• Subject Name : Management

Ethics and Governance

Executive Summary of Caltex Australia Ltd. Analysis

The report is regarding the ethical work and governance of Caltex Australia. The report is going to analyze the composition and the importance of the stakeholders and directors of the company. Analysis of the policies of the organization would be done in order to understand the working of the organization that can be beneficial to the employees. The mandatory stores taken to ensure that the working runs smoothly is also an important way to figure out the governance of the company. The mode of rewards and incentives are also discussed in the following report.

The major priorities are stated and the acts or measures implied in taking care of the priorities in the company are discussed elaborately. The efficiency of the company in dealing with the legitimacy theory is also implied, The effectiveness of using legitimacy is discussed by using examples related to real situations. Caltex has been the number one fuel brand and it has made sure that they remain on the position by applying several measures and also by assessing the risk the deformities can probe. The purpose of this report is to analyze the ethical outlook and the governance of the oil company Caltex Australia.

Table of Contents

Executive summary.


Introduction to the Company.

Summary of corporate governance at the company.

Immediate priorities of the company’s plan to achieve them..

‌Interpretation of company communications using Legitimacy Theory.



Introduction to Caltex Australia Ltd. Analysis

The following report is about the working of the fuel providing company in Australia. The report consists of the introduction of the company, a summary of the corporate governance and board orientation. The policies and priorities that must be implemented by the company to work efficiently are discussed in the report. The main purpose of the report is to analyse the ethical and governance theory of the company. The annual report of the company would be discussed and the report and its policies would be based on the annual report of the company. The report includes a brief about the composition of the organization, its history, and the market where it works. The directors, employees, and the other members of the organization. The latest annual report of the organization and the latest news about the organization would be mentioned here. The report would also cover the importance of ethical and governance theory that is imposed on the working of the organization. According to Milne & Patten, (2002), the theories used and analyzed is Legitimacy theory that covers all the important parts of the working of the organization. The administrative theory and social theory are also included while assessing the policies. The outcomes that can be measured are efficient working of the organization, the implementation of rules that would help in making the workplace environment friendly, the inclusion of all the sectors of people and proper incentive plans (Milne & Patten, 2002 p400). According to Kaine (2016), the theories help in maintaining the diversity in an organization and also helps in removing the inefficiency among the workers (Kaine, 2016 p330).

Introduction to the Company

Caltex Australia Ltd. is an organization dealing in the transport of fuel in the nation. It has been transporting one-third of the fuel in Australia. It mainly deals with supplying fuels for transportation. It offers services by providing oils to business services, cards for fuels, lubricants, oil, and finders. The operation is mainly initiated through the infrastructure and Fuels segment and Convenience retail. It operates through the Convenience Retail, and Fuels and Infrastructure segments. The Convenience Retail part consists of costings and revenues in connection to the fuels and the offers in the shops Caltex stores. It also includes the cost of the shops that offer their services and the fees of the franchise stores as well. The fuel and the infrastructure contains costs related to the wholesale supply of the fuels and the lubricating oils in Caltex inclusive of the international business of the company(Caltex Australia, 2020).

Caltex was founded in 1900 and the headquarter is in Sydney. There are about 7600 employees in the company. The history of the organization began when an oil importer Ampol was listed in ASX and Caltex then opened its oil refineries. At that time Ampol and Caltex were competitors where Caltex acquired the Golden fleece and the former went to take over “Total” brand. It went on to be a small industry for a few years when both the oil companies decided to have a merger. The merger that happened in 1995 helped Caltex become one of the influential oil companies in the country(Caltex Australia, 2020).

The fact that sets Caltex apart from others is that it is independently operated and all the decisions are taken by the management of the company and the Australian board. Caltex is listed on the ASX. The CEO of the company is Matthew Halliday. It has a composition of 7 independent and 5 non-independent executives. Caltex is Australia’s number one transport fuel company. It has a huge unit of dedicated people and has a strong partnership with the organization of the same field. It has 23 distributors for fuel and around 1500 customers commercially to execute their strategies successfully. Caltex has emerged to be a successful fuel providing organization to the country. It has other companies in collaboration such as Uber, Toyota, and a few more. The company has a strong leadership team that looks after all the affairs of the company and helps in the proper running of the organization. It provides full space to the inclusion. It strives to work according to the natural environment without misusing the assets. The organization has made several plans to increase productivity and has smartly planned policies to gain from every sphere without hampering the fundamental rights (Caltex Australia, 2020). The ethical issues and the governance issues are discussed and explained in connection with the methods implied in the development of the organization. The theories about the issues are mentioned as well.

Summary of Corporate Governance at The Company

  1. Composition of the board, including the ratio of independent to non-independent directors. Is the Chairperson of the board an independent director?

The organizational board is composed of 7 independent directors and 6 non-independent directors. The directors include department form audits, law and governance, and financial affairs. The chairperson of the board is an independent director. The board has directors and executives from all important fields that help in a company’s development and smooth running. The strong non-independent team works in all the departments and makes sure that the working is initiated properly. The directors are responsible for taking vital decisions in improving the work of the organization (Caltex Australia, 2020).

  1. The reports from the Chairperson and the CEO

The report from the chairperson and CEO stated that the financial year 2019 has been a roller coaster ride for them. The financial report was not so good but the business performed well. 2019 was an important year for Caltex. While financial outcomes overall were disappointing, the business performed well. The report stated that the commitment of the company is its reputation and the safety and reliability helps in productivity. It was disappointing that the safety performance did not meet high standards. The rate of injuries increased last year. There have been cases of strips and falls resulting in injury. Acts must be implemented to lower the rates of accidents. It includes programs targeted to reduce workplace injuries. Extension of service and product is the main motto for fuels and its stores. The Foodary stores is a new launch that has set a standard form providing service that would promote growth. The COVID 19 pandemic has also disrupted the business and therefore it should be taken care of that it does not hamper the markets. It has also initiated to approve three-year sustainability where proper use of fuel would be done that would allow less wastage thereby helping the future generation (2019 Annual Report, Caltex Australia, 2019).

  1. Summarise how directors and executives are remunerated. Remuneration is the monetary reward given by the organization to its employees. Caltex does reward their employees by the means of performance management (Caltex Compliance Activity Report, 2018). It is also determined by the reward outcomes by the company, or department or on an individual basis. The organization has reward programs that motivate the employees. The organization has fixed remuneration and the base pay that every employee is eligible to receive. Other remuneration includes variable one that includes cash-based performance and Equity-based incentives for senior employees if the company. It aims to reward on a competitive basis. The fixed ones with variable ones are determined based on performance. The weightage is given more to it because the efficiency of the employees is proportional to the success of the organization. The opportunity for incentive increases with the increase in success and competency. The directors are rewarded with the Equity Plan and the executives are rewarded based on fixed monetary plans and by the help of the transparent performance chart (Caltex Compliance Activity Report, 2018).

The board orientation of the company is diverse. The orientation is done in such a way that it appreciates and welcomes women directors. The company has the indigenous population in the board of directors as well. All important areas are being looked around and the amalgamation of female and male employees while working is also healthy and all sorts of discrimination are avoided at all cost (Caltex Compliance Activity Report, 2018).

Immediate Priorities of The Company’s Plan to Achieve Them

The immediate properties that the company planned to achieve are the Sustainability plan made according to the United Nations sustainable development goals. It mainly focuses on safety and the following responsibility ethically in proceeding with the business. A sustainable plan is the plans implemented to achieve the maximum out of the process by extracting less from nature. It is done to maintain equilibrium and make sure that the resources used are not exhausted in such a way that it affects the environment and it must be saved for the future generation. Being safe and ethically responsible in how we do business Developing and looking after our people to support the delivery of our strategy(Sustainability Report, 2019).

Safe and responsible business environment - Caltex being an organization that deals in fuels and oil markets to have better safety measures to make sure that the business environment is safer for working. It has implemented the needs to improve and upgrade the safety performance by organizing campaigns such as Do the right task that reviews the safety and leadership in providing safety to the employees. The organization had updated its OEMs. This is a mechanism that holds the safety policies of the company. It also provided the backbone of safety management, health, the security of the employees and also includes the environmental risk. These can help in improving the safety processes of the company (Sustainability Report, 2019).

Fostering a diverse workplace- The concept of a diverse workplace arises from including all types of people and individuals in the company. For that, the organization must provide opportunities to all sorts and levels of people to prove their determination in the workplace. Celebrations of some cultural days are done such as NAIDOC week, women’s day, and a few more. The initiation and planning of these celebrations are done by the women employees and the indigenous population in the company. This step is taken to ensure the inclusion of all and giving equal opportunity to them. The company has made significant progress in having diversity in the workplace. The female participation was elevated and there was a hike in the involvement of employees from the LGBTQ community. The inclusion of all types helps in bringing the community closer. It also helps in building confidence in the people working for the organization. This also helps the organization in fostering healthy relationships among the employees and the owners (Denis, 2019). The administrative theory is being initiated and applied here to secure a healthy environment.

Continuous use and improvement of assets and maintaining the first position in fuel providing companies in Australia - The organization try to use the maximum out of its assets and thus the refineries have been implemented with a three-year program to uplift the furnaces that would help in obtaining efficiency in the use of energy. The furnaces would also focus on minimizing the use of water. It can be achieved by applying a smart meter. It can help in utilizing reused water to produce steam and also in the treatment of the wastewater. The other several important things that can be implemented are thermal glazing, useful fittings in water, insulation, and LED lights across the retail stores in the country (Padayachee, 2016).‌

.Protection and caring of the environment- The Caltex strives to care for its environment and has refreshed its environment policies. The organization has prepared environmental-based policies forming management strategies for managing the environment. It focuses on the risk that is probed on the environment. It also works to check the auditing of the internal working to keep an eye on the expectations that are to be met. There have been reports of minor marine spills and that is to be looked upon by these strategies. The environment must not be disturbed and the balance must be maintained to have a safe and secure implementation of the process that is being carried out by the company (Kaine, 2016).

Ensuring fundamental rights - The organization pays important attention to the privet human trafficking and slavery in modern form. It is done in response to the Modern Slavery Act 2018. It has been undertaken by management of the high-risk areas and exercising functions to remove them. The business partners and suppliers are also made very clear about the policies of removing slavery. Steps are taken to ensure the protection of human rights. Identification of the high-risk areas where slavery may exist or can be practised must be tackled with care and handled wisely. The social theory for governance is utilized here and it can be achieved by ensuring social equality.

The recent annual report 2019 stresses on the above-mentioned points in the development of the organization. It contained all-important development in the organization and the future policies mentioned as well that would help the industry to foster. The annual report is available on the official website of the company: Caltex Australia | Fuels, Lubricants & Convenience Retail. Caltex.

The recent media release that was seen on the website was the return of the Ampol, the most favourite fuel brand by the organization. Julian Segal, MD and CEO of the organization announced it with great joy and said that it was the great opportunity for the comeback of the brand because it is still trusted by Australians. said the announcement was a great opportunity for the company to bring back this iconic brand that is still trusted by Australians of all ages(Caltex Australia, 2019), Some other media releases included the delivery of late-night food by the Uber and Ampol in partnership with Evie networks would provide vehicle charging stations that would be ultra-fast (Caltex Australia, 2020).

The ethical issues that are obtained are ensuring the safety of the workplace and refraining from slavery and human trafficking. The charters of governance and safety have been applied totally on the organization making it friendly to work and providing fundamental rights (Caltex Australia Limited Safety and Sustainability Committee Charter, 2019). The administrative and social theories are also implemented that helps in the healthy growth of the organization.

The governance issues that are analysed are providing proper remuneration and rewards to the employees and the inclusion of all types of people without discrimination. The role of the governing bodies has also been efficient to attain the maximum out of the assets used by the organization. The implementation of new technology is also mentioned which can be undertaken as the governance policies of the organization (Corporate Governance Statement, 2019).

‌Interpretation of Company Communications Using Legitimacy Theory

Legitimacy theory has been given importance in the working of the organizations. It plays an important role in elaborately explaining the behaviour of a company (Deegan, 2002). It also helps in developing disclosure of information on a social and environmental level. It is done to get their social contract fulfilled so that the objectives made can be recognized and the company can survive in a difficult and pragmatic environment. Legitimacy theory has the role of explaining the behaviour of organizations in implementing and developing voluntary social and environmental disclosure of information to fulfil their social contract that enables the recognition of their objectives and the survival in a jumpy and turbulent environment. As stated by Zhang et al., in his journal, it is a tool through which the perceptions of the stakeholder can be managed and their views are attained throughout. The theory allows the organization to have the right to perform the sorting activities with the consent of the interests of the stakeholders (Zhang et al., 2019 p260).

The legitimacy helps the organization in carrying out the process with approval and in a legal way. The theory helps the organization and its stakeholders in acknowledging the full capacities. The capacities perceived can help implement the proper norms that can prove helpful to the organization. Through legitimacy, many ethical issues can be addressed and implemented. The company can develop its legitimacy by giving information on the benefits that can be achieved on norms such as the health and safety of the workplace or development of the career with the organization. Legitimacy also attempts to improve moral values through communication. According to Haque & Islam, (2015), communication can include topics regarding discrimination policies or ethics in business. There are factors included in developing cognitive legitimacy. It can be done by reporting the problematic areas of health issues and safety. It can also include safety regarding the corporate issues that arise in the organization (Haque & Islam, 2015 p380). The theories that have been imposed on the organization can be taken into legitimacy. The terms expressed are the concerns of matters including all as mentioned above. It is about human rights, expressing the requirements of the organizational need, and improving the equipment. The concern for nature is also included that can be shared by the stakeholders. Legitimacy theory plays an important role in implementing rules on the particular department without any hesitation. The agendas on which the organization must work is also elaborated and thus proves efficient in implementing them through the stakeholders. It is the methodological foundation in entrepreneurship. The legitimacy works on social and environmental scopes as well which makes it easier to be adopted by the corporate and service organization. According to Deegan, (2019), the governing bodies can use the theory in implementing better policies and it can help them express themselves to the other foundations of the organization (Deegan, 2019). In a nutshell, it can be said that the legitimacy theory has helped build strong communication bridges in an organization.

Conclusion on Caltex Australia Ltd. Analysis

The following report analysed the theories related to the working of the organization and also helped in going through and understanding the policies and norms of Caltex Australia. The organization is friendly towards the working environment and follows legitimacy so that the employees and the stakeholders are benefited. Therefore it can be concluded that the organization follows the ethical rules while working for the community and its employees as well.

References for Caltex Australia Ltd. Analysis

CALTEX AUSTRALIA LIMITED ACN 004 201 307 SAFETY AND SUSTAINABILITY COMMITTEE CHARTER. (2019.). Retrieved from https://www.caltex.com.au/-/media/documents/caltex/corporate-governance/2019-corporate-governance-docs/safety-and-sustainability-committee-charter-current-22-february-2019.ashx?la=en

Caltex Compliance Activity Report. (2018). Retrieved from https://www.fairwork.gov.au/reports/caltex-compliance-activity-report/download-pdf

Corporate Governance Statement. (2019). Retrieved from https://microsites.caltex.com.au/annualreports/2019/files/Corporate_Governance_Statement.pdf

2019 Annual Report | Caltex Australia. (2019). Retrieved from Caltex website: https://www.caltex.com.au/annual-report-2019

Deegan, C. (2002). Introduction: The legitimising effect of social and environmental disclosures - a theoretical foundation. Accounting, Auditing & Accountability Journal, 15(3), 282-311.

Deegan, C. M. (2019). Legitimacy theory. Accounting, Auditing & Accountability Journal, ahead-of-print (ahead-of-print). https://doi.org/10.1108/aaaj-08-2018-3638

‌Denis, N. (2019). The effects of employee turnover on caltex.doc. Denis Njogu. Retrieved from https://www.academia.edu/38494762/The_effects_of_employee_turnover_on_caltex.doc

Haque, S., & Islam, A. (2015). Stakeholder pressures on corporate climate change-related accountability and disclosures: Australian evidence. Business and Politics, 17(2), 355–390. Retrieved from https://eprints.qut.edu.au/83934/

Kaine, S. (2016). Women, work, and industrial relations in Australia in 2015. Journal of Industrial Relations, 58(3), 324–339. Retrieved from: https://doi.org/10.1177/0022185616635849

Milne, M. J., & Patten, D. M. (2002). Securing organizational legitimacy: An experimental decision case examining the impact of environmental disclosures. Accounting, Auditing & Accountability, 15(3), 372-405.

Padayachee, P. (2016). The Impact of brand experience on brand loyalty: selected Caltex retail site. Retrieved from iiespace.iie.ac.za website: http://iiespace.iie.ac.za/handle/11622/111

‌‌Sustainability Report. (2019). Retrieved from https://www.caltex.com.au/-/media/documents/caltex/environment-documents/2020-environment-documents/caltex-2019-sustainability-report.ashx

‌Zhang, J., Jiang, J., & Noorderhaven, N. (2019). Is certification an effective legitimacy strategy for foreign firms in emerging markets? International Business Review, 28(2), 252–267. Retrieved from: https://doi.org/10.1016/j.ibusrev.2018.09.

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