62 Accounting: Business Reporting for Decision Making
(continued)such as government regulation, the onslaught of big corporate food companies and banks interacting to make
it hard for farmers to be economically viable. This led Robert to establish Food Connect. It is a social enterprise
whose mission is to create a fairer food system. The enterprise encourages a healthy and flourishing food cul-
ture by sourcing and distributing local in-season produce. Their goal is to pay farmers a fair price for their pro-
duce and ensure the work to grow, process, pack, transport and distribute is rewarded fairly. They claim to pay
the farmers about four times the amount of the big food chains. Since starting in 2005, the average distance
produce now travels is 140 km. This means fresher produce to the consumer, less packaging and waste, and
less energy costs in transportation. The added benefit of sourcing locally is increased resilience for local com-
munities. This is a great example of the Buy Eat Live phenomenon that is currently transforming the way people
think about food and their planet. Rethinking the need for economic growth, governance and sustainability will
require reflection on basic ethical questions of what is good for society and its survival.
Source: Food Connect, http://www.foodconnect.com.au.2.3 Corporate governance
LEARNING OBJECTIVE 2.3 Explain the concept of corporate governance.
Central to the discussion on business sustainability is the role that governance plays in determining the
future of an entity. Although it can be fun and rewarding to be in charge, making decisions is a difficult
task. The quality of those decisions determines the success or otherwise of an entity in meeting its objec-
tives and can influence the lives of many. People who make such decisions have power, but they also have
responsibilities and are accountable for their actions. Chapter 3 outlines a number of different business
structures and also discusses the differing reporting requirements for small and large entities. Regardless of
whether an entity is small or large, there needs to be some type of governance structure (decision-making
process) in place. Some of the guidelines and listing rules presented below are relevant only for large public
entities. However, it is important that the owners, as directors, of small and medium-sized enterprises, most
of which operate using a private company structure, comply with legislation governing such structures.
What is corporate governance?
Generally, corporate governance refers to the direction, control and management of an entity. This
includes the rules, procedures and structure upon which the organisation seeks to meet its objectives.
The Organisation for Economic Co-operation and Development (OECD) (www.oecd.org) states that:
Corporate governance deals with the rights and responsibilities of a company’s management, its board,
shareholders and various stakeholders. How well companies are run affects market confidence as well as
company performance. Good corporate governance is therefore essential for companies that want access
to capital and for countries that want to stimulate private sector investment. If companies are well run,
they will prosper. This in turn will enable them to attract investors whose support can help to finance
faster growth. Poor corporate governance on the other hand weakens a company’s potential and at worst
can pave the way for financial difficulties and even fraud.The meaning of corporate governance has evolved over time but, in the strictest sense, is linked to
the legislation that allows its existence. The law sets forth a corporation’s rights and responsibilities.
These can differ from country to country. In New Zealand, the Ministry of Business, Innovation and
Employment oversees the Companies Office that administers a wide range of legislation including the
Companies Act 1993, while in Australia, the Australian Securities and Investments Commission (ASIC)
oversees Commonwealth legislation including:
- Corporations Act 2001
- Australian Securities and Investments Commission Act 2001
- Financial Services Reform Act 2001
- Insurance Contracts Act 1984