Governance and Fraud for Quantas Airways Limited- myassignmenthelp

Question: Discuss about theGovernance and Fraud for Quantas Airways Limited. Answer: Corporate governance refers to administrative mechanisms adopted by a corporation to regulate it functioning. This means that corporate governance includes all managerial and administrative positions and their actions within the framework of the companys policies (Tricker and Tricker 2015). Corporate governance principles refer to well defined and ethical mechanisms prescribed for implementation by companies in order to establish a more moral and accountable stand from the companys perspective (Davies 2016). The HIH Insurance fraud and similar failures of corporations to be accountable lead to the need for well defined corporate governance principles Australia (Leung et al. 2014). The Australian Securities Exchanges (ASX) Corporate Governance Council makes recommendations for the same the current edition in force is the 3rd Edition (Beekes, Brown and Zhang 2015). The following paragraphs will explain the extent to which two corporations have adopted the ASXs recommendations in light of their current administrative position. Quantas Airways Limited (QAN): The management at QAN takes pride in stating that they have implemented the ASXs corporate governance recommendations and structure their corporate governance policies based on the same. The first step to this was the disclosure their corporate governance statement in the corporate governance section of their official website and it had additionally filed its corporate governance statement with the ASX. ASXs first recommendation is to provide for sound management and oversight (Young and Thyil 2014). This basically means a high degree of vigilance in the managerial activities undertaken by the corporation. QAN states that it has formulated a formal charter which is available to the public, its board oversees all managerial activities responsibly and the company secretary is directly answerable to the board. This is evidence that the first recommendation had been implemented. The second recommendation by the ASX is the structuring of the board strategically to add value (Christensen et al. 2015). This means the addition of independent directors to the board to ensure that the board complies with the interests of the company (Kim and Lu 2013). The current board at QAN comprises of ten directors out of which nine are independent director. This demonstrates compliance with the second recommendation. The third recommendation of the ASX deals with ethical and responsible actions of the administration (Tao and Hutchinson 2013). QAN has implemented a corporate governance framework which embodies certain business principles which must be followed and cannot be negotiated. It also had an employee share trading policy which ensures that value of the distributed shares are not lost by the creation of any charge on these shares. This is evidence of compliance with the third recommendation. QAN currently has an internal Audit Committee as well as a rotational external audit system. The external auditor is changed once every 5 years and the same staff isnt allowed to be employed. There is also a system of meeting of the management with the internal auditor and the internal auditors with the external auditors. The payments made to the external auditors are also disclosed. This is aimed at compliance with ASXs fourth recommendation which deals with ensuring the integrity of corporate financial reporting (Chapple, Clout and Tan 2014). QAN had various disclosure mechanisms including a half yearly confirmation from the Executive management that all disclosure requirements have been complied with. QAN also communicates with its shareholders through the ASX informing them of each of these disclosures. This aligns QANs policies with the fifth recommendation made by ASX which deals with balanced disclosures and the sixth recommendation dealing with rights of the shareholders (Bottomley 2016). The board at QAN also takes effective steps to ensure risk management and employees two committees for the same. The Audit committee and the Safety, Health, Environment and Security committee. This is in compliance with ASXs seventh recommendation which deals with risk management (Schultz, Tian and Twite 2013). The board at QAN also explicitly conforms to the adequate remuneration recommendation made by ASX which is its eighth recommendation (de Villiers and Alexander 2014). Qube Holdings LTD (QUB): QUB sets out its compliance with all 8 recommendations made by the ASX in seriatim in their corporate governance statement. With respect to recommendation 1 it provides that QUBs board functions under a charter which is available to the public and embodies a corporate governance framework. The charter also provides for evaluation of the boards performance and disclosure of such reviews. In relation to ASXs second recommendation it lays down that the board currently consists of six members five of whom are non-executive directors (independent directors). This ratio is evidence of its compliance with the second recommendation. The third recommendation of the ASX is also implemented through the companys code of conduct which is strictly adhered to and is also available to public in the companys official website. ASXs fourth recommendation deals with ethical financial reporting and in light of the same QUB employs a rotational framework for external audits similar to QAN above. With regard to recommendation 5 which deals with the disclosures to be made by the company, QUB employs has a Continuous Disclosure Policy in place which is also made available to the public. In compliance with the 6th recommendation of the ASX, QUB undertakes that it makes accurate and timely disclosures to all their shareholders providing them with an accurate image of the companys dealings. In relation to risk management which is the ASXs 7th recommendation the company employs an audit and risk management committee (however this committee does not carry out internal audit functions) to assess viable risks. This committee employs an external agent to assess viable risks of the company. The final recommendation of the ASX deals with fair remuneration, in accordance with this QUB employs a Nomination and Remuneration Committee which reviews and regulates these functions of the company. The structure of the board of both these entities over the past 3 years represents how implementation of the ASXs corporate governance principles has enhanced the performance of both companies. This has been explained below. The board of QAN the Chairman of the Board and the Chief executive officer are separate people. The chairman is an independent director and this increases the value of the board in light of the interests of the company. The rest of the board consists of 8 non-executive directors who have various professional backgrounds for a better understanding of all aspects of the companys transactions (Bals and Tate 2017). The financial structure of the company is thus aligned with the shareholders interests with the help of the prevailing framework. This has also reduced the net debt incurred by the company as compared to the other years. It may be inferred that the adoption of ASXs corporate governance principles have helped QAN grow as a more accountable and performance oriented organization. The present board of QUB contains 5 non-executive directors. Over the years it has also been seen that executive directors tenures have ceased to exist and have not been renewed. The company reported a profit of $73.2 million for the financial year 2016-2017 which is significantly high when compared to the reported profit of the past year which was $56.2 million (Qube, 2018). Thus, as can be seen from the profit and revenue figures compliance with ASXs corporate governance recommendations have enhanced the performance of the company and has further made it evident that the board id aligned with the interests of the company. The TFS Corporation in Australia dealt with Indian Sandalwood and was regarded as a fairly successful venture. When celebrating its highest revenue rates it faced major backlash from an independent research firm which alleged a failure of corporate governance would lead to the downfall of the company. Share prices fell monumentally in early 2017 and the company became insolvent in 2018 (Lingard and Perry 2018). The strengths and weaknesses of the TFS corporation (now known as Quintis Limited) are as follows: In 2015, the TFS corporation acquired two pharmaceutical companies based in the United States, namely, Santalis and ViroXis. However, this deal did not usher in any noticeable benefits for the shareholders and the company. This would be in contravention of ASXs third and sixth recommendation and is not an ethical or responsible act. This also effects the rights of the shareholders as they have a right to have their interests safeguarded by the administration. Such a move of acquiring businesses that have stagnated or are not making any revenues also harms the credibility of the board. It also shows that the structure of the board did not provide for value creation. It is also established that the TFS Corporation was unaware of contacts between its subsidiaries and other entities ceasing to exist. This is inconsistent with the disclosure standards and shows a lack of communication within the organizational framework. This is against the ASXs first recommendation which relates to structuring of management and oversight in a responsible way. It would also pay up large amounts of dividends (rate of which kept increasing from the year it first started declaring dividends which was 2007). This in ways did amount to protection of shareholders interests and was one of the only identifiable strengths in Quintis Limiteds corporate governance policies. However, this would be regarded as a misrepresentation later as the shares ultimately amounted to zero. The company had also made numerous misrepresentations which made the financial position of the company appear inflated. Researches (Glaucus Inc) however predicted the shares of Quintis Limited were worthless. This was proved to be true when the company share prices collapsed and eventually lead to its demise in the form of insolvency. These misrepresentations would be in contravention of ASXs disclosure principle as well as the obligation to act ethically and responsibly. The above observations conclude that the implementation of corporate governance principles into the framework of Quintis Limited was limited if at all put in effect. The various fears stated by the critical research turned out to be realistic and materialized in due course. This also lead to a passing of allegations between the corporation and its subsidiaries which further establish a complete failure of corporate governance in the corporation. The corporate governance policies of the TFS Corporation lead to its downfall despite being projected as a viable profitable venture at first glance. The following acts by the company lead to its demise: The acquisition of two companies that were generating no revenue was a step that lead to the detriment of the company. This was not only against ASXs corporate governance recommendations but also against the Corporations Act 2001 which provides for decision making in good faith and in the best interests of the company. This was the first failure as one of these subsidiaries was a major source of controversy in later years as its contracts with other entities were terminated yet the board of Quintis Limited was apparently not notified. This question of the board being unaware also shows in the communications and disclosures between the company and its subsidiaries. All of these entities are obligated to act in the best interests of the company and such gaps clearly show a conflict of interest in that regard. The misrepresentations made by the company (which were eventually evident from the rapid fall in share prices) lead to a massive loss of credibility and thus investor reliance on the representations made by the company fell monumentally. To conclude, TFS Corporations inability to incorporate or intentional deviance from ASXs corporate governance principles lead to the ultimate demise of the corporation. The directors had represented that they are working in line with the best interests of the shareholders in mind however it was the shareholders interests which suffered the most from the final predicament. Thus, had the organization implemented better corporate governance policies it would be a stable investment and would continually usher in profits for all shareholders. This demise is a reminder of a corporations true obligations and responsibilities and also it ethical duties towards the public and society at large. Reference list: Bals, L. and Tate, W., 2017. Transparency. 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