Corporate governance is a practice that refers to a set of principles, systems and processes that a company employs in its routine operations. These frameworks provide a guideline in which the company can be controlled in order to fulfil its goals and objectives with the aim of adding value to the company for the long-term sake of stakeholders. In this case, stakeholders include everyone ranging from the society, employees, shareholders, customers, management and the board of directors. The only role assumed by the management of the company is that of trusteeship.
Therefore, corporate governance is concerned with those principles that involve conducting business with all the fairness and integrity required. This concept of transparency in all organisations transactions makes it necessary to disclose all decisions that comply with the law of responsibility and accountability towards stakeholders and commitment to business ethics. These principles also provide management with the ability to distinguish between personal and the corporate assets in their course of managing the company resources (Concerted Practices 2001).
The highest level of confidence that is associated with the company is to know that it has set out a good corporate governance policy. Corporate governance is one of the common criteria that foreign investors depend on when making a decision on which company to invest in. these policies also have a higher rate of influence on the share price of a company. Having a clean image on management front can make it smooth for a company to source capital at reasonable costs. However, the corporate governance dominates major discussions when exposed to scams. In contemporary debates, fraud has been the major topic of corporate governance debates.
In the case of Tale & Lyle Corporation, the company has outlined its objectives in the corporate plan in order to provide for a technique of performance measurement to the stakeholders. Its objective is to build a platform that delivers a steady and sustainable longer term value and growth to shareholders. Therefore, all its strategic plans have been geared towards achieving this objective (New Zealand 2003). According to the reports and accounts released for the year ended 31 March 2011, the company performed well and managed to achieve a steady volume of growth across its major markets.
Tale & Lyle key performance indicators for the year that ended March 2011 focussed on growing the specialty food ingredients business. The strategy employed to achieve the objectives was to create a deeper customer understanding about their products and develop a continuous process of innovation and agility. The company also focused on achieving a stronger customer position in its high growth market. The importance of this strategic move was basically to ensure ethical practices are followed to satisfy all the company stakeholders particularly the customers in this case.
In 2011, Tale & Lyle Corporation employed stringent financial management tactics to ensure that the shareholders leap enough from their investments. The objective of tracking all the underlying business performance was to ensure sales growth has a direct translation to increase in profits. This is one of the ethical practices of management that enable them to differentiate what is personal and what belongs to the shareholders. The company’s adjusted operating profit in 2011 was 321 million pounds, which indicated a 17% increase from the previous year.
In order to ensure a continued generation of strong rate of return on invested assets, the company employed a disciplined approach to capital investment. The company managed to attain a 20.6% increase in return on capital employed as compared to 13.6% increase recorded on the previous financial year.
The cash conversion cycle was used to measure how efficient the company was in turning the increased sales into cash and ensure proper management of working capital. The controllable working capital was divided into quarterly sales then multiplied by the number of days in each quarter. It was discovered that in 2010 each quarter had 45 days while in 2011, had 34 days. There was a change of 11 days, which indicated a positive improvement in converting sales into cash thus reducing the allowances for bad debts (Solomon 2004).
TASK II Remuneration report
Tate & Lyle Corporation has one of its human resource objectives as to provide ethical employment practices to its people and across standards of their operations. In line with its business codes of conduct, the company’s approach is to attract, retain and motivate the right people who are aligned around the right values. In March 2012, the company increased its number of employees as a result of additional sectors in the organisation.
In order to reduce the supervision level, the company ensures a practice of employees’ engagement in all fronts. There is a belief in the company that engaged employees are happier and delivers better results that the supervised ones. The company also launched an employee engagement programme focused on employees’ survey. This is to ensure the company engage and support the employees in various ways (Warren 2000).
It is the responsibility of these remuneration committees to ensure that good remuneration policies and practices are adopted in an organisation in order to achieve the best value for shareholders. Pays, salaries and incentives have to be set at the correct level to attract and maintain good management and produce outstanding performances from the human capital engaged in production. The correct level must be in line with the general sector and thus provide a fair investment to shareholders.
The remuneration committee comprises of independent non-executive directors and the chairman of the board. The committee meet before each board meeting. Their major mandate is to determine the remuneration package for each executive director. These packages include salary, bonus, benefits and term employment, long term incentives including those whose term may be terminated. The salary base is also determined by the committee in consultation with other senior executives. The remuneration of non-executives is set by the executive director and the company chairman (Hall 2005).
Other duties of the committee include the following:
- To review the competitiveness of the executive remuneration using real time data from an independent consultant professional.
- To review the operation of the long run incentive plans and annual bonus plans. This is in addition, to determining the participants of overall grant levels.
- Setting of performance targets for an annual bonus plans and long term incentive plans and review performance against targets.
The company maintains a pension plan for their employees in various countries. Some of the arrangements are defined benefit pension plans schemes. In addition, the employees are provided with medical cover and life insurance benefits as part of their retirement package.
During the year that ended on March 31, 2011, the committee was engaged on a comprehensive review of executive remuneration programs. The committee resolved to change3 the directors award limits under the performance share plan approved by shareholders at the 2010 AGM. These changes were aligned to the company’s business strategy that place more emphasis on driving the company’s growth and performances. The remunerations detailed on the report captures the new policies.
The changes to incentives are an important component in delivery of the business strategy. They help in the provision of focus on the drivers of sustained growth including product service innovation and strengthening the company position in high growth markets.