BHP Billiton and Corporate Governance

Abstract

This paper talks about corporate governance in general and corporate governance in light of review of a public listed organization. This organization is BHP Billiton, which is a world-renowned resource extraction company. The main discussion of the paper highlights the importance of, and principles of corporate governance itself. The discussion is then followed by a review of corporate governance framework of BHP Billiton, which is further broken down in smaller discussion segments for ease of analysis and review. This main discussion is then ensued further, by providing appropriate recommendations and with concluding remarks of this paper.

Table of Contents

Introduction1

Discussion1

Corporate Governance1

Importance of Corporate Governance2

The OECD Principles of Corporate Governance3

Corporate Governance and BHP Billiton Limited4

BHP Billiton Limited5

Company's overview of Corporate Governance6

Recommendations and Conclusion10

References12

Appendix15

BHP Billiton and Corporate Governance

Introduction

Corporate Governance can be described as dealing with the rights and responsibilities of an organization's management, stakeholders, shareholders and its board of directors (Gavrea & Stegerean, 2011). In broader respect, corporate governance is concerned with the overall operations of the company that has a strong impact on its performance, market perception and investment decisions (www.oecd.org, 2012).

The chosen publicly listed Australian organization is BHP Billiton Limited and this paper aims to highlight the importance of corporate governance and practices in review and contrast of those being practiced by BHP Billiton, followed by possible recommendations derived from the review of the main discussion.

Discussion

Corporate Governance

A widely used definition of corporate governance states it as a 'system' that the business organizations have to comply with in order to direct and control their operations. More particularly, it is a framework through, which the various interests of all the stakeholders are, managed. Conversely, Tricker (2012) has defined corporate governance as 'control of corporations and overseeing the accountability of those who control these corporations.

Corporate Governance is also a framework through which the companies set their future business objectives, along with determining the means through which these objectives will be achieved. Cowton (2011) states the two main fundamentals of corporate governance to include; a long term relationship that is concerned with the investment aspect of the business between the management and its investors, along with providing transparent checks and balances system. The second important fundament represents a transactional relationship concerned with the management and disclosure policies and practices. Thus, it comes down to the job of the board of directors to maintain transparency and open communication to all its shareholders and stakeholders.

Sir Adrian Cadbury identified five main rules or principle for corporate governance for the directors and business managers to consider and incorporate in their businesses. These five principles stated are the long-term strategic goals of the business, the past, present and future performance and employee workforce needs. The consideration of how the business practices has an impact on the environment and the community in which they function along with the integrity and accountability shown towards their suppliers and customers by the business. The last of the five principle states to be businesses compliance with the legal regulations of the city, state ...