Corporate Governance of Westpac Banking Corporation - Case Study Example

CORPORATE GOVERNANCE OF WESTPAC BANKING CORPORATION AUSTRALIA Introduction Corporate governance has become the buzz word and has accomplished in drawing a good deal of public interest because of its visible significance of corporations and society with respect to economic health. Corporate governance is a complex concept as it deals with many different economic happenings. Looking at a broader perspective corporate governance can be regarded as a set of procedures, customs, guidelines, rules and regulations affecting the way a corporation is planned, directed, governed or controlled. It also includes the relationships among the stakeholders and the aims for which the corporation is managed. The main stakeholders involved are the shareholders, management and the board of directors. Along with employees, suppliers, customers, banks the environment and the community as a whole. As mentioned earlier corporate governance is a complicated and multi-dimensional subject. Corporate governance deals with issues of accountability and fiduciary duty, making sure all the guidelines and mechanisms are implemented for the safe guard of shareholders. Another focal point is to achieve optimize economic through corporate governance to emphasize on shareholders welfare. Westpac Banking Corporation was founded in Sydney, Australia, in 1817 as the Bank of New South Wales and merged with the Commercial Bank of Australia and changed its name to Westpac in 1982. Today, it is a leading provider of banking and financial services in Australia, New Zealand, and eight Pacific island nations. It is Australia's oldest bank and offers general banking services to retail, commercial, and institutional customers and provides investment management and insurance. Westpac has strived to reach the position today it has by focusing on such issues only establishing a strong relationship with the stakeholders. "Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return." [www.encycogov.com, Mathiesen [2002].] Companies are scored based on specific issues such as board composition, management remuneration, accounting treatment and transparency. [https://www.shareanalysis.com/asp/glossary.asp]. Westpac has always focused upon promoting corporate justice, precision and self-actualization. The corporate governance structure followed at Westpac specifies the proper allocation of rights and responsibilities of the board, managers, shareholders and other stakeholders and properly defines the rules and procedures for corporate decision making. Increased competition, stringent regulatory standards, and continuous change in customer wants and demands have put pressure on global banking companies like Westpac to develop creative and cost-effective business strategies. Some of the examples of how corporate governance is implemented at Westpac are as follows: (http://www.westpac.com.au/internet/publish.nsf/Content/WISEWP+Protection) SSL connection Internet Banking system uses a technology called Secure Sockets Layer (SSL). This creates a secure connection between the customer and the Westpac. This is a highly beneficial technology developed by Netscape, Microsoft and RSA Inc that is supported by most browsers. Encryption Westpac has employed precise security mechanisms to guarantee that the client's information and accounts are secured. The latest encryption technologies have been used to protect the data when being sent over the internet. Westpac Internet Banking uses certificates which generate security "keys" to verify the connectivity with Westpac banking. Every stakeholder has an account with all the details. As information sent between the browser and the Bank is encrypted, it makes it very difficult for anyone to get hack the password during transfer from the internet. Westpac Internet Banking uses digital certificates issued by VeriSign to protect the confidentiality and integrity of an individual's information. Westpac have systems in place to continuously observe online transactions. Internet security issues are communicated to the customers through telephone messages, advertising, and media releases, using our secure messaging system and website warnings. Westpac is doing everything possible to close down any internet fraud scams by working closely with a number of law enforcement agencies and authorities including the Australian Federal Police and Australian High Tech Crime Centre. The Australian Crime Commission's role is to develop Australia's ability to meet the threats posed by crime, by dropping the rate of the incidence and impact of serious criminal activity. It also operates an Identity Fraud Intelligence facility. www.crimecommission.gov.au The Australian Federal Police (AFP) enforces Commonwealth criminal law, and protects Commonwealth and national interests from crime in Australia and overseas. The AFP is Australia's international law enforcement and policing representative, and the chief source of advice to the Australian Government on policing issues. www.afp.gov.au The Australian High Tech Crime Centre provides a national coordinated approach to combating serious, complex and/or multi-jurisdictional high tech crimes. It is hosted by the Australian Federal Police in Canberra and includes representation from all Australian State and Territory police forces. www.ahtcc.gov.au The Australian Bankers' Association is the national organization of licensed banks. The role of the Association is to improve the economic wellbeing of Australians by fostering a banking system that is one of the safest, dynamic and most efficient in the world. www.bankers.asn.au AUSTRAC is Australia's anti-money laundering regulator and specialist financial intelligence unit. It oversees compliance with the reporting requirements of the Financial Transaction Reports Act 1988 by a wide range of financial service providers, the gambling industry and others. www.austrac.gov.au Diagram 2: The business case for sustainability Source: Westpac Banking Corporation, Adapted from Sustain Ability (http://www.environment.gov.au/settlements/industry/finance/publications.html) Conclusion Westpac continues to maintain its position of corporate stability on a global scale by successfully facing all challenges whether it is achieving customer satisfaction by exceeding customers' expectations or resolving corporate social responsibilities. Exceptional corporate governance, risk management and compliance along with commitment to being accountable are the core competencies of Westpac's. Reliability and innovation are pivotal factors to value creation along with compliance with the international best-practice corporate governance and standards. 1. Westpac's performance for Corporate Governance as an economic criterion Westpac 10th consecutive year of growth showed operating profit after tax growth rate of 15% to AUD $2,192 million in 2002 which was a result of sound revenue growth and constant cost control. Westpac has achieved improvements from 1997 to 2002 in terms of expense to income ratio (0.12%), Return on equity (4.7%) and Productivity ratio (37%). [Westpac Banking Corporation Ensures Financial Integrity and Achieves 376% ROI through Efficiency Gains.] Competition grew in the late 1990s and Westpac had to find efficiency and effective savings across its operations to generate profitability and shareholder returns along with meeting customer demands, and an e-business infrastructure. Due to International Accounting Standards (IAS) by 2005, Australian government planned to strengthen the financial reporting framework, and it was vital for Westpac's financial systems to deliver precise and timely financial information. Westpac, recognizing the importance of good corporate governance and to maintain precision and responsibility, took Oracle Financials support to meet these important standards. Last but not the least Westpac showed its edge over others by realizing that corporate governance goes beyond regulatory compliance and therefore in the past several years focused upon having a consolidated view of the business to help meet this objective and achieve extensive business effectiveness. Reference: Sustainability Leader, Member of DJSI World; Westpac Banking Corp. BNK Banks (2006) [internet] Available from: [Accessed on 30 March 2007] Business Benefit Series, (2005) Westpac Banking Corporation Ensures Financial Integrity and Achieves 376% ROI through Efficiency Gains [internet] Available from: [Accessed on 30 March 2007] American Australian Association (2007) [internet] Available from: [Accessed on 30 March 2007] Mathiesen (2002) [internet] Available from: [Accessed on 30 March 2007] Westpac Internet - How Westpac protects you (2007) [Internet]. Available from: [Accessed on 30 March 2007] Australian Crime Commission (2007) [Internet]. Available from: [Accessed on 30 March 2007] Home - AFP (2007) [Internet]. Available from: [Accessed on 30 March 2007] Home - Australian High Tech Crime Center (2007) [Internet]. Available from: [Accessed on 30 March 2007] Australian Bankers Association (2007) [Internet]. Available from: [Accessed on 30 March 2007] Westpac Internet - How Westpac protects you (2007) [Internet]. Available from: [Accessed on 30 March 2007] Australian Government Environmental Publication (2007) [Internet]. Available from: [Accessed on 30 March 2007] Glossary of Investment Terms (2007) [Internet]. Available from: [Accessed on 30 March 2007] Read More