Ethical & Governance:

Cleanaway Waste Limited

Executive Summary

The operation of every organisation is governed by certain ethics and governance approach, such
approach are outlined by the board of directors of the company. This report is focused to
generate the understanding about the ethical and governance approach involved in an
organisation. In this report the governance and ethical approach of Cleanaway Wasted Limited
have been analysed. Cleanaway Wasted Limited is registered under the ASX top 100 list under
the symbol of CWY. CWY is a waste management company which is highly focused on resource
efficiency and resource from waste.

The approach of ethical and governance behaviours have been clearly evaluated through the r
report. The information and content used for the formation of the report were collected from
annual report, company official website and various voluntary disclosure. The overall report is
divided into four section including summary of company, corporate governance, board
orientation and company communication using legitimacy theory. This area have been explored
based on the agency theory and stakeholder theory.

Introduction

The overall objective of this report is to construct a report that presents the detail evaluation
regarding the corporate governance and ethical approach. Report have been explored based on
the practice of Cleanaway Wasted Limited. The purpose of the report is to clarify the concept
and practice of ethic and governance based on the real company case. To form report information
were analysed based on the annual report, voluntary disclosure and official website of the
company beside this relevant theory were also researched using various article and journal. The
theories that have been included in the report are agency theory, stakeholder theory and
legitimacy theory. This report provides the in depth knowledge about how real life company are
governed and managed by the directors and how this companies are influenced by social
responsibility.

Report
 1. Introduction and summary of the company

Cleanaway Wasted Limited (CWY) founded on 1975, is an Australian public company which is
listed under ASX 100 list. It operates only within Australia and headquarter is located in
Melbourne. It operates under the industry unit of waste management and recycling. It provides a
specific range of services including solid waste management, recycling, industrial service,
hazardous and liquid waste management and waste equipment manufacturing. CWY division
consist of solid waste, liquid and industrial service. 1Cleanaway Wasted Limited is the Australian
biggest waste management company with over 260 branches through Australia consisting of
more than 6,000 employees and manages nearly 4,500 trucks. CWY serves a wide range of the
customer segment from small business to biggest multinational company throughout Australia.
Sustainability is the main approach of CWY business. The primary focus of the business is to
ensure effective resources recovery.

CWY operates with the mission statement to manage the waste to promote environmental
sustainability through cost effective approach and promoting recycle, reuse, waste reduction and
education. The vision of CWY included promoting corporate and individual responsibility to
reduce waste generation, to transform of business from waste disposal to waste management as
resource, eliminating the use of landfills and to ensure best use of the recover waste. The ethical
and governance goal of the CWY is to create a sustainable future for company and people. Under
this goals company perform to accomplish several components including a better working place,
better safety approach, better partnership with community, good customer relationship,
environment safety and effective control gas emission. CWY is one of the leading Australian
company to invest in the sustainability of the environment and practice high level of corporate
governance and ethical behaviours. Due to this it have been able to develop a wide range of
network k through the industrial segment.

Based on the annual report 2018, the company had acquired two major companies’ toxfree and
Daniels. The integrated network allows the company to deliver the best better service than other
waste management companies. It is one of the fastest growing company in Australia, due to its
focus on environmental sustainability and superior product and service in the last few years there
have been significant growth in the business. 2Based on the annual report 2019, the net revenue
1
https://www.cleanaway.com.au/
2
https://cleanaway2stor.blob.core.windows.net/cleanaway2-blob-container/2019/11/2019-Annual-Report.pdf
of company was $2,109 million which represent 35% growth as compared to 2018 and with
EBITDA of $462 million which represent 36% growth. Due to the increasing effective business
performance there have been a significant growth in the company share price, the average price
per share of CWY in 2017 was $1.020 which was $1.680 in year 2018 and $ 2.110 in the year
20193. The company have set a strategic footprint plan 2025, as per which the company wants to
achieve the status of complete resources recovery waste management company. To achieve the
goal of resources recovery the Cleanaway Wasted Limited directors are more interested to invest
into the system, technology and process of resources efficiency. 4In 2019, CWY launched a new
plan to generate energy from the waste project. To achieve this project CWY partnered with
Macquarie capitals green investment group.

2. Summary of corporate governance

2.1 Composition of the board

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Cleanaway Wasted Limited (CWY) board of director composition consist of the six independent
director and single non-independent director. Independent directors are the direct representatives
of the shareholder and such director are expected to accomplish the interest of the shareholder.
The current chairperson is Mark Peter Chellew and the CEO is Vik Bansal. Directors of CWY
are responsible for the entire company management. The directors are appointed by the majority
of the shareholder. And this director are the representative of the shareholder interest, being the
company focused on sustainability directors of CWY are also the representative of various
stakeholder expectation from the company. The current chairperson of the CWY board is also an
independent director.

2.2 Report from the Chairperson and CEO

Based on the annual report 2019, chairman outlines that that the company have been able to
achieve strong growth in financial performance since the last four years. In the message director
pointed out that acquisition of Toxfree Company during year 2018, was on the track to
accomplish synergy target of $35 million within early June 2020 and this acquisition have been a
major component to strengthened the services provided by Cleanaway Wasted Limited. This
3
https://www.asx.com.au/asx/share-price-research/company/CWY
4
https://au.investing.com/news/stock-market-news/briefcleanaway-waste-management-announces-plans-to-
develop-energy-from-waste-project-1967657
5
https://www.wsj.com/market-data/quotes/AU/XASX/CWY/company-people
message out lines that CWY have been able to reduce frequency of injury from 8.1% to 5.7 %
during the year 2019.

The CEO message based on annual report 2019, states that the company have been able to
achieve growth based on its ethical and sustainability strategy, which CWY management team
have following for the last four years. In this message CEO have made clear about the increasing
financial performance of the CWY and the company will further focus on energy efficiency
through recovery waste management.

2.3 Remuneration report

Based on the 2019 remuneration report, due to the significant growth in financial performance
the remuneration of CWY was significantly higher as compared to industrial unit under ASX list.
The director fee structure is based on the salary and fee and superannuation benefits. But the
overall remuneration is paid on the basis of cash and equity. CWY adopts a mix remuneration
approach including fixed remuneration, short term initiative and long term initiatives. During the
year company distributed remuneration more than targeted. Company remuneration is based
upon the Corporation Act 2001 and audited as per the Section 308(3C).

Overall the annual report 2019 states that the priority of Cleanaway Wasted Limited is to make a
sustainable future for planet and people and encourage sustainable waste management. The
immediate priorities of the CWY is to ensure the complete practice of recovery waste
management. The company have outlined the footprint goal till 2025, till the year the company
expect to develop the technology to support total resources recovery from waste. To achieve this
CWY have expanded their network through Australia and have acquired business like toxfree
and Daniels. To increase the awareness of waste management the company are constantly
involved in running various camping throughout Australia. To do so CWY have invested over
$805,000 in Australian community, more than 800 national program and active participation of
over 27,780 student.

3. Board orientation

Corporate governance is the process and system based on which organisation are directed,
governed and controlled. Board of directors are obligated for regulation of the organisation. It is
the responsibility of the shareholder to appoint the director that can govern the organisation with
for sustainability and growth. Therefore, corporate governance is mostly about action and
strategy used by the board of directors to set a value for the organisation. Corporate governance
role is concerned with regular operational management as well as executive decision. Cleanaway
Wasted Limited (CWY) board of director composition consist of the six independent director
and single non-independent director. The shows the CWY board orientation is based upon the
majority of the independent director. The performance if the CWY director are over seen by the
shareholder, as they are appointed by shareholder to manage the company to accomplish the
interest of shareholder common interest. Beside financial improvement, the major corporate goal
of the CWY is to ensure resources sustainability. The vision of the company is to ensure the
benefit of every stakeholder of the company.

After evaluation the board composition of Cleanaway Wasted Limited based on the annual report
2019, among the many theory the best theory that explain the corporate governance of CWY is
agency theory and stakeholder theory. Board composition states management approach based in
the composition and priorities of the independent and non-independent directors. A board that is
governed by agency theory generally have the majority of the independent director. Beside this,
the approach of company director and management to achieve sustainability determines the
practice of stakeholder theory.

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Agency theory is the most dominant theory in perspective to the approach of corporate
governance. Agency theory states the separate standing of the company management from that of
the owner (shareholder). The result of this separation is represented by the agency cost, this cost
are the result of the existence of the agency relationship. Shareholder appoint agents with the
expectation to manage company and maximise wealth of shareholder but to the self-interest
agents is more likely to undertake action for their own benefit rather than working to accomplish
shareholder interest. The role of corporate governance is significant it can assist to minimise
agency cost through increasing accountability, transparency and limiting or controlling the
performance of the agent.

https://www.researchgate.net/publication/317321830_Agency_theory_Review_of_Theory_and_Evidence_on_Pro
blems_and_Perspectives
Board focus: It denotes to the main concern or aim of the board. The role of the agency is to
priorities the interest (such as profit, growth and dividend) of the board self-interest. For doing so
agents are provided with appropriate remuneration.

Key communication: The performance of the agents are communicated over the financial
statement and remuneration report. Such reports outline the focus of the agents towards the
priorities of shareholder.

Agency theory one among the two theories that explains the board orientation of the Cleanaway
Wasted Limited (CWY). CWY board consist of majority of the independent non-executive
directors. The dominant of the independent directors shows that the director are more concerned
with the priorities of the owner (shareholder). The existence of the separate owners and
management team shows the application of agency theory in CWY. Company is more focused to
reduce the agency cost and to protect the priorities of the shareholder. The director of the CWY
are highly focused on the business growth and maximising the profit of the company. In the past
four year directors are more focused to increase the financial performance of the company,
through the adaptation of various strategy directors have been able to boost the financial
performance of the company by average growth margin of 25%. The annual report 2019 of
CWY, clearly indicates the n focus of the director to ensure rapid growth of the company based
on various approach. The result have been clearly communicated over the audited financial
statement and remuneration report under the Corporation Act 2001, Section 308 (3C).

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Stakeholder theory is concerned with the business ethics and company management, which
represents the impact of the business performance on various business units such as employee,
customer, contractor, community, investor, government and many other. This theory represent
the ethical and moral value included in the corporate governance of the organisation. Stakeholder
theory view the approach of the director and management of the organisation on resources based
view, practice of social responsibility and market base view. This theory outlines the approach
of the company management in respective to the relationship with stakeholder. In context of
stakeholder theory company or directors are more focused on managing aspect such as resources,
human, environment and law. Stakeholder theory suggest that for company to be successful,
management and director must form the strategy prioritising the needs of the stakeholder.

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https://www.managementjournals.com/journals/ig/vol1/21-1-1-1.pdf
Board focus: Apart from the shareholder interest, the boars is also more concerned with the
stakeholder management. Board priorities the interest of employee, customer and the society as
its mission and objective.

Key communication: Information are communicated over the annual report, voluntary discloser
and other corporate publication.

Cleanaway Wasted Limited (CWY) is governed by the stakeholder theory. Apart from the
priority of the shareholder, director of the CWY are concerned with the welfare of the
stakeholder units. The outline objectives by the board of director of CWY is to develop a
sustainable future for the people and business. Director of CWY regulates the entire company to
achieve environment sustainability. The focus of the director if the company is to develop CWY
as a total waste management business through converting waste into resources. To promote
waste management awareness CWY have invested over $805,000 in Australian community,
conducted more than 800 national program and have active participation of over 27,780 student.
The overall objective of the director is to achieve the resources efficiency. Through annual report
and other voluntary disclosure director have clearly communicated their objective, strategy and
action to develop CWY as resources efficiency business unit. So, it can be concluded that board
composition of the Cleanaway Wasted Limited is also highly governed by the stakeholder
theory.

4. Interpretation of company communication using Legitimacy Theory

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Legitimacy theory defines the range of corporate governance relevant to practice of corporate
social responsibility and voluntary disclosure. Business practice are influenced by the set
boundaries of the community, so gain the social value and avoid being penalised by society
organisation needs to ensure practice of legitimacy practice and disclosure. Practice of
legitimacy theory ensures that company operates within the application of social norms and
value. Simply, legitimacy is the action of the company to accomplish expectation of society. To
ensure the company is governed based on the ethical and social practice, board of director needs
to make discloser of statements such as corporate social responsibility, governance and
sustainability. The organisation can make its pubic discloser through annual report and official
publication. Legitimacy theory is highly associated with that of stakeholder theory, as it makes
8
https://pdfs.semanticscholar.org/1895/305329d2fd0c4e26f5a7641ce148a233732c.pdf
the voluntary disclosure which allows the stakeholder to understand about the action and strategy
of board of directors. It allows the director to understand about the operation of the company
based on social and internal functioning.

Cleanaway Wasted Limited (CWY) is an organisation governed by the concept of the

environmental sustainability and resource efficiency. CWY uses various tool to communicate
with society. The company is dedicated to ensure that stakeholder can access the company
discloser through open channel. CWY makes disclosure targeted at various entities such as
employee, customer, financer, regulator, contractor, associate and society. 9Company have a
practice to make a corporate governance statement disclosure every year. This statements
outlines company information related to management foundation, structure of board, ethical and
responsibility act, safeguard integrity, risk management, fair remuneration and respect of right.
Cleanaway Wasted Limited continuously makes voluntary disclosure about its business practice
and thro ugh its official website, so that society members or stakeholder can have an open assess
to company information and performance. Even through the use of annual report directors
disclose the public in formation not just regarding financial performance but also about
sustainability approach of the company. Under the annual report company outline information
regarding strategy and approach to achieve better working place, better safety approach, good
customer relationship, environment safety, better partnership with community and effective
control gas emission. To ensure fair practice CWY is governed based on the various Australian
law and ASX policy and rules. 10Based on the recent report 2019, Cleanaway Wasted Limited
have 72% corporate social responsibility in its regular business operation as compared to 18,760
companies in Australia.

The analysis above clearly indicates that Cleanaway Wasted Limited communicates under the
concept of the legitimacy theory. CWY are highly focused to achieve sustainable future for the
people and business through the approach of resource efficiency and resource form waste. CWY
not just disclose public information but to ensure effective communication with the stakeholder
director and management team of the company are focused on to make a continuous voluntary
disclosure about corporate social responsibility, governance, environment and social behaviours.

9
https://www.cleanaway.com.au/about-us/for-investor/corporate-governance/
10
https://www.csrhub.com/CSR_and_sustainability_information/Cleanaway-Waste-Management-Ltd
Conclusion

The entire report is based on the evaluation of information regarding, corporate ethic and
governance, theory based on board orientation and legitimacy theory and communication
approach. Based on this are the practice and performance of Cleanaway Wasted Limited have
been explored. Company is directed by the majority of independent director and the company is
governed to ensure sustainability, resource efficiency and resource from waste. So the company
is based on agency theory as well as stakeholder theory and company communicates based on
the legitimacy theory.