Social Corporate Strategy at Virgin Australia Holdings - Case Study Example

Virgin Australia Student’s name University name Introduction Virgin Australia Holdings is a company domiciled in Australia. It is a company limited by shares and it was incorporated. (Chatfield, 2000: 141). The company was founded in the year 2000 where it became owned wholly subsidiary by the Virgin Group. Virgin Australia Holdings deals mainly with Airlines services. Its headquarters is in Bowen Hills, Brisbane. The company not only operates Domestic Operations but also International Operations Segments. Apart from the introduction, this paper will look at the literature review used for this study. It will then analyze different key features of corporate governance of the company, its engagement with other stakeholders and the ethical challenges the firm encounters with its current governance arrangements. The paper will finally conclude on the study. Literature Review In carrying out this study, works of different authors and scholars would be majorly relied on. The literature review used would be books, articles, journals, charters, principles and policies. Virgin Australia Holdings by having a corporate governance framework has a rules and regulations that govern it. The rules and regulations are provided for under the ASX Corporate Governance Principles and Recommendations (2nd Edition, 2014). All the governance documents should comply with the Principles. Under the ASX Corporate Governance Principles and Recommendations there are several other documents for governance that deal with the different key features of corporate governance. Some of the governance documents include the Board Charter, Nominal and Committee Charter, Code of Conduct for Directors and Senior Executives, Guide to Business Conduct, Nominee Director Protocol, Diversity Protocol, Audit and Risk Management Policy, Continuous Disclosure Policy, Shareholder Communication Policy, Safety and Risk Management Committee Charter, Risk Management Policy, Remuneration Committee Charter. All these charters must comply with the ASX Corporate Governance Principles and Recommendations of 2014. The research paper also will use the Annual Financial Records for the year ended 2014 to get to know and understand how Virgin Australia Holdings has complied with the corporate governance framework. By using the Annual Financial reports, it can be determined whether there are key features under the Virgin Australia Holdings Limited. It is through the annual financial reports that the research will find out how each feature performs the roles it is mandated to do. For the key features of the Virgin Australia Holdings, the research paper will look at different articles, books, reports and website materials. Some of the materials to be looked at are; International Finance Corporation Annual Report on Corporate Governance (World Bank Group, 2014: 268). The annual report provides for the main key features in a corporate company and also defines the roles each feature should take. Adams (2008) in his article The Role of Board of Directors in Corporate Governance shows what the Board of directors should do. It also brings about the aspect of delegating duties by the Directors to other member when they deem fit. In an article by M Huse (2005), Accountability and Creating Accountability: A framework of exploring behavioral perspectives of corporate governance, the author goes ahead to state the importance of accountability and democracy in corporate governance in a company. He goes further to emphasize on the importance of corporate governance. Another major article that will be useful in the study is Investor Protection and Corporate Governance by La Porta (2000). In this article La Porta sets out the laws and the qualities of good corporate governance. He also brings out the elements and key features of corporate governance. For the aspect of engaging stakeholders, the research will look at the following materials; Social Corporate Strategy: Stake holders Engagements and Competitive Advantage by Bryan Husted, David Bruce Allen (2010). This book talks about how competitive advantage is vital to a corporate through social strategy. It goes further to encourage corporate to create value and participation in their engagements with stakeholders. Allen goes further to outline the advantages, the purposes and the corporate responsibilities of engagement, participation and communication to stake holders. Another source to be looked at is the Annual reports which lay out how Virgin Australia Holdings manages and engages their stake holders so as to ensure that corporate governance is upheld. Ethical challenges faced in Virgin Australia Holdings will be discussed and researched from the following sources; Global Rules and Private actors: Towards a new role of the transitional corporation in global governance by RV Aguilera, CA Williams (2006). The authors discuss the ethical challenges a company encounters when managing social and environmental issues. It also brings out the moral motives brought about and driven by ethics in action. The book also discusses the republican concept of ethics. A survey of corporate governance and ethics by A Schiefer (1997) is also another source that will be majored on in the course of the research. In this source the author tries to bring about how corporate governance and ethics are very much on different pages. He goes further to state that some issues of ethics cannot be addressed and solved by some issues of corporate governance. Overview of Virgin Australia Holdings Limited Virgin Australia Holdings being a company limited by shares has corporate governance framework just like any other company. A corporate governance framework can be defined as different institutions in the company that evaluate and seek to improve the governance performance in the company. Corporate governance framework is very beneficial to a company because it helps in ensuring that a better understanding of the oversight role is achieved. It also ensures that the management’s responsibilities of the board are fit, more constructive and convincing. A corporate governance framework is vital because it helps to ensure that the roles of the board and management are well defined and that duplicate duties efforts and the overlooking of critical issues are avoided. Key features of corporate governance in Virgin Australia Holdings Limited Virgin Australia Holdings has a composed corporate governance framework which lays out solid foundations, management and oversight of the board, provides he nominal structure of the board to add value, promote ethical and responsible decisions making, safeguard integrity in financial reporting, remunerate fairly and responsibly, recognizes and manages risk, respects the rights of shareholder and finally, which makes timely and balanced disclosure. (Annual Report, 2014: 13) All the key features of Virgin Australia Holdings Limited are supported and governed by a charter, a policy or a protocol. The key features of the company are; internal and external audit, external safety advisor, remuneration committee, safety and operational risk review committee, auditing and risk management committee, assurance and oversight reporting board, executive committee and finally the company secretary. All the key features are answerable to the Board which is governed and provided for by the Board Charter. (Annual Report, 2014: 17) The Board which is governed by the Chief Executive Officer has a mandate to provide strategic guidance and ensure effective oversight of the management. The Chief Executive Officer has the mandate to delegate the powers given to him as he finds appropriately. Board meeting are to be held on a regular basis and are to be coordinated by the Company Secretary. The Company Secretary is to ensure that there is coordination and that the meeting is timely. He or she should also ensure that the briefing materials and the Board meetings agendas are dispatched. The Audit and Risk Management Committee has the mandate to ensure that there is utmost integrity in the reporting, reviewing and assessing financial reports. They also have a duty of reviewing the risk management policies and to ensure that they are processed and profiled. They also ensure that the insurance cover is up to date.(Huse, 2005.) The Remuneration Committee is another key feature of corporate governance framework. Under the Remuneration Committee, performance assessment processes are reviewed. This assessments are not only restricted to the members but to also group executives and Chief Executive Officers. The Committee also has a role of agreeing with the recruitment, retention and termination of Group executive policies. They also ensure that there are available policies for employee incentives schemes and superannuation. It is also the role of the Remuneration Committee to ensure and recommend to the Board the diversity objectives. The Nomination Committee has the mandate of ensuring that the induction and ongoing development of directors is carried out. They are also required to conduct performance appraisal of the Board, its directors and the also the Chief Executive Officer. The Safety and Operational Risk Review Committee is the last key feature of the Board of the Virgin Australia Holdings Limited, its main role is to ensure that there is oversight of operational safety, health and security risks. It is also mandated to maintain best practice in operational safety management. It should ensure that there is compliance with the legal and regulatory obligations and also with the internal systems of control. The Committee should ensure that serious investigations and remedial actions are monitored. Engagement with the stakeholders One of the key foundations of efficient corporate responsibility performance is the stakeholder engagement. The engagement is through participation and, for it to be held, it must be guided initiated and even sustained. It is only after establishing effective engagement and highly stimulating the communication that ownership and increased responsibility can be established. Engagement has several purposes, which if followed to the later, encourages regular discussions and opportunities for feedback in case of any submitted ideas. (Husted, Allen, 2010). Engagement improves contribution to a more equitable, socially and a more environment friendly sustainable development. It also improves the management of business risks and reputation. Through engagement, forward thinking is encouraged and solutions to challenges of sustainability are ensured. Communication being a key foundation for corporate governance keeps stakeholders not only informed but also invites and encourages their support, agreements and even sustains their interest. Communication and engagement of both local and international stake holders enhances and promotes strong partnerships especially with leading global airlines hence bringing significant benefits to the Australian customer. (Adams, 2008) Studies show that Virgin Australia Holdings engages with a wide range of stake holders on regular basis. They have noted, identified and analyzed the key stakeholders by regularly communicating to them. The stakeholders identified by the company are their shareholders, employees, community groups, major suppliers and their customers both local and international. Virgin Australia Holdings Limited tries to engage with the non- governmental organizations through the provided programs and partnerships directly. Stake holders are often faced with several challenges which include competition. The major competition the stakeholders are facing is with the Qantas Airline which is termed as the Australian Airline.(Boundless, 2014: 8) They go further to claim that they should receive equivalent assistance equivalent to that given to Qantas. Another challenge they face is that of capital raising ventures. The capital raising ventures were designed to benefit trans-continental and regional routes that were lacking services and competition. Ethical Challenges The basic principle of corporate governance and ethics tend to differ and contrast. The most difficult decisions at the corporate governance level are usually those that deal with ethics because they must be made through the most complex assessments, societal, corporate and personal values. This makes corporate governance and ethics cross levels and therefore become difficult to address.(Aguilera, 2006.) There are certain aspects of corporate governance that cannot address certain aspects of ethical considerations. It is the duty of the managers and directors to have the primary obligation to ensure that they themselves are held accountable in ways the businesses operate. Virgin Australia Holdings has a Code of Conduct that promotes ethical and responsible decision making. The Code of Conduct of the company applies to all not only directors and senior executives but to all members of the company. Through the company Code of Conduct, members of the company who are directors, senior executives and employees are made aware to what the company regards as acceptable business practices. The Code of Conduct also reflects the commitment of the members to the ethical standards and practices. The Code of Conduct has different policies. Some of the policies in the Conduct are; Equal employment opportunity policy; this policy ensures that all members are treated fairly and equitable, with dignity, courtesy and respect. It ensures that complaints and concerns of discrimination, victimization, work place bullying and sexual harassment are treated seriously. (Annual Report, 2014)The policy goes ahead to describe, define and communicate the extent through which gifts are accepted. It also summarizes the prohibited gifts and the process of approval for accepting gifts. The policy has created a hotline through which employees may be able to report any unethical conducts carried out in the company. It goes further to establish a whistle blower policy that protects employees who report any unethical conduct and ensures that the process is confidential. The policy has a securities trading policy. The policy was implemented so as to ensure that the legal restrictions about trading in the company’s securities are made aware to the members and employees. The securities trading policy is meant to ensure that directors and executives seek consent before dealing in the company’s securities. Diversity and inclusion is also a policy that the Code of Conduct uses to prevent ethical challenges. The policy is used so as to ensure culture is included and people can then be treated and treat each other with mutual respect. Though the policy of diversity and inclusion, the recruitment process is developed and promoted on merit basis and not on any other tribal or racial basis. The policy also ensures that gender diversity is achieved. The policy also incorporates supports and retains members with disability. It seeks to educate people about diversity and cultural awareness. Conclusion Corporate governance is very important to all corporate companies. From the study done it can be adduce that if carefully managed, the key features of corporate governance framework will be beneficial in a company. Engagement of stakeholders through communication and participation should also be upheld to ensure that the company is effectively managed. Strong partnerships between the company and both the local and international companies will bring significant benefits to the company if all the required procedures are followed, initiated and upheld. Corporate companies should ensure they establish means and methods that will determine ethical issues in case they arise. Modes of solving ethical considerations and disputes should be clearly established. Reference Annual Financial Records for the year ended 2014. Aguilera, R. 2006. Global Rules and Private actors: Towards a new role of the transitional corporation in global governance. Allen, B. Husted, B. 2010. Social Corporate Strategy: Stake holders Engagements and Competitive Advantage. Corporate Governance Principles and Recommendations, 2014, 2nd Edition. Grimmson, M. 2014. The Fight for Australia’s Skies: Qantas versus Virgin Australia Holdings Limited. Hermalin, A. 2008. The Role of Board of Directors in Corporate Governance. Huse. M. 2005. Accountability and Creating Accountability: A framework of exploring behavioral perspectives of corporate governance. Porta, L. 2000. Investor Protection and Corporate Governance. Schiefer, A. 1997. A survey of corporate governance and ethics. World Bank Group. 2014. International Finance Corporation: Corporate Governance. Annual Report. Read More