Features of Corporate Governance - Qantas Airways - Assignment Example

Qantas Student’s Name Subject Professor University/Institution Location Date Qantas Introduction Qantas Airways is Australia’s flag carrier which operates from Sydney. It is the largest airline in Australia and the oldest constantly operating airline across the globe. The company has a market share of 65 percent of the domestic market in Australia and carries 18.7 percent of the passengers coming in and going out of the country. Qantas has two harmonizing airline brands namely Jetstar and Qantas. Additionally, it operates other businesses and airlines in certain markets like Q Catering and Qantas Holidays. Its brands offer domestic, regional and global services. The company’s main strategy is enhancing the profitability of its two core brands. It also aims at restructuring its global business operations in efforts to eliminate increasing losses (Plessis, McConvill & Bagaric 2005, p.200). This paper will identify Qantas’ corporate governance key features and analyze how the company positions itself in engaging with stakeholders at the local and global levels. It will also talk about the ethical challenges of Qantas which can or cannot be handled using its present governance framework. Features of Corporate Governance Good corporate governance ensures the creation, enhancement and protection of the value of shareholders. Qantas’ Board of Directors maintains and makes sure that the company’s management maintains a higher level of business ethics. Qantas’ corporate governance has several key features (Clarke 2007, p.312). Independence According to Clarke (2007, p.312), Qantas has ten independent directors. Such directors have the capacity to discharge their duties without being bound by business interests or other relations. They are also ready to air their views during board meetings without any concerns pertaining to their position as well as third party’s position. In order to ensure that the company gets the appropriate independent directors several factors are considered. To start with, the director should not be a large shareholder of Qantas or have direct associations with a Qantas’ large shareholder. In addition, the director should not have served in an executive position in Qantas in the preceding three years. Moreover, the director should not be a customer or supplier of Qantas. He or she is also expected not to have any direct or indirect association with a customer or supplier of the company. Besides, the director should not have served in the Board of Qantas for a duration which can materially hinder his or her capacity to function in the company best interests. All these requirements are aimed at preventing conflict of interest among the independent directors while serving the company. Directors’ election and re-election The Board and the Nominations Committees are responsible for the election of directors. They ensure that there is a correct balance between skills, expertise, diversity and experience. During the selection process, the Board seeks the assistance of external consultants and each member of the Board is given a chance to meet all the nominated directors. After the selection, the appointed directors are given formal appointment letters which set up the main appointment’s conditions, terms and expectations. Re-election of directors is assessed by Nominations Committee. The directors are re-appointed according to the Constitution of Qantas as well as the Listing Rules of ASX (Clarke 2007, p.314). Diversity Schofield (2011, p.20) maintains that, revision has been done on ASX principles to require firms to set up measurable objectives that relates to diversity, carry out yearly evaluation of the objectives and to make annual reports regarding the objectives’ evaluation. Qantas’ diversity statistics mainly relate to gender and include the percentage of female workers in the company, women serving top executive positions and women who are members of the Board. The company is currently developing and making official diversity targets according to the current ASX principles’ requirements. Review of the performance of Board members Schofield ( 2011, p.21) further asserts that, the Board carries out an annual assessment of the performance of its members as well as the performance of Committees. It periodically employs the services of outside consultants to help in official Board performance assessment. During the 2010/2011 financial year, the Board carried out external performance assessment which included several interviews on directors, top management along with Board discussion. After the assessment, the chairman of the Board discusses the performance with every director. Balanced and timely disclosure According to Luck (2011, p.18), Qantas has set up a process of ensuring that it complies with the disclosure requirements of the ASX listing regulation. The requirements include a confirmation by every executive manager on whether their areas of operation comply with the constant disclosure policy, which should be done four times a year. Another requirement relates to a constant obligation to inform the secretary of the company on all substantial non-public information arising between confirmations. Recognition and management of risk Qantas is devoted to embedding practices for managing risk to promote the attainment of business goals and observe corporate governance requirements. The Board reviews and oversees company’s risk management plan. It also ensures that the Qantas Group operates under a suitable corporate governance composition. Within that general strategy, the top management has devised and executed a risk as well as internal control structure in order to manage the significant business risks of Qantas (Luck 2011, p.21). Engagement with stakeholders According to Stewart (2009, p.36), Qantas is determined in enabling effective communication between the company and its stakeholders. The company’s corporate governance structure places it in a better position to interact with stakeholders both at local as well as global level. Qantas’ main stakeholders are shareholders, customers, suppliers and the government. In making public speeches in relation to any matter, employees should not represent the company unless they have been given authority to do so. If given the authority to make public statements, workers are expected to keep up an honest and open approach. Such a provision helps in ensuring that all the company’s dealings with its stakeholders and response to issues are made on a systematic and honest basis. Moreover, Qantas’ workers should not take part, whether directly or indirectly, in activities which through association may bring public embarrassment or law suits to the company. This is important in preserving the reputation of the company. Qantas is a member of Australian Securities Exchange (ASX) and thus it ought to comply with relevant constant disclosure requirements of the Corporations Act of Australian and the ASX. The company’s staff is expected to give a detailed disclosure of any private information which they come across to the appropriate member of the executive committee or company secretary. This helps in ensuring that sensitive information does not leak to unauthorized people and that full details of rising matters are presented to the relevant authorities on time (Stewart 2009, p.37). Nankervis (2005, p.67) maintains that, when dealing with the government, Qantas encourages a collaborative rapport with government by complying with every law and maintaining the uppermost ethical standards. No political donation should be done including to a political party, government official, political candidate or election committee both directly and indirectly in representation of the company. The employees of Qantas are expected to be observant that no in-kind support or cash that is given to support community initiatives is construed as a political donation by the company. Moreover, employees are allowed to attend political conferences and activities in the employee capacities with permission from an appropriate member of executive committee only for commercial purposes. The employees should not charge prices which exceed the normal commercial charges for functions or conferences. This facilitates avoidance of political involvement in the activities of the company. It also helps ensure that customers are protected from exploitation by the employees. Drawing from Aulenbach (2007, p.55), Qantas is devoted to distributing communications and making announcements to its shareholders as provided by the ASX rules and Corporations Act. The company also supports the corporate governance commission’s recommendations and principles of the ASX which were published in 2007. It ensures that there is effective communication with its shareholders as well as full involvement during the company’s Annual General Meeting. Qantas provides several ways through which shareholders access the information of the company including email, print and internet. Besides, Qantas holds its AGMs at different States in Australia every year for maximum participation of its shareholders. For the shareholders who do not make it to the AGM, the event is webcasted therefore they can stream it. Different ways of reaching shareholders are applied in order to keep the shareholders up to date with the company’s progress. Qantas considers suppliers as very important to its reputation and success. In engagement and management of suppliers, the company requires its workers to adhere to the pertinent procurement rules and associated procedures. Such procedures are intended to ensure high value-for-money results which meet the needs of the business. It also ensures ethical and fair making of decisions and interactions as well as clear and consistent engagement rules. Moreover, procurement rules and procedures ensure correct visibility and approval of decisions. They also help Qantas to comply with relevant regulations and laws and to handle conflicts of interest in an appropriate manner. Besides, the compliance to procurement rules and procedures facilitates sustainable and successful rapport with suppliers as well as continuous innovation and improvement. Through such policies, Qantas is also able to asses and manage supply risk along with the correct behavior of suppliers (Aulenbach 2007, p.59). Ethical challenges Plessis, McConvill & Bagaric (2005, p.201) say that, as a national idol and the largest airline in Australia, Qantas is responsible for ensuring its business reflects principles of diversity and inclusion. Through its Reconciliation Plan, the company is carrying out an assortment of initiatives in support of the Torres Strait Islander and Aboriginal community, to boost shared pride among the people and cultures of that community. Despite its efforts in community initiatives and good corporate governance, Qantas still faces some ethical challenges. The first challenge relates to diversity. Currently, workforce diversity at Qantas mainly concentrates on gender by employing women and giving them some executive positions. Comprehensive diversity and inclusion should take into account other factors like race, religion and culture. In Qantas’ corporate governance does not talk about how many employees are from the Torres Strait Islander and Aboriginal community. This community is the most sidelined in Australia and thus diversity and elimination of discrimination should start from it. However, the main challenge for Qantas is that, the airline requires highly skilled and experienced workforce and people from this community are less educated and skilled. Therefore, it is difficult to include them in the company’s workforce for enhanced diversity (Plessis, McConvill & Bagaric 2005, p.201). According to Coles & Hall (2008, p.83), insecurity is currently becoming a challenge for Qantas. There are a lot of insecurities resulting from terrorist activities like the bombing which took place in September, 2001 which saw the cancellation of certain airline routes. An ethically responsible organization should ensure that its workforce has safe working conditions. Insecurity pose an ethical challenge for Qantas since airports and aircrafts are being targeted by terrorists. Therefore, to some extent Qantas is not in a position to guarantee the safety of its personnel and customers too. However, this can be addressed through its corporate governance because it has committees for dealing with safety at the workplace. Another ethical challenge for Qantas relates to consultation services. The company involves external consultants in their appointment of directors as well as in assessing the performance of the Board. It is difficult for Qantas to know whether the consultants provide a sound advice or not. This is most common when such consultants have conflicts of interests in the business. As providers of outsourced services, they are interested in the progress of the company so that they continue providing services to the company (Coles & Hall 2008, p.84). Conclusion Qantas is the largest airline in Australia with a market share of 65 percent of the local market. Its main brands are Jetstar and Qantas. It offers domestic, regional and global airline services. The main features of Qantas’ corporate governance structure are independence, directors’ election and re-election, diversity, review of the performance of Board members, balanced and timely disclosure and recognition and management of risk. In its engagement with stakeholders, Qantas has rules regarding the conduct of employees especially in disclosing information. It also complies with government laws as well as procurement rules and procedures. The ethical challenges for Qantas relates to diversity and inclusion, insecurity and consultation services. List of References Read More