Corporate Governance of Commonwealth Bank Australia's Commonwealth Essay
- Length: 8 pages
- Sources: 3
- Subject: Business
- Type: Essay
- Paper: #15843607
Excerpt from Essay :
Corporate Governance of Commonwealth Bank:
Australia's Commonwealth bank is a multinational bank with operations across the United States, United Kingdom, Asia, Fiji, and New Zealand. The bank provides various financial services including superannuation, broking services, investment, retail, business and institutional banking, and insurance. The financial institution is currently regarded as the country's second largest organization listed on the Australian Securities Exchange. Together with National Australia Bank, ANZ, and Westpac, Commonwealth bank is among the biggest four banks in Australia. The bank's strategic and business goals that form its aspirations are rooted on four major aspects i.e. customers, people, shareholders, and the community. For its customers, the company seeks to provide service experience that they value and recommend. On the other hand, Commonwealth bank seeks to offer safe, challenging, fair, and rewarding tasks to all it employees and people. In addition to being an active participant that contributes to a stable financial system for the community, the bank aims for top returns among its peers.
Commonwealth Bank Structure:
In order to achieve in strategic objectives and business goals, the organization has five major business divisions that are designed to support service delivery and product development with customer segments. These business divisions are:
Retail Banking Services:
The role of this business division is to provide customized service that focus on meeting financial needs of individuals and small businesses seeking for affordable and convenient banking.
Business and Private Banking:
This section manages relationships with the bank's small-medium enterprise, regional, and agribusiness customers to offer a broad range of solutions and services. The business and private banking segment also services the organization's personal and institutional online trading customers. Through the Commonwealth Private, this division provides advice, opportunities, and service to the bank's premium personal customers.
Institutional Banking and Markets:
This business division offers equity, debt, and banking services to the organization's institutional customers including payment systems.
This is the bank's department that brings together its funds management production and distribution ability. The Wealth Management division also unites the bank's domestic insurance and financial advice business support segments.
International Financial Services:
The business division is mandated with the task of leading the institution's international growth strategy through the development of offshore growth opportunities in the Asia-Pacific region. It's also responsible for the institution's retail banking and life insurance operations in Indonesia and New Zealand as well as the two investments in commercial banks in China.
Corporate Governance of the Bank:
Corporate governance involves all the arrangements with which an organization's leadership in charge of its business direction and strategy delegates and determines operations that enhance the possible long-term success of the firm. These arrangements are usually in consideration of the environment and risks with which the organization is operating. Due to the recent collapses of major corporations in Australia and the United States, corporate governance of many organizations has come into sharp focus ("Concise," 2002). This aspect has also become a subject of increased concerns because of its relation to the strength of reported results by various institutions.
The Board of Commonwealth Bank has constantly placed great value and significance to the governance of the institution because of its importance to the well-being of the organization. Due to this importance, the organization has adopted a comprehensive structure of corporate governance guidelines that are designed to balance conformance and performance properly. As a result, this has allowed the firm to effectively undertake cautious risk-taking activities that act as the foundation of the firm's business. The new principles and guidelines of the bank's corporate governance were developed in compliance with the regulations of the ASX Limited's Corporate Governance Council published in August 2007.
The bank's corporate governance is the main responsibility of the Board of Directors that oversees all of the institution's affairs and business. This board works in collaboration with the firm's management to establish strategic and financial objectives that are implemented by the management. In addition, the Board of Directors supervises the performance of the organization's management directly and through its various Board Committees. While the Board of Directors currently consists of eleven directors, it also contains various board committees i.e. nominations, audit, risk, and remuneration committees.
Functions of the Board of Directors:
As described and established in the Board Charter, the Board of Directors has various roles and responsibilities regarding the corporate governance of the bank including:
Oversight of the Affairs and Business of the Bank:
As previously mentioned, the Board of Directors assumes the responsibility of overseeing all the organization's affairs and business to ensure that the strategic and business objectives are achieved. This is done through several measures including the establishment and approval of strategies and financial goals together with the management. It also approves the institution's major capital and corporate initiatives as well as the capital expenditure beyond the limits delegated to the management. Moreover, the Board not only evaluates the performance of the management and the firm's business environment but it also develops suitable risk management systems ("Corporate Governance," n.d.).
The approval of the bank's main HR policies, relevant regulation, and required documents by the institution's constitution is also part of the Board's responsibility in providing oversight to its affairs and business. One of the major aspects of this body in carrying out the legal duties of its responsibilities is on the basis of the institution's values of integrity, trust, and honesty. The Board of Directors also carries out its roles and responsibilities based on the interests of the bank's employees, customers, shareholders, and the entire community.
Employment of and Delegation to the Chief Executive Officer:
The second major function of Commonwealth Bank Board of Directors is the employment of the institution's Chief Executive Officer. The CEO is responsible for the daily management of the bank's operations and maintains a detailed set of management delegations based on the bank's Delegation of Authorities framework. Some of these delegations include commitments regarding operational expenditure, project investment, and non-financial processes or activities. The Board delegates to the CEO the power to accomplish the organization's objectives through the creation of long-term value to shareholders for all shareholders. The Chief Executive Officer achieves this by offering financial services to the firm's customers and maintaining the best industry performance in community, safety, and environmental impact. These delegations by the Board of Directors are designed for the purpose of accelerating decision-making processes and enhancing efficiency and customer service.
To ensure that there are effective operations of the bank's day-to-day affairs and business, the Board of Directors has established various Board Committees that help in carrying out various roles and responsibilities. These committees, which help the bank in responding to various challenges and issues that arise include & #8230;
This committee consists of non-Executive directors and establishes the criteria for the appointment of new directors. As part of its mandate for the appointment of new directors, the nominations committee continues to engage in external consultations when seeking for new directors. Prior to the nomination of a director for re-election, the chairperson of this committee consults with the rest of the Board and analyzes the individual's performance before approving his/her re-nomination.
Throughout the history of the Commonwealth Bank, the firm has had an Audit Committee whose charter incorporates various policies and practices for its independence and effectiveness. While it entirely consists of non-Executive directors, these individuals must have knowledge of financial management with at least one of them being an expert in financial accounting and reporting. The Audit Committee is responsible for reviewing all material accounting issues that require judgment and decisions by the management and reports these issues to the Board. In addition to nominating an external auditor to the Board for appointment, this committee approves the external auditor's terms of contract. To improve the effectiveness of the bank, the Audit Committee analyzes and receives assurances from external auditors regarding the quality of the bank's accounting processes, financial results, and systems.
This committee is mandated with the responsibility of overseeing the institution's risk management criteria in the course of its daily operations and business. The Risk Committee reviews regulator reports from the management about the risk, adequacy, and effectiveness of the bank's internal control and risk management systems. It also evaluates and supervises the well-being of the company's risk culture and reports any major issues to the Board of Directors. Following its reviews, the Risk Committee makes recommendations on the main policies about capital, funding, and liquidity.
This is one of the major aspects of the organization's corporate governance that has continued to receive much focus in the recent past. The remuneration of the institution's executives is determined from advices to provide competitive remuneration packages in order to attract and sustain competent and high-caliber employees. As the bank has constantly restructured it long-term executive incentive plan, the incentive payments to executives are dependent on performance.
Handling of Issues and Challenges:
Due to the establishment of a comprehensive corporate governance structure in Commonwealth Bank, the directors act…