Corporate governance
Introduction
The Treasury Wine Estate can be termed of the global wine making company, which is located in Australia. The company is also involved in the distribution of wine into various countries worldwide. History indicates that the company was established back in the mid 1840s with its head quarter was based in the hunters valley. The company serves as one of the best basis of studying the importance of corporate governance in an organization. This is because according to the newsletter from value and broker’s newsletter of October 2012, the company has had a negative sales performance in the international market. This report therefore highlights the importance of corporate governance in an organization. In addition, the report first analyses the criteria that is used in the reviewing the corporate governance in an organization. Moreover, the report also highlights the importance of the application of the principles of corporate governance. The report also provides a review of the company corporate governance. Most importantly the report also highlights various recommendations that the management of Treasury Wine Estate needs to implement in order to improve on their corporate governance.
Importance of organization corporate governance
Corporate governance plays various critical roles in an organization. First, corporate governance help to protect and facilitate the exercise of shareholders rights. This in turn helps to ensure that the shareholders are able to monitor how the board exercises its mandate. Second, effective corporate governance help to ensure that there is timely and accurate disclosure of information regarding different aspects of organization (Ferrell, Fraedrich & Ferrell, 2011). It is also evident that effective corporate help to encourage active participation of the shareholders in the management of the company. Another importance of effective corporate governance is the fact that it helps to promote equitable treatment of all shareholders. Most importantly the corporate governance helps to promote and efficiency in the management since it promotes the rule of the law.
Criteria for reviewing organization corporate governance
The corporate governance refers to the various ways in which a corporation policies itself. Moreover, the corporate governance also involves the ways in which a company initiates its own customs, laws and policies to its employees. One of the major purposes of corporate governance is to improve the accountability in an organization and therefore help in ensuring that an organization achieves its set objective. Corporate governance should also help to promote efficient market and most importantly help in promoting rule of law and articulate clear division of responsibility among different management levels in an organization. Various issues and concerns related to the corporate governance should be always be discussed in open discussions. The following are some of the criteria that can be used to review the organization performance.
Transparency
Transparency in an organization mainly refers to how easy the outsiders can easily analyze the company various financial and non-financial information (Lipman & Lipman, 2006). In regard to this it is important for management of the company disclose all materials and information with quality standard of financial and accounting. Moreover, in order to promote transparency in an organization an external firm should carry out the annual audit. This audit should include the issues regarding the employee and other stakeholder in an organization. Most importantly the annual report should also indicate the company governance structures and policies.
Shareholders rights
The shareholders rights are other criteria that can be used to review organization corporate governance (Grandori, 2006). In relation an organization must ensure that they first it lays secure ownership registration strategies. The shareholders must also be in a position to acquire relevant information on various issues related to the corporate governance. In addition the management must ensure that they share the company profit is proportionally distributed among the shareholder. It is also evident that the management must ensure that they allow the members to that the shareholders elect the board of director. The shareholders in an organization also have the right to be informed on any changes that the management intends to undertake regarding the company affair. Most importantly the shareholders should be given an opportunity to participate in the annual general meeting. In relation to this the management of the company should ensure that they explain to the shareholders the rules and the procedure used in the annual general election.
Equitable treatment of the shareholders
The degree of equitable treatment of the shareholders should also serve as the criteria of assessing the application of good corporate governance. In relation the management of an organization needs to ensure that all the shareholders of the same class are treated equally (Mallin, 2007). This implies that the shareholders of the same class should be given the same rights to vote. In addition the shareholders of the same class should also have the idea of the voting procedures. This is to help ensure that the company embraces the practice of free and fair methods of conducting elections. It is also important for the members of the board to ensure that they avail any information to the shareholder in the same class in equal basis. The management should ensure all the shareholders understand the entire voting and tallying process. In order to ensure that an organization uphold the principle of equity it is important for the management to ensure that they give the shareholder their right to initiate legal and administrative proceeding against the management or the board. However, it is also important for the management to ensure that the interest of the minority shareholders is protected from the abusive action from the majority shareholders.
Role of the stakeholders in the corporate governance
The corporate governance in an organization should recognize the rights of all the stakeholders. This therefore implies that in well-managed organization the management should ensure that they protect all the rights of the stakeholder. In addition in a well managed corporate the management should ensure that they permit a performance enhancing mechanism where the stakeholders are free to participate. In the situation where the stakeholders participate in the corporate governance they should equally have access to all the relevant information they need to acquire in an organization. Moreover, it is also important for the management to ensure that they give the stakeholder an opportunity to communicate their concern on illegal or unethical practices from the board. In relation to this the management needs to ensure that the employees are not compromised when they raise issues related to unethical practice in the management. In addition it is also important for the board to ensure that they respect even the shareholders law, which is established through mutual agreement. The corporate governance also plays an important role in promoting performance-enhancing mechanism of employee participation in the management. In this case the management should ensure that there is adequate employee participation in some of the company management activities.
The responsibility of the board
The board of directors plays a significance role in ensuring that an organization achieves its objectives. Most importantly the board of directors is also actively involved in the corporate governance. In relation to this the board of directors needs to act in good faith and in the best interest of the organization. When making various decisions the board needs to ensure that all the shareholders equally. The board should also ensure that they comply with the various laws that in the shareholders management. The board also has a responsibility of ensuring that they review on the guiding corporate strategies and the major plan of action. In addition the board of director has the responsibility of selecting, monitoring and overseeing the succession plans. Most importantly the board of director needs to ensure that they maintain the integrity of the corporation accounting, and of the various financial transactions. Moreover, the board should also be committed in monitoring of the governance practices that they execute. However, in order to ensure that the board executes their responsibility effectively it is important that they be provided with accurate and reliable information regarding different aspects in the company administration.
Review of the Treasury Wine Estate
The following are some of corporate governance issues that affect the management of Treasury Wine Estate and hence resulting into poor performance of the company
- Disclosure and transparency issues
According to the various principles that guide the corporate governance it is important for the management needs to promote transparency in their operation. Strong audit committee needs to be put in place to ensure that the audit the company income, revenues and expenditure. However careful analysis of the company this has not been the case. In addition the management of the company has also been ignoring the fact that they need to expose the company financial transactions statements.
- Auditing matters
Treasury wines Estate is also faced with issues related to auditing their revenue and expenditure (Rittenberg, Johnstone & Gramling, 2010). This is because according to the company law the management needs to ensure that they set up a credible audit committee that is supposed to present their finding in the annual general meeting. In addition, the law also requires that the company to invite an independent external auditor that has the responsibility of auditing company financial transactions. However this has not been the case in the Treasury Wine Estate.
- Equity ownership disclosure
Another critical problem that Treasury Wine Estate is facing is the fact that the management has failed to adhere to the corporate governance that require them to disclose the equity ownership in their management. This has also in turn led to increase in the issues related to transparency in the management of the company affairs.
- Communication failure
Communication plays a critical role in ensuring that the company is able to achieve its set objective. However, the board of Treasury wine estate has not been receiving adequate information regarding the internal company audit report. This has in turn made it hard for the management of the company to adequately plan for the various activities. Moreover poor communication has also led to failure of the management to give accurate information regarding the market demand and supply. In addition communication failure has also affected the growth and development of the company. This is because most of the company stakeholders are unaware of the company goals and objectives.
- Failure of a risk assessment program
There has also been a failure in the implementation of a risk assessment program in the company. In relation to this there has been a failure of the board to exercise proper internal governance control in the management of the company. One of the possible causes of the failure in the risk program is the fact that the corporate governance is involved in the risk management program. This therefore implies that failure of the corporate governance may result in the poor risk management in the company. Moreover, there has also been a problem to do with the accountability of the managers.
- Poor decision-making
Comparison of the performance of the Treasury wine estate and one of its leading competitors the Constellation Brands shows that the company has a lot to improve in order to compete effectively with the company. This is because according to the report on (http://finance.ninemsn.com.au/article.aspx?id=8422634) shows that the company had a lower sales volume compared to its competitor constellation Brands. This clearly indicates that the board and the management have to improve on some of the decision that it makes regarding the management of the various company investments.
Recommendation
The company needs to first to improve on the transparency in their management. Improving the transparency in the organization can help to ensure that the investors gain trust in the management of the organization. In relation to this the management needs to ensure that they provide to the various stakeholders information regarding various company operations. This therefore implies that the management must ensure that they notify the stakeholders all the actions they intend to undertake. This can in turn help to ensure that all the stakeholders understand the various goals and objectives of the company. Most importantly improving transparency can also help to promote honesty and open communication in the organization
Moreover, the management of the company also needs to improve on the shareholders rights. This can helps to ensure that the shareholders are able to hold the management of the company in the most accountable ways. In addition improving the shareholders rights can help to ensure that they are able to contribute in the management of the various company activities. Another critical area that the management of the company needs to improve is the issues related to the equity ownership disclosure. This can in turn help to ensure that the all the stakeholders understand the ownership structure of the company. Promoting equity ownership in the company can also help to improve on transparency in the management.
The management of treasury wine estate also needs to improve on their risks assessment program. In relation to this the management of the company must ensure that first factor in the threat that might be posed by the entry of new entrants in the industry (Segal, 2011). This can in turn help to ensure that the management develops measures to counter such risks. Second the management must ensure that they assess the risk that might be posed by substitute products. The management must also ensure that they analyses the various risks that are posed by the rival companies. It is also evident that the management must ensure that they address the problems faced by the Austria wine grapes farmers. This can help to ensure that the company continues to have a constant supply of the raw materials most importantly the management must ensure that they improve on some of the decision they make regarding management. This can help to ensure that the company is able to compete effectively with companies such as the Constellation Brands.
Conclusion
From the above it is evident that corporate governance plays a critical role in the management. This is first it is involved in the promoting of transparency in an organization. This in turn help to ensure that the all the stakeholders are supplied with information regarding the company financial transactions. Moreover, corporate governance helps to ensure that the rights of the shareholders are protected as stipulated in the law. Protecting the shareholders rights also helps to ensure that they are able to raise any issue related discrepancy in the management. Another critical function of the corporate governance is the fact that it helps to promote equitable treatment of the shareholders. In relation to this good corporate governance help in ensuring that the rights of the minority shareholders are also protected. In addition it is important with improved corporate governance management of Treasury Wine Estate can help to improve the performance of the company. This can therefore help to ensure that the company is able to increase on its market share both in the local and in the international market.
References
Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2011). Business ethics: Ethical decision making and cases. Mason, OH: South-Western Cengage Learning.
Grandori, A. (2006). Corporate governance and firm organization: Microfoundations and structural forms. Oxford: Oxford University Press.
Lipman, F. D., & Lipman, L. K. (2006). Corporate governance best practices: Strategies for public, private, and not-for-profit organizations. Hoboken, N.J: Wiley.
Mallin, C. A. (2007). Corporate governance. Oxford [u.a.: Oxford Univ. Press.
Rittenberg, L. E., Johnstone, K. M., & Gramling, A. A. (2010). Auditing: A business risk approach. Mason, OH: South-Western Cengage Learning.
Segal, S. (2011). Corporate value of enterprise risk management: The next step in business management. Hoboken, N.J: Wiley.
http://finance.ninemsn.com.au/article.aspx?id=8422634
http://www.tweglobal.com/about/history/
