Whitehaven Ties Executive Pay to environment - Economics Assignment Help

Assignment Task:

Task:

Question 1
Whitehaven ties executive pay to environment
Whitehaven Coal's environmental performance will have a bigger influence over managing director Paul Flynn's remuneration, after a year in which Mr Flynn said the company ''fell significantly short'' on environmental compliance. The bigger focus on the environment came as the company also pledged to make its NSW mines more consistent and cheaper to run, after fiscal 2020 was marred by rising unit costs, spasmodic production and Whitehaven's weakest coal sales in five years. Whitehaven was charged in August by the NSW Natural Resources Access Regulator with failing to rehabilitate drill sites, illegally drilling bore holes and building unauthorised tracks at its Narrabri coal mine. It is being pursued by the same regulator over accusations of breaches at the Maules Creek mine, and Mr Flynn conceded the company had to do better. "Environmental compliance is another area where we must address some more recent shortcomings,'' he said in an ASX filing on Friday. "Outcomes fell significantly short of what we expect and what the community and other stakeholder groups deserve. Material improvement in this area is essential to maintaining our broader social licence to operate and to meeting the high standards required in the Australian resources sector.''

Changes to incentives
Environmental performance will now have a greater bearing on the short-term incentive payments in Mr Flynn's remuneration package. Whitehaven has also tweaked Mr Flynn's long-term incentives to align them to the company's growth ambitions. Whitehaven's three most prominent growth

projects are to restart the Vickery mine that Rio Tinto used to operate in NSW, expand its existing Narrabri mine and build a new mine in Queensland's Bowen Basin at Winchester South. The progress made on those projects between now and June 2024 will carry a 15 per cent weighting on Mr Flynn's long-term incentive payments.

Question 2
Imagine you are working as an accountant for a small proprietary company and you are in charge of all accounting functions of this company. It is the company policy that, if the company achieve 15% profit growth, all, employees get a 5% cash bonus. If the company meet this target, you are entitled to $12500 and the CEO gets $20,000 as bonus. No bonuses will be awarded if the company does not achieve the targeted profit growth. The CEO and you review the financial results before finalising the accounts and realise that the company’s profit growth is 14% for the year. Due to the Covid-19 pandemic, some of the company’s customers have been badly impacted and you are certain that for two of your major customers, the amount due cannot be recovered. The company’s asset impairment is also much higher than usual. If you did not account for these impacts, the company could reach the bonus target. The CEO asks you to make the provision for doubtful receivables as usual and not to take the Covid-19 impact into account. The CEO is your immediate boss and has a good relationship with the board of directors.

Required:
I. How do you think this situation should have been handled? Discuss the ethical dilemma presented by this case using the ethical decision-making framework (model) given below or another model that you know. (words 700) ( 14 Marks)

II. II. What is the role of the board of directors in implementing good corporate governance to avoid such behaviour? (words 300) ( 6 Marks)
An ethical decision making framework using Utilitarian and Rights Theories
• Identify the ethical issue(s).
• Determine the affected parties and identify their rights.
• Determine the most important rights.
• Develop alternative courses of action.
• Determine the likely consequences of each proposed course of action.

Extracted from Shapiro, P and Cranston, W. Australian Financial Review. July 13, 2020.
Required:
I. Explain what fundamental earnings means and why such an earnings figure is important in the situation that the article above discusses. (words 250) ( 5 Marks)
II. Do you think fair value is a suitable measure to report on certain items discussed in the article under a Covid-19 pandemic situation? (words 350) ( 7 Marks)
III. What theories from “accounting theory unit”can be applied to the situation reported in thi article? (words 400) ( 8 Marks)

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