IntroductionGenesis Energy Ltd. is a New Zealand based company that started in 1999. It is one of the largest gas and electricity retailers in New Zealand. It supplies power to more than 650,000 customers in New Zealand. It focuses on attracting and keeping industrial, residential, and commercial customers. This company produced fourteen percent of the country’s total electricity in the year 2015 (Genesis NZ, 2019).In the first part of this report, eight principles of Genesis energy are discussed with suggestions and examples. After that, in the last part, three ethical issues of an organization are discussed with recommendations.
Code of ethical behaviourAt Genesis energy, it’s the responsibility of the directors to establish high standards of ethical behaviour and ensure that these standards are being followed and maintained throughout the company. The company has a code of conduct and ethics that describes behaviour consistent with
- Objectives and goals of the business
- Company’s behaviours and culture
- Best policies and practices
- Legal obligations
Board composition and performanceThe shareholders of the Genesis elect the Company's board. The board is responsible for the overall direction and supervision of the business. Composition - The board of directors has a very good gender ratio. Genesis is among the few listed companies who have 50:50 gender diversity in their board. It is formed in a way that the structured group has the required experience, skills, diversity, and knowledge to operate efficiently (Governance documents, 2019). The board consists of 8 members: Source: Genesis Annual Report 2018 The board of directors above evaluate and review the performance of the board, chairman, and committees annually to ensure overall efficiency and effectiveness of the processes for example Dough McKay, Tim Miles, Paul Zealand and Maury Leyland support and assist the board in formulation and supervision of diversity and inclusion policy. Joanna Perry, Maury Leyland and James Moulder manage all the work of audit and risk committee whereas Barbara Chapman, Dough McKay, Tim Miles and Paul Zealand assists the board in board succession planning, balancing the knowledge, skills, experience and remunerations of the directors (Board Charter, 2018). The board charter records the board's responsibilities and key functions. The board also reviews and evaluate the performance of the board charter as well as delegations that chief executive receives from the board (Genesis Governance, 2019). Diversity and inclusion policy: This policy is committed to a workplace which ensures and promotes diversity and provides equal opportunity to everyone through various initiatives. It is considered that diversity is important and people from different gender, race, religion, experience, education, marital status, colour, nationality, political opinion, or sexual orientation increases productivity and efficiency of the firm. The company aims at establishing high performance culture by hiring people from diverse backgrounds. The company reviews this policy every year to find out whether the targets are archived, or any change required in the policy (Governance documents, 2019).
Board CommitteesTo perform the functions and responsibilities effectively, the board has created some committees. The board appoints members as well as chairs for the committees. The performance of every committee is reviewed and evaluated by the board annually. Genesis has three standing committees. There are at least three members in every committee. It is required that only non-executive and independent directors can be a member of committees (Governance documents, 2019). Source: Genesis Annual Report 2018 Human resource and remuneration committee - Dough McKay is the chairman and Tim Miles, Paul Zealand and Maury Leyland are the members of this committee. All the members of this committee are independent, and the employees can attend the meeting only if invited by the committee. The main purpose of this committee is to support and assist the board in formulation and supervision of diversity and inclusion policy, Human resource strategy and policy of the company and monitor performance and remuneration of chief executive and senior executive of the company. The Audit and Risk Committee - Joanna Perry is the chairman and Maury Leyland, and James Moulder is the members of this committee. This committee consists of non-executive and independent directors where one member is a qualified accountant without having a relationship with the external auditor of the Genesis. The purpose of this committee is to support the board in:
- Appointment of internal and external auditors and monitoring their performance
- Internal control system and financial management
- Practises and policies related to accounting
- Ensuring high standards of external financial reporting
- Compliance with rules and regulations, code of practices, applicable laws, standards, the NZX, and ASX listing rules.
Reporting and disclosureThe board provides accurate, timely, meaningful, and balanced reporting of financial information, whether it is positive or negative. Since Genesis is a listed company, it is the responsibility of the board to ensure that the market is being informed. There are many policies, procedures, and mechanisms which support the integrity of reporting and disclosure of Genesis, which are mentioned below: Continuous disclosure - Genesis has a market disclosure policy to provide access to important information to various interested parties. There is a disclosure committee consisting of a chief financial officer, chief executive, company secretary, and general counsel where the chief secretary and general counsel is the disclosure officer of the company (Market Announcements, 2019). Financial reporting - The annual report of the company includes financial results, detailed financial commentary, changes in financial reporting, etc. This annual report is being prepared by the IFRS (International Financial Reporting Standards). The chief financial officer and chief executive provide formal assurance that the information provided in the financial is fair, accurate, and complies with IFRS (Governance documents, 2019). The audit and risk committee - It provides oversight and guidance to the board regarding financial accounting, risk management, external reporting requirements, financial management, and controls (Governance documents, 2019). Balanced disclosure - The Genesis aims to create a balanced, objective, and clear financial reporting with consideration of sustainability, environmental, and economic information. The annual report of the company also includes nonfinancial disclosures such as the company has reduced carbon emissions by 50 percent in the last decade, Genesis has partnered with Department of Conservation to prevent distortion of water and wildlife, the company has started School-gen program and more than half schools of the country are already registered etc (Genesis Annual Report 2018, 2019).
RemunerationThe main purpose of Genesis’s remuneration strategy is to attract, motivate, and retain experienced and talented employees throughout the organization as well as to take care of the interest of shareholders. The company has a performance-based remuneration structured to align the interest of employees with the goals of the organization. The company aims to have a remuneration framework which:
- Attract and keep talented and high-quality directors, employees and executives while motivating them to contribute more towards organizational growth and success
- Aligned with the objectives, strategies, and performance of the company
- Is realistic, market-based, affordable, simple to understand and flexible
- Provides clarity and ensures transparency
Risk managementThe Company is exposed to various operational, strategic, and financial and sustainability-related risks due to its complex and large business which are inherent in the energy industry. It’s the responsibility of the board to identify risks and effectively manage them. The risk management context of the company is supported by various other policies such as Treasury management policy, Market trading risk policy, compliance policy, credit risk policy and delegations of authority policy which helps to monitor, understand and manage the possible risks that the company a face. In addition to these policies, there are several ways through which risks can be managed like project risks awareness and reviews, transfer tools such as insurance or hedge contracts, financial risk mitigation and regulatory and policy development (Genesis Annual Report 2018, 2019). Some of these risks and their management are explained below: Price risk - The spot price of electricity and light crude oil is dependent on some market conditions due to which Genesis is exposed to price risk. The company manages this electricity price risk through electricity swaps and options. These electricity swaps and options are negotiated with some major customers, other energy companies, or either traded on ASX. Genesis manages changes in the price of light crude oil with the help of price swap contract in which the company gets a fixed price for future sales. Credit risk - It refers to the risk that the company can face financial loss if counterparty defaults and fails to meet its obligations. The company manages this risk with the help of the letter of credit in which the counterparty issues letter of credit to the market clearing agents such as AZX ltd. Interest rate risk - The parent company borrows money at fixed as well as floating interest rate due to which Genesis faces interest rate risk. The company has interest rate swaps for this risk in which minimum and maximum control limit are being set for fixed interest rate exposure (Reports and Presentations, 2019). Health and Safety risk - There are established systems to minimize the health and safety risks and to achieve the company’s aim to provide zero harm workplace. The board takes the wellbeing, health, and safety of employee’s very seriously, and all major health and safety issues are reported to Genesis’s board (Governance documents, 2019). It’s the responsibility of the Audit and Risk committee to monitor the risk management framework, inform the board about the risks at each board meeting as well as provide suitable recommendations to the board. Management is responsible for identifying, monitoring, understanding, and managing risks appropriately, reviewing risks regularly as well as making sure that all risks are handled and managed as per the expectations of the company. Employees of the organization are responsible for complying with Genesis’s risk management policy and the supporting tools or processes, observe and report cases which have an impact on health and safety, company’s reputation or customers, profitability, assets or on any other legal obligation (Reports and Presentations, 2019).
AuditorsThe auditor general is the Auditor of the company as per the Public Audit Act 2001 who can appoint an audit firm to carry out the responsibility of annual audit on his/her behalf. Andrew Dick from Deloitte Limited has been appointed by the auditor general as external auditor to perform an audit of the financial statements of the company .The audit and risk committee of the company has the responsibility of external audit arrangements (Governance documents, 2019). The company has an independent audit policy which provides a structure to assure that the external audit independence is in appearance as well as in fact to make eternal financial reporting of the company more credible and reliable. This policy provides guidance on non-audit series which the external auditor can’t perform in any circumstance and also provides information regarding other non-audit series which can be performed only after the consent of the committee (Audit Independence Policy, 2018). The internal audit function of the company is outsourced, which includes risk management and internal control systems. Internal audit function works both independently as well as with the management and reports to the audit and risk committee. The internal audit plan is reviewed by the audit and risk committee annually, and the eternal auditor gets access to the internal audit reports (Audit Independence Policy, 2018).
Shareholder rights and relationsThe board aims at developing effective communication with its shareholders and other stakeholders including institutional owners, insider owners like employees, general public and customers by respecting their rights and providing them complete and accurate information. The Genesis has an active investor relations program to maintain a dialogue with analysts, institutional investors, and retail investors through presentations and meetings. This program also includes international and domestic briefings and road shows. The company has designed an Investor app through which the investors have access to various financial as well as other important information of the business. The shareholders can email or call anytime Investor relations manager and get information on a confidential basis. The board motivates shareholders to participate in the meetings and encourage them to ask questions where eternal auditor provides answers to all their queries and doubts. At the time of additional equity capital requirements, the board takes into consideration the interest of existing shareholders and allow them to participate when it’s in the interest of the company or reasonable. The companies act 1993 and constitution of the company gives right to the shareholders to attend the meeting of shareholders and cast a vote on various resolutions. Shareholders take the major decisions having the capacity to change the nature of the business through voting like removal or appointment of directors, approval of major transactions, amalgamation of the company, alter, adopt or revoke constitution etc. Voting is conducted in shareholders meeting by poll and is based on one share one vote. NZX listing rules declare results of the voting in the market (Genesis Governance, 2019).
Ethical issuesCoal burning: It is a real issue that the company is facing. The company promised in the year 2015 that they will remove their last coal-burning electricity generators by the end of 2018, but now Genesis Energy has dropped its plan to stop coal burning to the year 2030. They have signed a contract stating that they will permanently remove their last two coal-burning electricity generators and completely phase out coal burning by 2030. This plan of the company to keep burning coal for another eleven years stunned the environmentalists. Burning of coal has various negative impacts on the environment and the climate, so the company is facing the ethical issue from environmentalists, society, and the government as well (Howard, 2018). Solution: As the company has postponed its plan to stop coal burning to the year 2030 so the company should devise new opportunities to reduce the effect of the company’s operations on the environment. The company should innovate new ways to reduce emissions and decarbonize the company. Some of the ways through which the company can reduce carbon emissions are mentioned below:
- Genesis should use the company’s renewable to produce electricity such as Tilt and Genesis renewable.
- The company should establish a partnership with other major firms like Z Energy, Contact, and Air New Zealand to mitigate and reduce carbon emissions. These major companies can work together, like the development of forests to offset carbon emissions.
- The company should contribute towards a sustainable future by supporting government initiatives and innovating new sustainable and environmentally friendly technologies (Genesis Energy, 2019).
- Audit Independence Policy. (2018, December). Audit Independence Policy. Genesis Energy. Retrieved from genesisenergy.co.nz: https://gesakentico.blob.core.windows.net/sitecontent/genesis/media/new-library-(dec-2017)/about_us/investor/pdfs/2019/governance/audit-independence-policy.pdf
- Board Charter. (2018). Board charter. Retrieved from genesisenergy.co.nz: https://gesakentico.blob.core.windows.net/sitecontent/genesis/media/new-library-(dec-2017)/about_us/investor/pdfs/2018/governance/board-charter.pdf
- Corporate Governance Statement. (2019). Corporate Governance Statement. Retrieved from genesisenergy.co.nz: https://gesakentico.blob.core.windows.net/sitecontent/genesis/media/new-library-(dec-2017)/about_us/investor/pdfs/2019/governance/corporate-governance-statement.pdf
- Dewar, K. (2017, July 22). Opinion: Genesis flybuys an ethical fail . Retrieved from goodsense.co.nz: https://goodsense.co.nz/genesis-flybuys/
- Energy futures lab. (2019). Is energy an ethical issue? Retrieved from energyfutureslab.co.nz: https://energyfutureslab.blog/2016/11/25/is-energy-an-ethical-issue/
- Genesis Annual Report 2018. (2019). Genesis. Genesis Annual Report. Retrieved from genesisenergy.co.nz: https://gesakentico.blob.core.windows.net/sitecontent/genesis/media/new-library-(dec-2017)/about_us/investor/pdfs/2019/governance/corporate-governance-statement.pdf
- Genesis Energy. (2019). Caring for our environment. Retrieved from genesisenergy.co.nz: https://www.genesisenergy.co.nz/about/sustainability/caring-for-our-environment
- Genesis Governance. (2019). Genesis Governance. Retrieved from genesisenergy.co.nz: https://www.genesisenergy.co.nz/investors/governance
- Genesis NZ. (2019). Genesis NZ. Retrieved from genesisenergy.co.nz: https://www.genesisenergy.co.nz/about-genesis
- Governance documents. (2019). Governance documents. Retrieved from genesisenergy.co.nz: https://www.genesisenergy.co.nz/investors/governance/documents
- Howard, R. (2018, February 14). Genesis Energy irks greenies with plans to keep burning coal. Retrieved from scoop.co.nz: http://www.scoop.co.nz/stories/BU1802/S00315/genesis-energy-irks-greenies-with-plans-to-keep-burning-coal.htm
- Market Announcements. (2019). Market Announcements. Retrieved from genesisenergy.co.nz: https://www.genesisenergy.co.nz/investors/market-announcements
- Market Disclosure Policy. (2018, December). Retrieved from genesisenergy.co.nz: https://gesakentico.blob.core.windows.net/sitecontent/genesis/media/new-library-(dec-2017)/about_us/investor/pdfs/2019/governance/market-disclosure-policy.pdf
- Reports and Presentations. (2019). Reports and Presentations. Retrieved from genesisenergy.co.nz: https://www.genesisenergy.co.nz/investors/reports-and-presentations
- Risk Management Statement. (2018, December). Retrieved from genesisenergy.co.nz: https://gesakentico.blob.core.windows.net/sitecontent/genesis/media/new-library-(dec-2017)/about_us/investor/pdfs/2019/governance/risk-management-statement.pdf
- Scoop Independent News. (2016, August 16). Genesis Energy’s link to organised crime "highly disturbing". Retrieved from scoop.co.nz: http://www.scoop.co.nz/stories/PO1608/S00175/genesis-energy-s-link-to-organised-crime-highly-disturbing.htm
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