Policies Woolworths has met with the compliance of internal control policies and procedures at the greater extent as it has implemented different types of committees such as audit, risk and compliance, sustainability, nomination, remuneration, etc. to ensure effective compliance with the compliance and to meet with the corporate governance requirements. In addition to this, it also has the board with the appropriate structure and size that also indicates effective internal control within this firm. Internal and external audits are placed within this firm to ensure regular mentoring and evaluation of the internal control systems and policies (WHL, 2016). But, the board of this firm has failed to manage risks at the Woolworths Masters that incurred huge loss and affected the interest of shareholders (The Daily Telegraph, 2016). This indicates failure of Woolworths in applying CG principles effectively. By including more skilled directors in board structure, it can manage the risk successfully f or ensuring better internal controls (ASIC, 2016). References ASX Corporate Governance Council (2014) Corporate Governance Principles and Recommendations. Australian Taxation Office (2016) Good governance principles. Financial Services Council (2016) Standards and Guidance. The Daily Telegraph (2016) Masters hardware chain sell-off to start this week. Woolworths Holding Limited (2016) The Board.