Responsibilities of the Board and Management of BHP Billiton

Base for management and oversight

There are certain accountabilities that the board of the corporation need to undertake for enhancement of specific management along with oversight. In this regard, it can be said that the board of BHP Billiton has the necessity to monitor and oversee various matters associated to the business affairs of the corporation. In addition to this, board of the company also has the need to establish specific financial along with strategic organizational objectives, analyse and track the complete procedure of functioning strategic movements for achievement of the mentioned objectives (Alm et al. 2015). Furthermore, the board also has the obligation to keep note of overall performance of business concern’s management and endorse adoption of main corporate strategies of BHP Billiton.

Framework and composition of board for augmentation of firm value

The corporation BHP Billiton has a structured along with rigorous advance to planning of succession of the Board of the firm. As per the annual report of the firm, there are in all 11 members in the board and 10 to 12 members can be considered to be appropriate. The board also has strategic, operational as well as financial experience across wide range of segments (Groomer and Murthy 2018). The company has made a number of appointments during this present year and the board intends to continue to be fit for different purposes. This procedure is continuous and this can bring about supplementary concentration to make sure that the board necessarily evolves to consider rapidly altering external environment as well as consideration of BHP. 

Undertaking business exercises ethically and responsibly

BHP Billiton can act ethically along with responsibly by concentrating on commitments, handling conflicts of diverse interests. The firm executes trading strategy that can restrict people belonging to the firm to participate in insider trading. In addition to this, whistle blowing policy is also existent that can help in developing a culture that can encourage different individuals to speak out about different issues along with conducts that are affecting them adversely (Sinkovics et al. 2016). BHP Billiton also shows commitments that set anticipations of the entire group, including directors, different senior directors of the corporation to participate and engage in balancing activities that are of utmost interest to the shareholders of BHP Billiton.

Presentation of timely as well as fair disclosure

The company presents the financial statements according to the directives of the Corporation Act of the year 2001 as well as ASX listing regulations. In essence, the administration has designed controls for the purpose of establishing integrity of financial reporting. According to the point of view of the CEO of BHP Billiton, the business entity has correctly maintained pecuniary assertion along with different disclosures that are prepared as well as presented as per the accounting standard. This in turn can present true as well as fair view of pecuniary statements and subsequently financial condition of the firm (Bolgert et al. 2015). IT can be hereby said that BHP Billiton has an established strategy for maintenance of compliance to the necessities of disclosure mentioned under the Corporation Act of the year 2001 and listing rules of ASX. This declares information in a timely way with conformation to policy of carrying out proper communication between the company and the shareholders.

Corporate Governance Practices of BHP Billiton

Preservation of power and authorities of shareholders of the firm

Management considers shareholders of the corporation since the owners and values the necessity to undertake communication properly. The corporation essentially respects shareholder’s rights and has the intent to distribute specific information that is timely and of better-quality. Thus, this strategy of management to participate in the procedure of enthusiastically presenting information can help end users to get to know the actual condition of the firm (Chan and Vasarhelyi 2018). The company also engages in the process of listening to the concerns of the shareholders’ as well. 

Exposure and handling identified risk of the firm

The board of the corporation assesses material risk of the firm. The firm has a committee for risk that is accountable for evaluating risk management structure, presenting risk appetite statement of the corporation and evaluating profile of risk. The risk committee can assist the firm’s board in looking into the matters of risk associated to appointment and termination along with performance of risk team of the firm (Brockmann et al. 2016).

Fair and responsible way of structuring remuneration

According to the necessities of ASX Corporate Governance Council’s principles, the company has the chief intention of presenting remuneration fairly and at the same time in a responsible manner. BHP Billiton has a remuneration scheme together with upshots for specifically CEO, various finance personnel and others who get affected by the financial situation of the firm (Backof 2015) 

BHP Billiton is essentially an Anglo-Australian transnational mining, petroleum as well as metal firm that is a dual listed firm. The business concern operates in the metal and mining segment. The company serves worldwide and deals with products such as Iron Ore, petroleum, nickel and uranium, copper, natural gas and many others. There are different regulators that engage in the operation of regulation namely, the UK Financial Reporting Council’s Corporate Reporting Review Team, US Securities and Exchange Commission (SEC) and many others. 

Risks faced by the firm include decrease in assets of the corporation. In addition to this, liabilities of the firm have also decreased. Furthermore, total liabilities as well as stockholder’s equity of the firm has also decreased considerably for the corporation (Duncan and Whittington 2014). The decline in the assets of the firm can be considered to be a matter of risk. Analysis of the income statement also replicates the fact that the net income of the corporation has decreased for the firm during the financial year 2017. Also, the net income that is available to different common shareholders of the firm has also declined during FY 2017. Thus, the firm might possibly encounter the risk due to the above mentioned decreased income.

Financial Reporting and Compliance

Assignment of a specific score for the risk of the firm can help in proper assessment of the risk. This process of assessment of the risk can be reflected as a relevant dimension for analysis of demand for the company’s stock in the market. In particular, beta can essentially be regarded as a specific metric of volatility of stock considered against volatility of the specific market. The value of the beta enumerated for the firm BHP Billiton stands at 0.83. As such, it is basically less than 1 implying that the volatility of the firm is less than the overall volatility of the entire market (Egels-Zandén 2014) 

Calculation of Receivable Turnover Ratio

Receivable turnover registered for the corporation for financial year 2016 and financial year 2017 shows an increasing movement. Essentially, this reflects that receivable turnover of BHP Billiton has augmented from the level 7.68 recorded during 2016 to 10.52 in 2017. In essence, higher level of receivable turnover ratio can be referred to as desirable financial state of affair for the firm since it shows higher potential of the corporation to efficiently gather receivables (Grimm et al. 2016). By itself, the elevated ratio shows BHP Billiton is resourcefully gathering receivable of the firm in a more recurrent manner.

Calculation of Debt Equity Ratio

Debt equity ratio registered for the corporation for the financial year 2016-2017 replicates a declining trajectory. Essentially, this reflects the fact that debt equity ratio BHP Billiton has decreased from approximately 1.08 registered during 2016 to 0.94 in the year 2016. Particularly, this shows comparatively higher equity financing in the year 2017 in comparison to debt financing over the said period. Fundamentally, lesser debt equity shows higher financial soundness along with stability along with desirable financial circumstances (Bumgarner and Vasarhelyi 2018).

Calculation of Quick Ratio

Quick ratio is a dimension that refers to a measurement of how well a business concern can pay off all the short term necessities or else obligations. Quick Ratio enumerated for the firm for FY 2016-2017 replicates an increasing trend during the said time. The quick ratio calculated for BHP Billiton stands at 0.83 in the financial 2016 and the same is recorded to be 1.24 in the financial year 2017. This reflects improved condition of liquidity of the firm BHP Billiton. Critical evaluation of the current trend replicates that the increase in the quick ratio is mainly owing to increase in the quick assets possessed by the corporation (Gaynor et al. 2016). However, at the same time, the current liabilities of the corporation have also decreased. 

Shareholders’ Communication and Participation in the Business

Appraisal of Income Statement Ratio

-Operating Profit Margin enumerated for the financial year 2016-2017 reflects a decrease in specified period of time. As rightly indicated by Sadiq and Governatori (2015), operating margin has increased to approximately 0.76 in financial year 2017 as compared to 0.67 in the financial year 2016. Furthermore, increase in operating profit margin replicates a favourable financial condition of the corporation since this replicates that the corporation has successfully acquired enough wealth to disburse various costs (including both fixed as well as variable costs).

Net Profit Margin

Net Profit Margin enumerated for the financial year 2016-2017 reflects a decrease in specified period of time. As rightly indicated by Alzeban and Gwilliam (2014), operating margin has increased to approximately 0.76 in financial year 2017 as compared to 0.67 in the financial year 2016. Furthermore, increase in operating profit margin replicates a favourable financial condition of the corporation since this replicates that the corporation has successfully acquired enough wealth to disburse various costs (including both fixed as well as variable costs).

-Return earned on equity of the firm BHP Billiton calculated for the period 2016 and 2017 reflects an increasing trend. In actual fact, it can be seen that return on equity has increased from -0.106 in 2016 to 0.0939 in 2017. Essentially, this increase in ratio shows that the business concern is making higher amount of profit from particularly the owner’s equity (Vasarhelyi and Halper 2018). 

References

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