Finance
Name
Institutional Affiliation
Finance
Discussing the Background Information about the Company
Genesis Energy Limited is one of the largest retailers of electricity, natural gas, and LGP in New Zealand. The Company has been operating in New Zealand since 1999, where it is listed in the Energy sector of ASX Stock Exchange. The company is one of the largest electricity and natural gas retailers in the country. This has allowed the management to acquire 26% of market share in electricity and 39% of market share in natural gas. Furthermore, the company is the third largest electricity producers in the country, where it produces 14% of the total New Zealand electricity in 2016. During the financial year of 2016, the organization has obtained total revenue of 2,011.3 million in 2016, while the net profits amounted to 184.2 million. The total revenue declined, while net income of the company has increased during the fiscal year of 2016 as compared to 2015 (Gesakentico.blob.core.windows.net, 2018). Therefore, the 2016 financial year has allowed the management to improve their overall profitability by reducing the cost incurred from operations. The financial strength of the company is to minimize the exposures of excess expenses and maximize the total production output. Currently, the organization for improving their operations is minimizing the expenses and maximizing the level of income from operations. These measures have allowed the organization to capture the market share in New Zealand and become one of the largest retailers of electricity in the region.
Analyzing the Board Structure in relation to ASX CGC Corporate Governance Principle
The annual report of Genesis Energy holds the information regarding the board structure and its committees for the financial year 2016. The board structure of Genesis Energy consists of a minimum of three Directors, maximum of nine Directors, the majority of independent non-executive Directors and with a minimum of two Directors who will ordinarily be resident in New Zealand. The combination of the board structure is listed in the constitution and Board Charter of the organization. The organization also accommodates a Nomination Committee in their operations for adequately supporting the requirements of ASX CGC Corporate Governance Principles and Recommendations. Hence, evaluation of the current disclosures of Genesis Energy is evaluated on the basis of ASX CGC Corporate Governance Principles and Recommendations.
The evaluation of ASX CGC Corporate Governance Principles and Recommendations indicates certain rules and regulations that need to be followed by the organization, which are depicted as follows.
Nomination Committee should be present within the organization
Having least three members in the committee, where the majority should be independent directors (Asx.com.au, 2018)
The independent director should be chaired in the committee
Adequate charter for the committee needs to be prepared
All the members of the chart company need to be met
Recording the daily report information regarding the presence of the members listed in the county
The organization has no Nomination committee will have to provide relevant disclosure regarding the number of time the committee met the requirements. The board needs to have an appropriate balance of skills, knowledge, experience, independence and diversity within the management for discharging the duties and responsibilities effectively (Du et al., 2018).
Figure 1: Board structure of Genesis Energy
(Source: Gesakentico.blob.core.windows.net, 2018)
The above figure depicts the board structure that is being followed by Genesis Energy, where minimum three directors with a maximum of nine directors are used by the organization. In addition, the organization has maintained independent non-executive directors in the organization where two of the directors are ordinarily resident of New Zealand. The board size of the organization is adequate for supporting the operations needed for maintaining the financial performance. Moreover, the board diversity level of Genesis Energy is high, as the organization has maintained diversified board members, where board structure allows independent non-executive directors. The restriction on the board members is in accordance with ASX CGC Corporate Governance Principles and Recommendations. In addition, the annual report indicates that the company follows the ‘Principle 2: Structure the board to add value’ strictly. This is the main reason, as all the relevant information asked in the principle is listed by the organization in their annual report (Hay et al., 2017).
Analyzing the structure of its audit, remuneration and Nomination for 2016
Figure 2: Board of directors of Genesis Energy
(Source: Gesakentico.blob.core.windows.net, 2018)
The above figure indicates the presence of an adequate structure for remunerations, audit and nomination committee in the annual report of Genesis Energy. The information highlights all action taken by the Genetics Energy Management uses for forming the remuneration committee structure, where the principal purpose of the committee is to help the board in overseeing some actions (Lama & Anderson, 2015). The remuneration committee was responsible for evaluating the performance of Chief Executive, Directors and Senior Officers to determining their remuneration for the fiscal year. The committee members of remuneration are Doug McKay (Chairman), John Dell, and Dame Jenny Shipley. The audit and risk committee has Joanna Perry (Chairman), John Dell, John Leuchars, Rukumoana Schaafhausen, and Mark Cross as their members. The remuneration committee is responsible for calculating the correct remuneration of the Executive, Directors and Senior Officers, which reduces the chance of error (Beekes et al., 2015).
The audit committee aims to evaluate the integrity of the external financial report prepared by the company. In addition, the other roles are internal control systems, Appointment & performance of internal & external auditors, financial management, Related-party transactions, risk-management framework, accounting policy & practice, and the monitoring of compliance within that framework. These identified roles are a performance by the members of the audit and risk committee of the organization. With the help of the audit committee, the organization is able to evaluate performance and maintain integrity, while disclosing the financial report externally (Gitman et al., 2015).
The members of nomination committee are Dame Jenny Shipley (Chairman), Joanna Perry, and Graeme Milne, who are responsible for board successful planning, identifying suitable prospects, conducting annual board self-review process, Monitoring the appropriate balance of skills, experience, independence, and knowledge of the Board. In addition, the committee provides director induction and development for reducing the future problem faced by directors of the company. Therefore, with the presence of the nomination committee Genesis Energy is able to evaluate the succession planning, as it is essential for continuous growth (Shimeld, 2017).
Hence, from the evaluation it can be detected that Genesis Energy complies with the ‘Principle 2: Structure the board to add value’. Therefore, the organization has forged 3-committee and disclosed all the information in an annual report regarding its actions. Genesis Energy follows the recommendation from 2.1 to 2.6, as listed in ‘Principle 2: Structure the board to add value’. This has allowed the organization to prepare the annual report in accordance with the ASX CGC Corporate Governance Principles and Recommendations.
References
Asx.com.au. (2018). Asx.com.au. Retrieved 12 December 2018, from https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf
Beekes, W., Brown, P., & Zhang, Q. (2015). Corporate governance and the informativeness of disclosures in A ustralia: a re‐examination. Accounting & Finance, 55(4), 931-963.
Du Plessis, J. J., Hargovan, A., & Harris, J. (2018). Principles of contemporary corporate governance. Cambridge University Press.
Gesakentico.blob.core.windows.net. (2018). Gesakentico.blob.core.windows.net. Retrieved 12 December 2018, from https://gesakentico.blob.core.windows.net/sitecontent/genesis/media/new-library-(dec-2017)/about_us/investor/reports%20and%20presentations/pdfs/annual%20reports/genesis-energy-annual-report-2016.pdf
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.
Hay, D., Stewart, J., & Botica Redmayne, N. (2017). The Role of Auditing in Corporate Governance in Australia and New Zealand: A Research Synthesis. Australian Accounting Review, 27(4), 457-479.
Lama, T., & Anderson, W. W. (2015). Company characteristics and compliance with ASX corporate governance principles. Pacific Accounting Review, 27(3), 373-392.
Shimeld, S., Williams, B., & Shimeld, J. (2017). Diversity ASX corporate governance recommendations: a step towards change?. Sustainability Accounting, Management and Policy Journal, 8(3), 335-357.