Discuss about the Corporate Governance Principles of Westpac Group and OCBC Group.
Corporate governance is defined as the system of rules, practices and procedures through which an organization is proscribed and regulated (Tricker, 2015). The corporate governance of an organization includes the balancing of the stakeholders’ interests of a firm like management, shareholders, suppliers, government, community, financiers and customers. In addition to this, the corporate governance also offers the framework in order to attain the objectives of the particular firm. It also encompasses the every sphere of administration, starting from interior controls and accomplishment plans to the disclosure of corporate and measurement of performance (McCahery, Sautner & Starks, 2016). Generally, the board of directors is considered as the primary direct stakeholders that influences the corporate governance. However, it has been found that the corporate governance practices and principles vary with different countries, businesses and regulatory environments. In this assignment, two companies of two different countries have been selected i.e. Westpac Group (a financial institution based in Australia) and OCBC Group (a financial institution based in Singapore) in order to analyze the similarities and differences between the corporate governance practices.
Westpac Group was founded in the year 1817 as the Bank of New South Wales under a charter of incorporation that is provided by the Governor of the country ("Westpac Group | Westpac", 2016). It has been found that Westpac has a proud and long history as the oldest and the first bank of Australia. In the year 1982, in the month of October, the particular bank changed its name to Westpac Banking Corporation after the acquisition of the Commercial Bank of the specified country ("Westpac Group | Westpac", 2016). The vision of the particular organization is to become one of the famous service organizations across the world and also to help its customers, people and communities with the aim to grow and prosper. The strategy of the firm Westpac Group is to deliver on the firm’s vision by offering superior returns to the stockholders of the company, enduring customer relationships and building deep, being a place where best personnel want to work and being a leader in the community. Westpac Group mainly focuses on the core markets of Australia, New Zealand and near Pacific, where the firm provides an inclusive variety of financial services and products in order to meet the customers’ demands. The Group’s 5 key divisions include – ‘business bank, consumer bank, BT Financial group Australia, Westpac New Zealand and Westpac Institutional Bank’ ("Westpac Group | Westpac", 2016).
The OCBC Bank Group of businesses in composed of several companies that are owned by the longest established local bank of Singapore. In the year 1932, the OCBC bank was established due to merger of three local banks and this OCBC bank is considered as the longest established bank of Singapore ("OCBC - Who we are - Group Business Overview", 2016). The objective of the organization OCBC bank is to understand the financial requirements of the customers and also to develop the financial solutions that are able to fulfill the needs. In order to address the increased diverse needs in various geographies and communities, the OCBC bank has acquired and expanded its business beyond the territory of commercial banking. It has been found that the particular company has been considered as the strongest bank in ASEAN and also among the five strongest banks across the world for five consecutive years that is since the inception of the ranking in the year 2011 ("OCBC - Who we are - Group Business Overview", 2016). Moreover, it can also be said that the particular company is considered as the second largest banking group in Singapore on the basis of its total assets.
Corporate Governance Practices in Westpac Group
As per the annual report of the company Westpac Group of the year 2015, it is important to understand and manage the social, environmental and corporate governance risks with the value chain of the firm ("Corporate governance | Westpac", 2016). The corporate governance approach of the particular firm is stood on a set of behaviors and values that emphasizes the daily activities and also to offer fair dealing and transparency and also aims to protect the interests of the stakeholders. The corporate governance approach of Westpac Group involves a commitment to excellence in the standards of governance. The management department of Westpac Group considers the particular corporate governance approach as the fundamental principle to the sustainability of the business and its performance (Westpac.com.au, 2016). This also involves the monitoring of the global and local developments in corporate governance and also to assess the implications of corporate governance. It can be said that the particular firm Westpac Group complies with the Corporate Governance Principles and Recommendations of the Australian Stock Exchange (ASX) with the amendments of the year 2014 that were published by the Corporate Governance Council of the ASX Limited (ASXCGC) ("Corporate governance | Westpac", 2016). The particular firm has equity securities enlisted on the security exchanges in the United States, New Zealand and obviously in Australia. As per the corporate governance report of the firm Westpac Group, the particular firm not only get complied its corporate governance principles with ‘the ASX Corporate Governance Principles and Recommendations of ASXCGC’ but also complies with the Corporations Act ("Corporate governance | Westpac", 2016). In addition to this, Westpac Group also complies with the governance requirements as an ADI as prearranged by the ‘APRA under the Governance (Prudential Standard CPS 510)’ ("Corporate governance | Westpac", 2016). The main structure of the corporate governance statement of the organization Westpac Group is consisted of – ‘Governance framework, Board, committees and oversight of management, ethical and responsible decision-making, diversity, sustainability, financial reporting, market disclosure, shareholder participation and communication, risk management and remuneration’.
Corporate Governance Practices in OCBC Bank
The corporate governance of OCBC Bank is similar to the Westpac Group as the principles of corporate governance are entirely committed to the fair dealing and integrity in all its activities. In addition to this, it also upholds the corporate governance’s highest standards. The firm has founded to adopt the practices of corporate governance in conformity with the Corporate Governance Regulations of the Banking sector, 2005, Banking (Corporate Governance) (Amendments) Regulations 2010 corporate governance guidelines (Ocbc.com, 2016). It has been found that all these corporate governance guidelines of the particular company OCBC Bank have been issued by the MAS (Monetary Authority of Singapore) (Ocbc.com, 2016). It has also been observed that the specified firm OCBC Bank follows the Code of Corporate Governance of the year 2012 of the Singapore Exchange Securities Trading Limited (Ocbc.com, 2016). The main structure of the corporate governance statement of the organization OCBC Bank is consisted of – Board of Directors, Board Committees, Internal Audit function, internal controls, external auditor, Director’s attendance at Board and Board Committee meetings, remuneration policy and share schemes. It also includes – Remuneration disclosure for material risk takers and senior management, communication with shareholders, related party transactions, ethical standards and summary of disclosures.
Therefore, it can be said that the components of the corporate governance statement of both the companies OCBC Bank and Westpac Group differ from each other, though some of the constituents are found to be similar. The corporate governance statement of OCBC Bank is composed of relatively several constituents, whereas, the corporate governance statement of Westpac Group is composed of relatively lesser number of constituents. In addition to this, the other difference that is found within the corporate governance statements of two different companies of two different countries are that each of the statements is prepared based on the guidelines of the respective countries.
Reasons for Variation in Corporate Governance Practices
It has been found that there are various types of corporate governance model across the world. These mainly differ due to the variety of capitalism where the principles, practices and guidelines of the corporate governance are embedded (Oecd.org, 2016). For instance, the Anglo-American model intends to put emphasis on the interests of the shareholders. On the other hand, the multi-stakeholders model or the coordinated model is related to the Continental Europe (Acharya et al., 2013). Additionally, the country Japan also puts importance on the interests of workers, suppliers, managers, community and customers with respect to the principles of corporate governance. The companies are developed as legal persons on the basis of regulations and laws of a specific jurisdiction (Claessens & Yurtoglu, 2013). This might vary based on various aspects between the countries; however, the legal person status of a corporation is fundamental to all jurisdictions and is awarded by statute (Hermalin & Weisbach, 2012). This might give rise to new principles or guidelines from general purpose legislation or from a statute of developing a specific corporation. All these lead to the development of corporate governance in various countries which are considered as a set of customs, laws, processes, policies and institutions that affects the way of regulating a corporation (Madanoglu & Karadag, 2016).
Therefore, it can be concluded that the corporate governance involves the relationships between various stakeholders who are involved and the objectives for which a corporation is governed. In case of contemporary business corporations, the primary external stakeholder groups include – the shareholders, trade creditors, debt holders, communities, suppliers and customers are mainly affected by the activities of the corporation. On the other hand, the internal stakeholders include executives, board of directors and other employees of the firm. Therefore, the basic principles of the corporate governance remain same for all the countries but some additional elements might be included on the basis of the rules and regulations of a particular country.
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