Corporate Governance in Coles
Coles Supermarkets Australian Pty Ltd trading in the form of Coles is a chain of Australian supermarkets that is owned by the Wesfarmers. The company was founded in 1914 in Collingwood, Melbourne and operates 776 supermarkets all over Australia including numerous rebranded supermarkets (www.coles.com.au 2017). Coles currently has more than 100,000 employees and along with the rival Woolworths, comprises of more than 80% of the Australian market.
The current report is based on the evaluation of the Coles governance and risk management strategies. The report will provide an in depth analysis of the commitments and practices undertaken by the company relating to the corporate governance and risk management (Tricker and Tricker 2015). The report will emphasis on auditing the extent to which Coles abides by its stated governance and risk management commitments and will further determine whether the alignment of the commitments and practices are in accordance with the optimal standards and policies.
Coles is committed towards making a positive impact on the economic, social and environmental contributions to the community with the principles of honesty, integrity, fairness and respect. The Board of Coles has undertaken the code so that it can offer a set of guiding principles that are to be observed by the Coles personnel and against which it holds accountable (McConnell and Qi 2016). The board of Coles is a strong advocate of good corporate governance. As observed from the analysis that the board is committed towards offering a satisfactory, return to its shareholders in order to fulfil its corporate governance obligations and responsibilities in the best interest of the company and its stakeholders.
Coles complies with the third editions of the ASX corporate governance council’s corporate governance principles along with the recommendations released on 27th march 2014 (McCahery, Sautner and Starks 2016). Corporate governance represents the systems of rules, practices and processes through which a company is directed and controlled. Coles considers its approach to corporate governance as vital and believes ongoing creation of values for its stakeholders and shareholders.
Coles identifies the significance of offering its shareholders and the wider investment community with the amenities of accessing up-to-date high quality information. It also provides the opportunity to shareholders to participate in the decision of the company and provides avenues to establish two-way communication amid the company, the board and the shareholders (Iliev et al. 2015). Coles has created a programme relating investor’s involvement for indulging with shareholders, debt investors, the media and the wider investment community. Furthermore, the shareholders of the company possess the capability of electing in order to receive communications and other information is relating to shareholders electronically.
Gender Diversity at Coles
The objective of Coles is to leverage each of the individual’s unique skills, background and perspective. At Coles, inclusion commences from the practices that is designed to increase the retention of leaders with noteworthy responsibilities outside the work. Coles divisions are taking up the opportunity in several ways which also consists of increasing the flexible work arrangements for current managers and advertising new roles being available on flexible basis (Larcker and Tayan 2015). In addition to this, Coles and its division perform numerous forums and events so that it can increase awareness to create networks by facilitating sharing of practices, which increases inclusion.
The objective of Coles is to embed gender diversity initiatives so that it can wide the talent management procedure to assist the development of all talents. Coles focuses on increasing representatives of women in leadership, which is embedded in variety of group and divisional talent management practices consisting of reviewing of talent, development of leadership, 360 assessment and development of talent through stretch assignment. The managing director of Coles meets at least once yearly with each division is concerned with formally reviewing the senior leader performance and development, succession planning for critical roles and the pipeline for higher potential leaders (Claessens and Yurtoglu 2013). Coles criteria for evaluating the capability and potential forms the basis of behaviour and traits which is gender neutral.
Upon analysis, it is observed that the overall number of women in manager or above roles increased from 29 per cent to 30 per cent (Clarke 2014). Such increase was highlighted across several levels of management consisting of leadership teams, senior manager and manager levels with only the post of general manager has witnessed a slight fall in the representation of women.
On auditing the organizations corporate governance statement it is found that ever since 2010, a group review relating to gender equity has been performed yearly with the results reviewed by the Board and divisional managing directors. Over this period, Coles have aggressively moved to close down any equal pay gaps. Coles has been able to close down the gap at all managerial levels of the organisation to 5% or lower with only exception of general manager’s level where a gap lies of 6.7% (Bhaduri and Selarka 2016).
The corporate governance statement on auditing highlighted the issue that the gap was predominantly because of differences in pay across industries, location and relative supply and demand for certain qualifications along with performance and experience of individual. To further cut down the gender gaps, Coles have implemented a wide variety of actions that consists of provision of gender pay equity adjustment as the part of annual remuneration review process. On auditing the remuneration policy, it is noticed that Coles ensure an appropriate and fair application with consistent implementation of job evaluation methods with ongoing market data comparisons.
Risk Management at Coles
There are opportunities for improvement in the areas of women representation in the roles of leadership across the Coles business. In the financial year of 2017, all the division will thrive towards continuous progress on this front with the diversity of initiatives, including embedding supportive practices and policies. Issues such as development of internal senior talent and addressing of exact characters or levels within the business where women leaders are materially underrepresented.
Coles is committed towards the identification, monitoring and management of material risk associated with the business activities across its chain of supermarkets. The board of Coles identifies that a sound culture is fundamentals to an effective risk management framework (Wook et al. 2016). Coles encourages a culture that values the principles of honesty, integrity, fairness and accountability and these values are reflected in the Coles code of conduct.
The management of Coles is accountable for daily compliance with the risk management systems. Management monitors the compliance with the effectiveness of risk management systems and controls the divisional level. Coles senior manager reports to the board of directors in the areas of risk management systems and processes on a consolidated basis across the group (Yoon, Yildiz and Talluri 2016). This helps the board in locating the areas to strengthen the culture of Coles and approach towards risk management. Separately, Group assurance and risk reviews reports are provided to the audit and risk communities based on the adequacy of the Coles risk management together with the internal control environment.
The risk management framework of Coles is reviewed by the board on yearly basis and was approved during the month of May in 2016. This outline the details of overarching principles and risk management procedure, reporting systems and division of vital risk management functions amid the board, Coles managing directors and finance directors (Ucer et al. 2017). The risk management framework of Coles consist of the assurance and risk which includes;
The Coles group of conduct
Establishing group and divisional structures, lines of reporting, appropriate authorities, responsibilities, together with guidelines and restricts the approval of expenditure. This consists of the capital expenditure, investments, and contractual commitments as well.
Operating risk management framework, which clearly sets out the board committees and divisional activities of the board.
A formal corporate planning procedure that requires each division to evaluate the trends that are most likely to create an impact on the performance scenario planning by preparing a SWOT analysis
Internal Audit and Risk Management Function
Coles policies and process are aimed for the management of the financial risk and the treasure operations. This exposure consists of the foreign currencies and movements in interest rates (Stanhope and Lancaster 2014).
Coles has comprehensive risk financing program, which includes transferring of risk to external insurers and reinsurers
Coles has appropriate due diligence procedures for acquisitions and investments
Internal and external assurance programs.
The risk management framework of Coles also defines the roles and responsibilities of audit and risk committee at the time of executing the internal audit functions through a compliance reporting program developed to encompass the areas recognised as highly sensitive to risk. The General Manager Group Assurance and Risk screens internal control framework of the group and provides reports to the audit and risk committee. It then provide approval to the internal audit charter along with the yearly internal audit plan in order to assure that the planned audit activities are associated to material the business risk (O’Neill, Sohal and Teng 2016).
The Audit and Risk Committee of Coles analyses the internal audit reports provided by the General Manager Group Assurance and Risk to screen the progress. The recommendations made in those reports assures that the adequacy of the internal control environment. The functions of internal audit and external audit are distinct and are independent of each other. The roles and responsibilities of the audit and risk committee are further laid down in the audit and risk committee charter.
On performing the audit of the organisation Coles managing director and the finance director offer written statement to the board in conformity with the section 295 A of the Corporations Act 2001. It is observed that the directors provide recommendations in terms of the ASX principles regarding the half and full year reporting periods. About the maintenance of the financial records, Coles complies with the accounting standards in preparation of financial statement and systems of risk management (Bradshaw, Donohue and Wilks 2014). The board members of Coles receives assurance from the Managing Directors and the finance directors that the declarations were founded on the sound systems of risk management and internal control. They provide assurance that the system is working effectively in all aspects of material relating to the financial reporting risk.
Management at each division is under obligation to have in place an effective risk management policies, programs and internal control systems so that it can manage the material business risk in conformity with the Coles risk management framework (Franconetti and Ortiz 2014). Divisional management is accountable to the Board for the relevant risk management systems. On auditing the organization risk management strategies it is found that the management has reported to the audit and risk committee on the effectiveness of the internal control and risk management systems throughout the year. The audit and risk committee on receipts of the reports from the management in conformity with the annual review procedure has reviewed and satisfied itself for the financial year of 2016 that the Coles risk management framework continuous to be effective and sound.
Conclusion
Coles states that its relationship with more than 15,000 suppliers across the group is of high importance. The company aims to provide value to its consumers and suppliers for sustainable growth. Striving for better efficiency in its consumer supply chains it ensures Coles continuous competitiveness. Coles forms the largest consumers business and continuously looks forward for efficiencies in its supply chain (Webster 2015). Coles relationship with the food and grocery supplies across Australia continuous to form the focus of attention and Coles is strengthening such relationships for sustainable development, long term agreements with suppliers throughout Australia. Coles possess an Australian sourcing policy that aims to support the Australian farmers and manufactures where needed at the time of sourcing new produce and Coles brand products.
On auditing the organization commitment it is noticed that Coles continuous to develop longer and deeper relationships with its suppliers. This provides the suppliers with greater certainty to invest in their businesses and more opportunity for collaboration on quality, efficiencies and product innovation (Lewis and Huber 2015). One of the ground-breaking examples found during the auditing is that it has established 10 year contract with Sun drop Tomatoes in southern Australia for the supply of truss tomatoes. The contract with Sun drop would assure yearly supply for customers. It has supported investment in highly innovative technologies that includes a 20-hectare greenhouse facility at Port Augusta that cultivates tomatoes by making the use of solar power and seawater.
Ever since the year 2013, Coles has been the leading voice in the development and implementation of voluntary Food and Grocery code of conduct with the Australian grocery council. The voluntary code of Coles govern the conduct between the grocery retailers and wholesalers in their dealing with the suppliers including the agreements of supply, payments and dispute resolution.
The industries of apparel are identified to be carrying the greater risk of child labour that enforced the labour and liberty of association, because of lower skill level needed in the manufacturing process (Wang 2015). With a high volume of apparel sold by Coles departmental, store ethical sourcing practices forms the material issues for Coles. During the year Target, Kmart and Coles continued to lead the way for Australian retailers regarding the transparency in the supply chain. Coles has made available the particulars of the factories that supplies the mix clothing range on its website. Coles is making preparation for the launch of SEDEX (Supplier Ethical Data Exchange) in order to rationalise the ethical agreement by screening and monitoring the efficiencies for its suppliers (Yeo 2013). SEDEX will also help in easing the risk evaluation and an information-sharing platform for social agreement audits in order to maintain the visibility by driving consistency across the Coles supply chain.
On auditing the organization corporate governance report it was noticed that during the year of 2016 96 per cent of the fresh fruit and vegetables were sourced in Australia (Chadwick, Super and Kwon 2015). Coles has led the accountability of sourcing in Australia in the recent years which includes the introduction of RSPCA approved chicken, Sow stall free pork, fair trade coffee, tea and chocolate. Responding to the issues of unfair and illegal labour conditions on supply farms and processing sites of Coles, it has continuously communicate in writing to local fresh produce and meat suppliers concerning their legal obligations regarding their immigration and workplace laws (Kolk 2016). Coles undertook a noteworthy audit and review program during the year so that it can identify and address compliance gaps in its supply chain and providing vital information to the suppliers on the areas of improvement.
Coles continuous functions with the Australian fresh produce, meat suppliers and cross industry working groups. In the current year of 2017 Coles has established a wages and conditions for farm and factory workers (De Castro and Griesse 2013). In Australia employees, working for Coles supplier can make a hotline call and gain more knowledge concerning the conditions of work or it can report biased labour practices. For workers whose English is not their first language Coles also provide the other options of communicating their concerns and learning more about their rights.
To lessen the hazard of immoral practices taking place in the supply chain Coles apply an ethical sourcing and audit programs for its suppliers. Suppliers are regarded with lower risk if they function in more controlled countries or if they are supplying standard international brands. Manufacturing unit in the audit program are under the obligation to possess a current audit certificate (Hartman et al. 2014). The audits recognises the range of non-compliance from minor non-compliances in the form of gaps in recording business to serious breaches such as indices of forced labour and corruption. Wherever a non-compliance is identified, the manufacturing unit is required to fix the issue within the appropriate time depending upon the nature of compliance.
Conclusion:
To conclude with the report has highlighted the corporate governance practice in several areas. Upon auditing, it was also found that Coles divisions are taking up the opportunity of increasing the flexible work arrangements for current managers. The report has highlighted that Coles complies with the third editions of the ASX corporate governance council’s corporate governance principles.
The board reviews the risk management framework of Coles annually by addressing the areas of financial and non-financial risk. The risk certification programs of Coles complies with the section 295 A of the Corporations Act 2001. Furthermore, the report has highlighted that the Coles is committed towards developing deeper relationship with the suppliers by establishing transparency in supply chain.
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