Accounting & Finance Assessment Answer

Description of key observations about the governance of the Weir Group PLC Company

The Weir Group PLC is recognized as a multinational engineering company that posits immense expertise in the realms of furnishing innovative products along with services oriented to the mining, oil and gas, and power industries. The company’s reputation in the context of abiding by exemplary corporate governance aside from transparency is reflected throughout its annual reports as well as other communications with stakeholders (Bhagat & Bolton, 2019). Few noteworthy observations regarding the corporate governance of the Weir Group with a focus on financial figures and statistics from its most recent annual report are outlined below.

The commitment in the field of risk management under Weir Group Is truly remarkable in nature and the same goes for its measures inculcated towards managing strong internal control systems. These facets are critical components of regulating and managing effective corporate governance. Apart from that, the company has a dedicated Risk Committee that scrutinizes the determination, evaluation, and management of pivotal risks facing the firm. This inculcates financial impediments such as currency fluctuations, credit risk volatility, and interest rate risk, as well as operational and strategic risks. The company's robust system of internal controls ensures the preciseness of financial reporting and assists safeguard fraudulent along with other misconduct activities. The efficacy of these aforementioned control measures are subjected to regular meticulous analysis by the external auditors (Fenwick, McCahery & Vermeulen, 2019).

The Board of Directors structure of Weir Group can be categorized as unitary in nature, owing to the majority of independent non-executive directors. The board is entrusted with the duty of devising the strategic notion and directing the working function of the firm, apart from monitoring its management, while the executive team’s sole responsibility for regularly operating the business. The organization culture of maintaining accountability with vivid responsibility and a system of performance-based incentives inherently furnish quality results for the firm to get ahead of its competition (Barzuza, Curtis & Webber, 2019).

In terms of financial performance, the Weir Group has a strong track record of growth and profitability. The company's revenue in 2021 was £2.2 billion, which can necessarily be translated to a 20% surge with respect to the year before. On a similar note, the underlying operating profit also experienced a 33% growth to £307 million, while the earnings per share rose by 32%. These figures reflect the success of the company's strategy of concentrating upon high-growth markets, all while investing in innovation to steer new product development seamlessly (Manita et al. 2020).

One of the notable positive facets of the Weir Group is its commitment to sustainability and responsible business practices. The company has set ambitious targets to reduce its carbon footprint and promote diversity and inclusion within its workforce. In 2021, the firm accomplished a 13% reduction in its Scope 1 and 2 emissions and dedicated to reaching net-zero emissions by 2050. The firm’s human rights policy is also exemplary and is committed to revering the rights of all its stakeholders (Alabdullah, Ahmed & Muneerali, 2019).

The Weir Group robust approach to manage and set executive remuneration is in compliance with the firm's long-term strategy and bolstering performance. The firm's remuneration policy is oriented to incentivize and motivate executives to concentrate upon fostering sustainable long-term value for shareholders as well as other stakeholders. The policy revolves around a mix of fixed and variable elements, with a significant portion of the variable component being delivered in the form of long-term incentive plans. The firm also furnishes intricate information regarding executive pay in its annual reports, which emphasizes transparency along with accountability (Hakimah et al. 2019).

In essence, it is fair to state that the Weir Group is definitely a well-governed organization that is solely dedicated to delivering sustainable long-term value to its stakeholders. Its strong financial performance, commitment to responsible business practices, and robust approach to risk management, executive remuneration, and internal controls safeguards the financial interest of the firm so that Weir Group a secure the vanguard position in the industry and get ahead of the competitive curve with adequate growth and sustainability (Dhar, Harymawan & Sarkar, 2022).

Link the observations to the company’s Corporate Governance Code (2021); and critical discussion of these observations

Conforming to the UK Corporate Governance Code (2021) carries immense significance as it advances efficient, lucid, and answerable corporate governance practices that bolster the durability and viability of listed organizations. The Code enunciates principles and optimal practices that steer the conduct of directors, management, and other stakeholders, providing a framework for effective decision-making, hazard management, and answerability. By adhering to the Code, firms can augment their reputation and cultivate trust among their stakeholders, including shareholders, employees, customers, suppliers, and the broader community (Aguilera, Marano & Haxhi, 2019). This, in turn, can facilitate firms in attracting investment, talent, and customers, and creating long-term sustainable value. The Code also furnishes guidance on critical areas such as board composition, remuneration, risk management, and stakeholder engagement, allowing companies to identify areas for enhancement and align their practices with evolving best practices and stakeholder expectations. Furthermore, firms that neglect to comply with the Code jeopardize their reputation, erode stakeholder trust, and expose themselves to legal and financial risks. This can have an adverse impact on their capability to attract investment, talent, and customers, and create long-term sustainable value. The evaluations of Weir Group PLC's corporate governance correspond with the tenets of the UK Corporate Governance Code (2021), which strives to instil effective, transparent, and accountable corporate governance practices across UK listed companies (Mumu et al. 2021).

The Weir Group's dedication to risk management and internal controls is in accordance with Principle 4 of the Code. Principle 4 stipulates that the board should establish formal and robust risk management and internal control systems to identify, evaluate, and manage risks in a proficient manner. This principle emphasizes the importance of having a dedicated Risk Committee to oversee the company's risk management framework and internal controls. Moreover, the board should possess a clear comprehension of the company's risk profile and risk appetite and ensure that management implements appropriate measures to manage risks. The company's specialized Risk Committee and system of internal controls help to ensure that risks are identified, evaluated, and managed adeptly, which amplifies the company's resilience and safeguards the interests of its stakeholders (Saidat, Silva & Seaman, 2019).

The Weir Group's adoption of a unitary board structure, consisting primarily of independent non-executive directors, is in line with Principle 2 of the UK Corporate Governance Code (2021). This guiding principle asserts the fundamental importance of a well-functioning, balanced board comprising individuals with the requisite expertise, experience, and diversity to effectively carry out their duties and obligations (Tibiletti et al. 2021). The preeminent significance of an independent unitary board structure is underscored, as it ensures the board's impartiality and enables it to exercise effective oversight. Additionally, the board must possess a lucid comprehension of the company's strategy, risks, and opportunities, and must be equipped to challenge and support management in a constructive manner. The company's culture of accountability, featuring clearly defined lines of responsibility and performance-based incentives, further reinforces Principle 2 (Marus et al. 2021).

The Weir Group's steadfast dedication to sustainability and responsible business conduct is firmly in line with Principle 3 of the UK Corporate Governance Code (2021). This principle mandates the board to promote the company's purpose, values, and culture, ensuring that they are in harmony with its strategic objectives and operations. It highlights the significance of establishing a culture that fosters principled behaviour, stakeholder involvement, and enduring sustainable prosperity. The company's ambitions to curtail its carbon footprint and foster diversity and inclusivity are indicative of its unwavering commitment to generating sustainable long-term value (Grofčíková, 2020).

The Weir Group adheres to Principle 3 of the Code, which stipulates that executive remuneration should be devised to facilitate the sustainable long-term success of the company and aligned with its strategy and values. The company's remuneration policy, comprising fixed and variable components, with a substantial portion of the variable component disbursed as long-term incentive plans, is in line with best practices. This policy aids in aligning executive incentives with the long-term interests of shareholders and other stakeholders. It is crucial to recognize that corporate governance is a dynamic concept that changes in response to shifts in the business environment and the expectations of stakeholders. As a result, it is critical for companies such as the Weir Group to continually review and enhance their corporate governance practices in accordance with best practices and evolving stakeholder expectations (Manita et al. 2020).

All in all, the observations regarding the Weir Group's corporate governance practices evince that the firm is committed to furnishing sustainable long-term value to its stakeholders, which bodes well for its future prospects. By aligning its governance practices with the principles set out in the UK Corporate Governance Code (2021) and demonstrating transparency and accountability in its reporting, the Weir Group can continue to enhance its reputation as a well-governed and responsible corporate citizen (Hakimah et al. 2019).

Reflection

i) Compliance perspective: On the basis of disclosures released by Weir Group over the course of the last 5 years' annual reports and accounts, the firm appears to be participating in activities which are in compliance with the UK Corporate Governance Code (2021). The company has a board that is diverse as well as independent, and well versed, and it has instituted committees to be in charge of pivotal areas such as audit, remuneration, and nominations. The company also furnishes detailed disclosures regarding its governance practices, such as executive remuneration policies, risk management approach, and stakeholder engagement (Aguilera, Marano & Haxhi, 2019).

ii) Effectiveness perspective: While the Weir Group PLC seems to be maintaining compliance with the UK Corporate Governance Code (2021), there are various scopes where amendments can be inculcated to augment its effectiveness. For instance, the company could ameliorate its stakeholder engagement approaches by substantiating more opportunities for meaningful discourse with stakeholders and incorporating their feedback into the process of decision-making. Additionally, the firm could enhance its approach to risk management by taking into regard an array of risks, including environmental and social risks, and integrating risk management into strategic decision-making processes (Mumu et al. 2021).

iii) Specific stakeholder perspective: From a specific stakeholder perspective, the Weir Group PLC could improve its engagement with its employees. While the company has established policies and procedures to promote diversity and inclusion, it could enhance its approach by providing more opportunities for employee feedback and input into decision-making processes. Additionally, the company could consider more flexible working arrangements to promote work-life balance and improve employee satisfaction (Tibiletti et al. 2021).

As an individual who esteems conscientious business conduct, I hold in high regard the apparent adherence of Weir Group PLC to the UK Corporate Governance Code (2021). It is imperative that firms establish heterogeneous and autonomous boards, as well as establish committees to supervise critical domains such as audit, remuneration, and nominations. Moreover, comprehensive disclosures pertaining to governance practices such as executive remuneration policies, risk management methodologies, and stakeholder engagement are indispensable for ensuring transparency and accountability.

Whilst acknowledging Weir Group PLC's adherence to the UK Corporate Governance Code (2021) and its commendable commitment to cultivating diverse and independent boards, overseeing critical committees, and furnishing detailed disclosures to enhance transparency and accountability, I am of the opinion that effectuality must be accorded equal importance. It is incumbent upon corporations not to merely meet the bare minimum standards but to endeavor to become pioneers in responsible business practices. In the instance of Weir Group PLC, there is an opportunity for improvement in stakeholder engagement and risk management. By assimilating feedback from stakeholders and considering a comprehensive spectrum of risks, including environmental and social risks, the organization can make well-informed and responsible decisions.

Conclusion

In conclusion, an inference may be deduced from the disclosures articulated in the annual reports and accounts of the Weir Group PLC spanning the last five years that the organization seems to be in compliance with the UK Corporate Governance Code (2021). The company has established governance practices that foster diversity, autonomy, and openness, and it has provided information on pivotal areas including executive remuneration, hazard management, and stakeholder involvement. Nevertheless, there exist domains where the company could refine its efficacy and involvement with specific stakeholders, particularly its employees. In its entirety, the company's adherence to the UK Corporate Governance Code (2021) serves to attest to its dedication to promoting ethical conduct, stakeholder engagement, and sustainable, long-term triumph.

References

Aguilera, R. V., Marano, V., & Haxhi, I. (2019). International corporate governance: A review and opportunities for future research. Journal of International Business Studies, 50, 457-498.

Alabdullah, T. T. Y., Ahmed, E. R., & Muneerali, M. (2019). Effect of board size and duality on corporate social responsibility: what has improved in corporate governance in Asia?. Journal of Accounting Science, 3(2), 121-135.

Barzuza, M., Curtis, Q., & Webber, D. H. (2019). Shareholder value (s): Index fund ESG activism and the new millennial corporate governance. S. Cal. L. Rev., 93, 1243.

Bhagat, S., & Bolton, B. (2019). Corporate governance and firm performance: The sequel. Journal of Corporate Finance, 58, 142-168.

Dhar, B. K., Harymawan, I., & Sarkar, S. M. (2022). Impact of corporate social responsibility on financial expert CEOs' turnover in heavily polluting companies in Bangladesh. Corporate Social Responsibility and Environmental Management, 29(3), 701-711.

Fenwick, M., McCahery, J. A., & Vermeulen, E. P. (2019). The end of ‘corporate’governance: Hello ‘platform’governance. European Business Organization Law Review, 20, 171-199.

Grofčíková, J. (2020). Impact of selected determinants of corporate governance on financial performance of companies. Ekonomicko-manazerske spektrum, 14(2), 12-23.

Hakimah, Y., Pratama, I., Fitri, H., Ganatri, M., & Sulbahrie, R. A. (2019). Impact of Intrinsic Corporate Governance on Financial Performance of Indonesian SMEs. International Journal of Innovation, Creativity and Change Vol, 7(1), 32-51.

Manita, R., Elommal, N., Baudier, P., & Hikkerova, L. (2020). The digital transformation of external audit and its impact on corporate governance. Technological Forecasting and Social Change, 150, 119751.

Marus, E., Mwosi, F., Sunday, A., & Poro, S. G. (2021). Corporate governance and firm’s financial performance amongst private business enterprises in Uganda, a perspective from Lira City.

Mumu, J. R., Saona, P., Russell, H. I., & Azad, M. A. K. (2021). Corporate governance and remuneration: a bibliometric analysis. Journal of Asian Business and Economic Studies, 28(4), 242-262.

Saidat, Z., Silva, M., & Seaman, C. (2019). The relationship between corporate governance and financial performance: Evidence from Jordanian family and nonfamily firms. Journal of Family Business Management, 9(1), 54-78.

Tibiletti, V., Marchini, P. L., Furlotti, K., & Medioli, A. (2021). Does corporate governance matter in corporate social responsibility disclosure? Evidence from Italy in the “era of sustainability”. Corporate Social Responsibility and Environmental Management, 28(2), 896-907.

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