Essay: Woodside Petroleum's Corporate Governance & Board Of Directors.

Evaluate the corporate governance structures and mechanisms in place for your chosen listed company as disclosed in the company’s most recent annual report. 

Ensure that you:

(i)Analyse the strengths of the structures and mechanisms; 
(ii)Identify any weaknesses in governance; and 
(iii)Comment on the extent of compliance with the ASX Corporate Governance Principles and Recommendations with 2010 amendments. 

Woodside Petroleum's Board of Directors and Chairman

The Woodside Petroleum's Board of Directors consists of 10 members. The Chairman of the company is Michael A. Chaney. He is serving as director since 2005 and as a Chairman since 2007. He is working as an independent head. The CEO of the company as well as the Managing Director is Mr. Peter J Coleman; he is serving as the director of the company since 2011. The CEO of the company is not independent as he gets delegations from the board of directors as well as is responsible to the board of directors for his activities. Other than the CEO/ MD of the company all other members of the board of directors are independent. Out of 10 members, 3 members of the board of directors are female which also showcase that the company is taking efforts in the field of gender equality (Woodside, 2017).

The strength of having an independent board of directors is many and great. The first such strength is Independence: an independent board of directors is not biased towards any one they always have the option to start a fresh and deal with any kind of challenges related to the business. They take such decisions that take care of perspective off all the parties involved in it. The other strength that is related to an independent board of directors is negotiating compensation and other executive agreements: the board of directors always faces a challenge to decide on the executive compensation and other benefits. The benefit of having an independent board of director is that they can consult with outside consultancies and come to a conclusion about the benefits or compensation of the executives. This usually creates a problem when family members hold leadership positions in the company. Credibility: this is the other strength of having an independent board of director in the company. The work becomes more transparent as well they can be held liable for any discrepancies. The other strength is resolving competing interests: independent members have the ability to negotiate with different solutions available in favor of the shareholders. By helping in this matter the independent member can prove a benefit to the long term activity of the company (Eimer, 2008).

The structure of the Corporate Governance of Woodside Petroleum includes various stakeholders. The structure of their corporate governance is very wide. In order to start with their structure includes two major sides that are the Delegation and Accountability. The main head of the board is the chief executive officer to who the work is delegated by the board and the chief executive officer is accountable to the board. The structure includes Audit and risk committee which is appointed directly by the board of directors, and their work is to help them in monitoring the work of the company, as well as keeping in check the integrity of the financial statement of the company, it checks the company's internal control system etc., are some of the key strengths of this (James, 2017).

Strengths of Having an Independent Board of Directors

The other is the Human resources and compensation committee. This committee is established by the board of directors of the company. The main strength of this committee is that this committee helps to develop policies and procedures that best suits the human resource of the company (Encana, 2017).

The next comes is the nominations committee which is also established by the board of directors in order to gain strength in the field of developing a strategic direction as well as to enhance the leadership qualities. These committees do not reveal the confidentiality of the organizations. The members of this committee also participate in the meetings and conferences(TESOL, 2017).

The next important head that comes under the structure of the company is the sustainability committee. The main aim of this committee is to communicate necessary changes made in the strategies or change that is required in the strategy according to the changes occurring in the outside world in order to grow sustainably. It aims to link both businesses as well as priorities on a sustainable basis so that the company is able to achieve what it wants to achieve and also adds to its good governance (Yeo, 2014).

Next in line is the independent assurance team which is directly managed by the board of directors. This includes external auditing; internal auditing as well as it also includes major project assurance checks (Woodside Petroleum, 2016).

Then in a row is the Management Governance and Assurance which gets a delegation from the chief executive officer as well as is responsible to the chief executive officer for its actions taken. There are different heads in this section also which undertakes the activity of strategic planning, deals with risk management, etc.(Woodside Petroleum, 2016).

Although the company has formulated policies relating to corporate governance and all but here was no separate body to overlook the working and implementation of the corporate governance. No single person within the company is responsible for the effective and efficient implementations of the corporate governance policies.

In the organization, there is a lack of awareness relating to the quality of financial disclosure, quality of managerial disclosure. Further code and compliance with respect to the best practice were entirely missing. Due to noncompliance with proper accounting standards, there was no transparency in the financial transactions. Another weakness is that the company is having short term returns and investment are quite long terms, thus desired return was not achieved and the strategic resources of the organization that is financed is wasted.

Corporate Governance Structure and Stakeholders at Woodside Petroleum

Financial reporting as well as auditing issue is more critical towards the corporate governance because it ensures management accountability. Since, the company is dealing in the petroleum business therefore, it should prepare and maintain off balance sheet because it provides greater transparency, and reduces risks that are faced by the stakeholders. Although the company has implemented corporate governance fundamentals but they were not maintained due to which the company is having difficulty in obtaining the license from the government. Further few companies already have this right but few of them have to get this permission later on so in that case also the companies find it difficult to get a license as after discovering about the oil or gas, the government starts to fear about the corruption activities that can be related to this project.

The company has made all the required efforts so that they can have an effective and efficient implementation of the Corporate Governance Principles. It can be said that the Woodside Petroleum is complying with the 2010 amendments of the ASX Corporate Governance Principles and Recommendations.

• Principle 1: is related to the lay solid foundations for the management as well as oversight. Reference for this ASX principle is 2.1.

Summary: this principle indicates that listed company should disclose respective roles as well as responsibilities of the company board and company management. Further company should disclose all the matters which are reserved and related to the board and management.

• Principle 2: Structure the board to add value. Reference number 2.2, 2.4, 2.3,

Summary listed entity board should have nomination committee which is comprises 3 members out of which majority should be independents directors. Chairperson should be independent director. In case company is not having nomination committee then same fact should be disclosed. Company should disclose director's interest, association, position, and relationship. The chairman should be an independent director and the chairman of Woodside is independent. In order to select the independent director, the company passed a special resolution within the company. Further, the chairman was selected from the unanimous resolution.

• According to the Principle2- Reference 2.3, summary; there is a clear demarcation between the Board of directors and the chief executive officer. The post of chairman and the CEO of the company are not one and the same. In order to ensure that there is separate person for the different post, the company has maintained an electronic database system. One person is made responsible for the data entry and all the details of that person along with their roles and responsibilities are there. Thus, when the nomination is received for a particular position then data is cross checked with the database which is maintained by the company. Therefore, it ensures that there is no duplication of responsibilities. The board has independent heads.
• According to the Principle2- Reference 2.4- the company has also established the nomination committee according to the requirement of ASX principle. The members of the nomination committee are independent directors which have experience. It ensures that the person is having required skills and competence. All the members of the committee are selected on the basis of unanimous resolution.

The other principle that is the Principle 3- Reference -3.1 is related to the promotion of ethical and responsible decision making process. In order to have an ethical as well as responsible decision making process the company focused on three things that are commitment, competency, and consciousness. The company's main aim is to do the desired task irrespective of the cost factor, therefore expert's advice was taken for such process. And according to Woodside, they carry a culture of ethical values and ethical behaviour, they thrive to work with integrity and respect (Woodside Petroleum, 2016).

The next principle is the Principle-4 that reads as Safeguard integrity in financial reporting is also exercised and adopted in the Woodside Company. In order to safeguard the integrity of the financial statements, audit committee was established so that the integrity of the financial   statements in addition to financial reporting systems can be maintained. 

Committees to Ensure Ethical Decision Making, Financial Reporting, and Timely Disclosures

Principle 5 states that make timely as well as balanced disclosure. Summary it states that listed company should have written policy and discloses that policy.

Principle 6: which states that respect the rights of security holders. Summary it states that company should provide full information to its investors relating to the governance. Company should disclose policies and processes to its stakeholders.  

Company has increased the representation of women within the middle management roles and senior management roles. Overall percentage of women employed within the company has been increased. Presently organization board is having 30%female members. Total recordable incident rate (TRIR) is 2.0, this ensures the sustained progress towards the global health and safety performance. Further company is having 0 tier 1 process for the safety events.  Company is having low level of environmental incidents. Intensity of flaring is less than 11t/kt (woodside.com.au, 2017).

Sustainability report of the company addresses the major key issues relating to various fields such as regulatory compliance, materiality matrix, safety performance, global, global health etc. Entire report is divided into eight sections that are overview, key issues, people as well as safety measures, environment scenario, society scenario, economic scenario, GRI and IPIECA index, data tables and supporting information, Further, the report dictates that Woodside Petroleum is an Australian-based oil & gas company which has global presence, the company is recognized for the world-class capabilities such as excellent explorer, a supplier, a developer, and a producer. By sustaining and maintaining a disciplined strategy to manage articulated risk and enhance shareholders and stakeholder's value, the company wants to grow existing portfolio through asset acquisitions as well as global exploration. The motivation that the company gets for creating a separate sustainability report is that by adopting this approach the company proves them to be accountable as well as transparent in front of their stakeholders. The company builds a good brand image in the eyes of people and so in return, the company gets to attract their potential customers. The main motivating factor of this is that the company gets a competitive edge in the market. The other motivation is that the company can work more efficiently and effectively due to all these factors so, in one way or the other the sustainability report preparation motivates the company as well as the employees of the company as a whole(Leavoy, 2015).Once the company is successful in proving the  presence plus value of hydrocarbons, the organization assets can move towards the development phase. Woodside Petroleum work and perform business activities closely with the customers, suppliers, joint venture partners, governments, as well as communities so as to realize the opportunities with respect to the development life cycle. Once the worth of resource is recognized plus approvals have been obtained, the development of the defined project moves into the project execution.

Female Representation in Woodside Petroleum

Sustainability is a part of Woodside Petroleum. This can be proved by the fact that the company separately produces its sustainability report on an annual basis to analyze as well as evaluate the sustainable performance of the company. The company claims to work in a sustainable manner so that they are able to serve the society for a long time. They are aiming to keep the environment safe by keeping in mind about the environment as well as the communities together. They are working towards building long term relationship with its stakeholders. The scope of their sustainability report is that the company aims to make their stakeholders understand about the sustainable approach that the company has adopted and all the actions that the company is undertaking to fulfill this (Woodside Petroleum, 2016).Presently, the company is operating at various locations such as Canada, Australia, Gabon, Ireland, Spain, republic of Korea, New Zealand, Australia. Material issues of the company according to the report is major incident response and prevention, technical integrity, reserves, new entry of the nation, biodiversity, ecosystem services, climate change policy, local content and supply chain, social impact, cultural impact, regulatory compliance.

Hence, it can be said that all the critical activities and operations of the company are covered effectively and efficiently within the sustainability report. Hence, it has been that this report is critical for the company's missions as well as motivations.

The fundamental and basic purpose of the sustainability reporting of the company is to communicate the financial information along with non-financial information to all the interested parties that can be influenced or affected by the organization's actions. Therefore, the company has decided to select voluntarily report on the basis of the corporate responsibility. Further, the company's main aim is to familiarize the stakeholders with respect to the Woodside petroleum's public reporting. To promote and establish examples relating to sustainable business behavior, and improve organization's internal processes so that business objectives can be achieved. The company had a belief that through this report, it will reach out to diverse stakeholders which are normally not possible through corporate publications for instance financial reporting. The scope of sustainability report aims to make the company's stakeholders know about all the activities and actions that the company has adopted towards achieving the sustainable growth (Nalco, 2017). This report aims to communicate all the non-financial information of the company as well as all the financial information related to the company to those who are or can be affected by the actions of the company (Vaisala, 2017).Woodside petroleum LTD has implanted the GRI (Global Reporting Initiative's), G4 guidelines in its defined reporting to the corporate responsibility as well as is in accordance with  the guideline's Core criteria(woodside.com, 2015)

G4 1 "Statement from the most senior decision maker" is relating to the Strategy as well as analysis of the company. This has been disclosed in the SD report and in annual reports though the message of the chairman. Chairman that is Michael has explained this clearly within the annual report. Organization profile has been explained through G4-3 to G4-16, this has been stated by the business model of the company which is there on the page 15 of the annuli report. In this company has tried to explain the acquire position and explore position, market and trade position, capital discipline, Capital efficiency, decommission and divest. Further company has disclosed its place of operations(woodside.com, 2016). This information has been explained by the company through disclosing information such as number of employees, list relating to charters, principles, and initiatives subscribed. Although information relating to the employees covered through collective bargaining agreements is not available right now. G4-17 to G4-23 has been depicted through the identified material aspects as well as boundaries. In this company has shown entities which are included in the financial statements. Material aspects have been identified so that they can be reported, further aspect boundary that is within the organization have been identified and aspect boundary that is outside the organization have been identified, information which has been gathered by the company is restated so that clear aspects can be drawn. Further through G4- 56 ethics and integrity of the company has been depicted through values, principles and code of conduct of the company (Woodside Petroleum, 2015).

The key achievements of Woodside's sustainability initiatives are many. To name some, the first achievement of Woodside is that Reconciliation Australia has awarded the highest ranking to the Woodside's Reconciliation Action Plan. Woodside has also won the APPEA Environmental Award for the second time in a row. Woodside also took initiative in the field of gender equality and also received success in this field. Woodside was able to increase the representation of women at the different level of organization that is executive level, the senior management level as well as at the mid-level groups. The company was able to publish voluntarily a statement on Modern Slavery and Human Trafficking Statement. The sustainability performance of the company ranked among the top 5 percent of the companies in the Dow Jones Sustainability Index. The Woodside has also received the award of RobecoSAM Silver Class for having a distinctive sustainability performance at the world class level. So, these were the major achievements of the Woodside Petroleum in the year 2016 (Forster, 2017).

The information made available in the report has been assured through the external source. The Ernst and Young (EY) took the work of conducting reasonable assurance related activities of the Woodside's material issues as well as it also conducted limited assurance activity related to the balance of the report. In order to conduct this assurance activity, the EY has gathered all the necessary information that are sufficient as well as appropriate to prove that what the company is claiming is true to its extent (Woodside Petroleum, 2016).

Conclusion (overall assessment of report)

From the above report, it can be said that long-term partnerships are regarded as critical towards the business. It has been recognized by the company that they will deliver and provide sustainable economic value only with respect to the communities in which they operate. The company has discovered (net) 68 MMboe through the Pyxis-1 well exploration. Currently, the company is holding exploration interests which cover gross area i.e. around 220,000 km2 within 11 countries. Further, the company has discovered gas within the well of Shwe Yee Htun-1 in Myanmar; the company is having a contract with the 68% of the local spend. To conclude it, it can be said that the Woodside Petroleum has taken many steps towards achieving the sustainable growth and has also performed very well in the last year that is in 2016.Woodside delivers important economic benefits to the communities which includes investing towards the training for personnel or staffs, taxes to the governments are paid on regular basis, purchasing goods as well as services through the effective supply chain, plus producing oil & gas that are regarded as fuel growing economies. Our strong capability in environmental studies enables the acquisition of robust scientific data critical to inform our impact assessment and decision making. It has also received many awards that will give a boost to the company to work more and put more efforts in this direction to further grow and prosper and set a benchmark for other companies. During the financial year 2015, the company continued and maintained strong and robust track record as the main contributor towards the economy of the Australia. The company has received so many awards on the basis of its work done in the last working year. Woodside Petroleum strategy is to maximize the core business this will leverage the existing capabilities of the company across the oil value chain plus gas value chain. It has provided growth to the company's portfolio. Further through this approach, the company has handled challenging economic conditions effectively and efficiently. It has provided enhanced productivity, effective and disciplined decision making. Further it also promoted the asset reliability. In the above article, a detailed analysis of its annual report 2016 and sustainability report 2016 has been dealt with in detail. Woodside Petroleum corporation-wide productivity agenda aims to add value as well as reduce waste within the business. The Woodside Petroleum got negative ratings in the year 2016 by Fitch Ratings due to the ongoing downfall in the oil prices(Macdonald-Smith, 2016).Woodside Petroleum productivity plan has delivered or provided benefits of around $700 million. Further, the company is having more than $1.2 billion towards the cumulative advantages since its establishment that is within two years.

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