MBA 402 Assessment 3 Case Study

You are an independent consultant, counselling companies on corporate governance issues. You have been engaged by JKL Renew Pty Ltd (JKL) to advise them on their corporate governance structures. JKL is a land remediation business. You are unfamiliar with this industry, and decide to conduct some quick online research. Next, you look up the JKL website. Visually clean and simple, it lists an impressive array of former land and water reclamation projects, with glowing testimonials from councils, local communities, and other grateful clients. JKL staff consist of full-time employees and contractors. Current annual company turnover is in the region of $50 million. To your annoyance, the seemingly simple website does not readily deliver the companys corporate governance information. It takes considerable time searching through unrelated links to find the relevant information.

The JKL Board comprises: Keith Logan CEO and company Co-founder Joshua Logan Board member, and company Co-founder Alana Logan-Jones COO and acting Chair of the Board, daughter of Joshua Logan Myra Winston Head of HR, and Company Secretary, Sister to Keith and Joshua Edward Winston CFO, son of Myra Winston .

Company History:

JKL was started in 1990 by brothers Joshua Logan (mining engineer) and Keith Logan (soil scientist). As Keith explained in his introductory phone call: Mining projects have a finite life. Once a mine closes, the site must be made safe for future generations, and eventually repurposed. The long-term game is not extraction [of ore] but land renovation.The company started small in Western Australia, with Joshua and Keith sourcing work through their mining industry connections. JKL extended activities to recovery of industrial sites as well as mines. Now headquartered in NSW, JKL plans to make water reclamation projects a larger part of their portfolio. Doing so would require company expansion, and significant capitalisation.

Context of your appointment:

Recently, JKL concluded a successful land reclamation project on behalf of Orecon, a multi-national mining corporation. Orecon, impressed with JKLs results and record, have created a memorandum of understanding, to make JKL the sole provider of remediation services for all of Orecons Australasian projects. The work would involve land reclamation of mine sites and of ore processing facilities. Orecon also owns a range of coal-fired power stations scheduled for decommissioning and site remediation within a 5- year period. JKL are excited by the proposed collaboration, as it fits with their plans for company expansion. They believe that Orecon may be willing to invest some capital in JKL, in exchange for a 20% ownership stake in the company, with representation on the company board. As part of the agreement process, Orecon conducted a brief investigation of JKLs corporate governance structures. The resulting short report was shared with JKL. The report raises concerns around the current company structure, its lack of management oversight and other operational controls. Orecon expressed reluctance to invest in a company, where so many senior executives and Board members are close family. You are friendly with the consultant who compiled Orecons report into JKLs corporate structures. So, you give her a call. She confirms that, when she asked for Board meeting attendances, the Company Secretary (Myra Winston) asked Ill check my emails for apologies. How far back should I go? The Orecon report indicates that for the collaboration to proceed, JKL must:

Show compliance with ASX guidelines on best practice for corporate governance.

Strengthen their risk management structures.

Engage in regular sustainability reporting, using a structure such as the GRI reporting standards.

Meeting with the Board:

Keith invites you to the next Board meeting. This is held at Joshua Logans rural property. Myra explains that the lack of disability access at the corporate headquarters makes this a rare chance for wheelchair-bound Joshua to attend a Board meeting. The Board meeting also coincides with Joshuas 70th birthday celebrations, giving you a chance to meet most of the extended Logan/Winston family.

Family views on governance, risk, and sustainability reporting:

The Board meeting raised some frank discussions among the Board members.

Keith Logan opined, JKL is doing well, but hardly commands the resources of a MNC. How onerous would it be to become compliant with ASX principles? We are not looking (yet) to transition to stock market listing. Childless himself but eager to keep JKL a family business, Keith also worried about the impact that company restructuring might have upon jobs for the next generation of the family: Alanas son (studying soil science at university), and Edwards daughter (enrolled in a business degree). We are building this company for their generation. If we offer Board positions to non-family members, does this squeeze the prospect of offering significant management roles to family who work for us?

Alana Logan-Jones wanted to know what ASX compliance would mean when it comes to auditing corporate reports. Edwards wife Leanne is a good accountant. She has audited our accounts for years. Could she continue in this role?

Joshua Logan was curious about the sustainability reporting requirement. Not all soil remediation is a matter of moving soil around. Sometimes, we use chemicals to keep the bad stuff inert in the ground. So yes, our work can involve handling chemicals but our guys know what they are doing, and are used to it. And why should we prove our sustainability credentials? Companies like ours are part of the solution, not part of the problem.

Edward Winston as CFO, shared concerns around the costs of compliance, that were expressed by his Uncle Keith. Is there any essential relationship between the two [risk management and sustainability reporting]? Would Orecon be satisfied if we engaged in just one of these: either adopting a risk management framework, or engaging in sustainability reporting?

REQUIREMENTS: You are required to write a report for JKLs board summarising your views on corporate governance, sustainability, and risk management practices. In your report, you must address the following three areas: 1. Identify and discuss three good corporate governance practices that you would consider to be relevant to this company. Describe how these would be beneficial for JKL, regardless of whether the company transitions into an ASX listed entity. (15 marks) (1,000 to 1,100 words) 2. Summarisethesignificance,benefitsandchallengesofproducingasustainability report for JKL, especially for a business within the land/water remediation industry. Identify some key elements that should be included in a sustainability report for this industry. (10 marks) (600 660 words) 3. Identify some key risks for a company such as JKL, and what benefits there would be in minimising risk. Provide clear and succinct advice on what actions the company should take to minimise risk. (7 marks) (400-440 words) Within the answers to the above three questions, you should refer to: A. The views of the four people who spoke up at the board meeting (Keith Logan, Alana Logan-Jones, Joshua Logan, Edward Winston). B. Recent news releases relating to best practice corporate governance, sustainability and risk management practices.