Introduction

The manner in which a company is governed is referred to as corporate governance. It is concerned with identifying how to make effective organizational strategic decisions. This paper examines Wesfarmers Ltd.’s corporate governance in utilizing ideas, methods, and methodologies to evaluate the structure, process, and effectiveness of the organization’s governance.

Background of Wesfarmers Ltd

Wesfarmers is one of Australia’s largest private-sector employers, having over 484000 shareholders. However, it is possible to argue that the primary goal of this company is to provide a decent return to its owners. However, the goal of this company is to meet the needs of its customers by providing competitive and specialized services and commodities. Aside from that, the company has the aim to offer a safe and enjoyable working environment to human resources by rewarding them for their high-quality performance and providing possibilities for growth (WESFARMERS LIMITED, 2021). In dealings both outside and inside the organization, the company’s management operates with honesty and integrity. Wesfarmers’ founders were mainly motivated by the goal of long-term prosperity, and they placed a strong emphasis on sound corporate governance in this respect.

Review of Governance Policies

Corporate governance is a collection of regulations, rules, and processes that influence the direction of business and control of a corporation on the employees and operation. Corporate governance refers to how corporations are governed and for what purpose. It determines who has power and responsibility, and who is eligible for making decisions to manage the business operations of the company in an effective manner (Davis, Althaus, and Bridgman, 2020). Rules of law, openness, participation, moral integrity, responsibility, accountability, efficiency, and effectiveness are all aspects of good governance in an organization. But, any discrepancy has an impact on the company’s governance policy.

According to the Agency theory of corporate governance, it is expected from the employees that they would execute all organizational duties in the employer’s favor. From this statement, it can be stated that every organizational employee must behave ethically and ensure the achievement of the organizational aims and objectives in an effective manner (Styhre, 2016). But the failure in performing the process may affect the performance of the company and may affect the brand image also.

On the other hand, another theory that is known as “Justice Theory, describes the needs for the organizational management and employees to develop effective corporate culture, business structures, and develop long-term bureaucratic procedures for ensuring the implementation of ethics-based practices in the corporation (Rawls, 2009). With the help of this theory, an organization can easily comply with societies’ social norms in which that corporation operates. As per the report of the company, it has followed the entire principles defined by ASX Corporate Governance Council. Through the help of this process, the company is trying to achieve a good governance approach (Mills, 2017). With the help of this, the outcomes of the company meet the shareholder’s and investor’s expectations.

The company uses two-way communication methods in that each stakeholder of the company may easily interact effectively to provide an effective direction for the business in the upcoming time. With the help of such communication, the company ensures the regular flow of accurate information related to the financial situation of the company with external stakeholders (WESFARMERS LIMITED, 2021). With the help of this process, the company earns their trust that ensures their engagement with the business and regular flow of the capital from the open market.

The risk and Audit committee of the company evaluates and reviews the process of internal control as well as policies that have been developed to maintain the integrity of the organization’s financial report and get the trust of the investors and shareholders (WESFARMERS LIMITED, 2019). This committee also supervises external auditors’ engagement to ensure the accuracy of external financial reporting. This committee of the organization is also responsible to formalize the new auditor’s appointment, if any flaws in the financial reporting may be faced by the company during the financial year.

Critical Review of Organization’s Governance

After the analysis of the sustainability report and above defined corporate ethics theories, it can be said that the governing board of the company is doing their responsibilities admirably. It is because that company follows business guidelines defined by ASX corporate governance (WESFARMERS LIMITED, 2021). Further, the policies of the company also give the values to the stakeholders of the company in the term of the role that is performed by the management for the betterment of the community. With the help of this process, the company associates the investors of the company and community people. Further, the company performs its operations under environmental and community values, which ensures the development and growth of the company.

The non-financial and financial risks to the organization’s performance have been effectively recognized by the team members of risk management. The system for risk monitoring, on the other hand, is avoiding the emergence of additional types of risk (WESFARMERS LIMITED, 2019). The organization’s diversity policy as well as recent advances demonstrate that it is working successfully to fulfill its performance goals. The gender diversity strategy and group policies have a substantial positive influence on organizational performance.

Despite the above-defined success factors, there are many weak areas in which the organization must establish ways to improve. Employee happiness may be harmed by a lack of diversity in the leadership field. It has also been stated in certain cases that equal pay for equal work is not being observed. The firm has stated that finding a cost-effective solution is getting more difficult, which may have an impact on their operations (WESFARMERS LIMITED, 2019). Additionally, ethical sourcing is a concern, as is maintaining supply chain transparency.

Recommendations for Improvement in Governance

However, after reading the full study report, it is important to give some useful recommendations to the organization’s addressed concerns in this section. To begin, it may be said that management is necessary to utilize an “Information Request List” to assess the organization’s structure in terms of good governance. Furthermore, Wesfarmers’ management is recommended to utilize the “Document Request List,” which contains the organization’s necessary credentials, policies, plans, processes, and strategies (Audit Suite, LLC, 2019). These two effective instruments are recommended for usage since it is believed that their use will improve the company’s standing and lead it to greater success.

The corporation has the chance to improve women’s leadership and representation across the board. To improve the chances of receiving different ideas for corporate decision-making, the company should try to enhance diversity in leadership roles (Aluchna and Aras, 2018). Where women executives represent their companies, it is advised that they develop a program of internal senior talent management that takes into account their specific roles and positions within the company. The Wesfarmers Ltd. board’s gender diversity policy will aid in their implementation.

Conclusions

As per the above discussion, it concluded that the corporate governance of the selected business is extensively scrutinized. This paper has described the board of directors in the context of the responsibilities of each board member, which have been examined. From the above discussion, it confirmed that the board of directors of the company was adopted each policy of the company, which are presented in the above paragraphs. The company has pledged to improve its performance in the following year. The guiding principles, which include the ASX corporate governance standards, have been presented in the context of the Wesfarmers organization. Since a result, one of the main principles for operating any given firm is corporate governance, as strong corporate governance ensures corporate success as well as economic progress. In a similar context, corporate governance helped the company to reduce wastage, hazards, corruption, and replacement mismanagement from the operations of the company. This paper has given some suggestions that might improve the performance of the organization in an effective manner.

References

Aluchna, M. and Aras, G. (2018). Women on Corporate Boards: An International Perspective. Routledge.
Audit Suite, LLC. (2019). What is an Audit Request List or PBC Request List? Retrieved from https://auditsuite.com/pbc-request-list-definition/
Davis, G., Althaus, C. and Bridgman, P. (2020). The Australian Policy Handbook: A practical guide to the policy making process. Routledge.
Mills, A. (2017). Company Accounting – Prepare Financial Reports for Corporate Entities. Cengage AU.
Rawls, J. (2009). A Theory of Justice. Harvard University Press.
Styhre, A. (2016). Corporate Governance, The Firm and Investor Capitalism: Legal-Political and Economic Views. Edward Elgar Publishing.
WESFARMERS LIMITED. (2019). Our Objectives. Retrieved from https://2019.sustainability.wesfarmers.com.au/
WESFARMERS LIMITED. (2021). CORPORATE GOVERNANCE. Retrieved from https://www.wesfarmers.com.au/who-we-are/corporate-governance
WESFARMERS LIMITED. (2021). OUR PERFORMANCE IN 2020. Retrieved from https://www.wesfarmers.com.au/sustainability
WESFARMERS LIMITED. (2021). Stakeholder engagement. Retrieved from https://www.wesfarmers.com.au/sustainability/our-reporting/stakeholder-engagement