Question

how can Woolworths improve their corporate governance?

Note: Woolworths Group Limited, a major Australian company, has extensive retail interests throughout Australia and New Zealand.

Answer 1

Corporate governance: Corporate governance is the combination of rules, processes or laws by which businesses are operated, regulated or controlled. The term encompasses the internal and external factors that affect the interests of a company’s stakeholders, including shareholders, customers, suppliers, government regulators and management.

"Create Better Experiences Together" 2020 Corporate governance statement

Top Ten Steps for Improving Corporate Governance of Woolworths Group Limited:

1. Recognise that good governance is not just about compliance: Woolworth group ltd Board of directors need to balance conformance (i.e. compliance with legislation, regulation and codes of practice) with performance aspects of the board’s work (i.e. improving the performance of the organisation through strategy formulation and policy making).

2. Clarify the board’s role in strategy: It is generally accepted today that the board has a significant role to play in the formulation and adoption of the organisation’s strategic direction. The extent of the board’s contribution to strategy will range from approval at one end to development at the other. Board must determine what role is appropriate for it to undertake and clarify this understanding with management.

3. Monitor organisational performance: Monitoring organisational performance is an essential board function and ensuring legal compliance is a major aspect of the board’s monitoring role. It ensures that corporate decision making is consistent with the strategy of the organisation and with owners’ expectations.

4. Understand that the board employs the CEO: In most cases, one of the major functions of the board is to appoint, review, work through, and replace (when necessary), the CEO. The board/CEO relationship is crucial to effective corporate governance because it is the link between the board’s role in determining the organisation’s strategic direction and management’s role in achieving corporate objectives.

5. Recognise that the governance of risk is a board responsibility: Establishing a sound system of risk oversight and management and internal control is another fundamental role of the board. Effective risk management supports better decision making because it develops a deeper insight into the risk-reward trade-offs that all organisations face.

6. Ensure the directors have the information they need: Better information means better decisions. Regular board papers will provide directors with information that the CEO or management team has decided they need.

7. Build and maintain an effective governance infrastructure: Since the board is ultimately responsible for all the actions and decisions of an organisation, it will need to have in place specific policies to guide organisational behaviour. To ensure that the line of responsibility between board and management is clearly delineated, it is particularly important for the board to develop policies in relation to delegations.

8. Appoint a competent chair:Research has shown that board structure and formal governance regulations are less important in preventing governance breaches and corporate wrongdoing than the culture and trust created by the chairperson.

9. Build a skills-based board: What is important for a board is that it has a good understanding of what skills it has and those skills it requires. Where possible, a board should seek to ensure that its members represent an appropriate balance between directors with experience and knowledge of the organisation and directors with specialist expertise or fresh perspective.

10. Evaluate board and director performance and pursue opportunities for improvement: Board must be aware of their own strengths and weaknesses, if they are to govern effectively. Board effectiveness can only be gauged if the board regularly assesses its own performance and that of individual directors. Improvements to come from a board and director evaluation can include areas as diverse as board processes, director skills, competencies and motivation, or even boardroom relationships.

Apart from the corporate governance should also on significant themes of current and futures years like:

a. Covid Crisis

b.Underpayment of salaried team members etc.,