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Governance and corporate culture

Wesfarmers Chairman Michael Chaney on governance and corporate culture video transcript

I think one of the reasons why Wesfarmers has been successful is the structure of its corporate governance arrangements. As we all know, it is management that runs the company on a day-to-day basis, but boards of directors exist to provide governance to supervise and direct management. They have to make sure they have the right management, the right chief executive and so on, and the right processes and controls within the group. In Wesfarmers, we have a main company board of directors that consists of non-executive directors - that is people who do not work for the company from a wide range of backgrounds and they are in position to take an independent view of management's actions.

At a divisional level we run all of our businesses in a very autonomous way. They are given a lot of freedom to run the businesses as they see fit, but each division has its own internal board of directors and that's made up of senior executives from the corporate office and senior people from the divisions. I think one of the great advantages of this structure is that we are able to disseminate and reinforce a Group culture around the different companies.

What do I mean by culture? Firstly, it's an understanding that the company exists to provide good returns to shareholders. It is more than that, it's about the way we operate. I heard somebody say recently that corporate culture is the way people behave when no one is watching. I think that's a pretty good description.

It's all about the values that we hold. In Wesfarmers, they are the following sorts of things. Firstly, we expect people to operate ethically and honestly in an open and transparent way. We expect people to observe all laws and regulations. We want people to have a focus on customers, on the genuine needs and desires of our customers. To treat suppliers with great respect. To make sure that our employees are looked after, that they have a safe and fulfilling environment in which to work. And we operate with environmental responsibility. And finally, we expect all our businesses to be making a solid contribution to the societies in which they live and work.  

Occasionally of course we have people who don't live up to those values and we have to be very strong and decisive when that occurs and take action very quickly.

I think a company that manages to achieve those sort of operating values and that sort of culture is a company that at the end of the day must have pretty good governance.