Executive Summary/Introduction
According to recent research, corporate governance is categorized as the overall mechanism used by business entities to gives directives or controls the day-to-day activities. It defines the rule and regulation that controls the market mechanisms, therefore, stating the relationship or connection of the organization's management shareholders, and the board of directors. Seagate's corporate governance articulate in the creation of a system that assists in resolving existing and emerging conflict of interest of the company's stakeholders.
Seagate Company, being one of the world’s leading brands in data storage. The company began as a manufacturer of rigid magnetic disks and disk drives and has since then grown into a global leader in information storage solutions. Being such a big company, there is a need to assess the corporate governance structure in place to clearly see the proper way of managing and handling investor relations (CompanySpotlight, n.d).
The objective of conducting this survey is to provide clear information to investors, both current and potential, about the ability of the company to be correctly managed. Investors are increasingly becoming aware of the importance of a good corporate governance score when they want to make an investment. Many companies are involved in managerial scandals that can be avoided by giving proper well-structured surveys of the same. Corporate governance rating help provides the investors with an indicator as an aggregate measure of investment risk. As a result, good ratings help companies gain better access to capital and credit markets.
This survey is designed in line with the OCED principles of Corporate Governance of 2004. A questionnaire that is concise, precise, objective and easily quantifiable is used to measure the key aspects of the company regarding its governance structure. A yes or no answer is given in response to each question, and where a no is given, a recommendation is made on how to improve the aspect of corporate governance.
The main findings of the survey conducted by Seagate Technology Company showed that the company has a good performance in corporate governance both locally and globally and has the promise for continuity. Seagate Company has an excellent governance policy that complies with most of the set regulations. (Seagate LL, n.d).
Company Background
Seagate is among the world top leading organization in the data storage industry. The company was incorporated in the vision of emerging the best organization the market share The key factor that has lead to the realization of its growth is attributed to the company's involvement in the acquisition of the market competitors. The major achievement of the organization is emerging as the global leader in the provision of the solution to the data storage problems. In addition, it had risen to greater levels of the development of the overwhelming goods and services that enable the users and other business entities to develop share and preserve their memorable occasions or memories and data for future reference (Seagate, n.d).
Seagate played a significant role in upgrading the amount of data stored in the HDD. Over the years, the data storage industry has encountered a bigger innovation. The storage capacity has increased from megabytes to geophytes. It implies that there is high demand of accessing to huge storage capacity for business data and personal memories. Seagate has grown in on the basis of increasing demand for the storage technology. It has introduced sophisticated technology for greater efficiency. (Seagate LL, n.d).
The financial information of Seagate reflects it general performance in the market share. It outlines the role of the corporate governance in the realization of the financial objectives. Over the past five financial years, the investment growth has experienced fluctuating results. In addition, the net income growth got an upward and downward impact in relation to the economic factors. The difference in the net income growth across the five years highlights the different corporate governance approach used. In a general overview, ROI decreased for the five fiscal years.
The CG Survey Results:
The survey results show a high compliance with the proper governance and shareholder relations. The right of shareholders takes the forefront in the survey questions with the company scoring highly in its ability to give shareholders a say in the governance and running of the company. The company scored a yes in the following categories:
The shareholders' ownership rights are fully recognized by the company with shareholders having a role in the decision-making of the company. Seagate allows its shareholders to have full access to company information and keeps a full register of all the shareholders. The company registers all its shareholders before every GSM and aims to treat all shareholders with equal importance regardless of the type and amount of stock they have in the company. Shareholders are free to trade their shares at any given time without any restriction. The free sale and purchase of shares in the stock market ensure continued investment and value addition of the stock. The Board of Directors sanctions the release of information to all stakeholders of the company ensuring transparency and fairness in trade.
All these positive compliance to proper corporate governance puts Seagate high up in the CG rankings. This is because the five main areas being tested show a high degree of compliance. Investors and stakeholders are being treated fairly, with equitable distribution of rights and being able to vote on important policy issues raised in the General Stakeholders’ Meeting (GSM). The question on whether the chairperson is an independent non-executive is not applicable in the context of Seagate Company since the Chairperson must be elected from the BOD, which is composed of stakeholders elected in the GSM and original founding members with large stakes in the company.
CG scoring
Category 1: The rights of shareholders and key ownership functions (19/20)
In this rating, Seagate Company scored a 19/20 in CGRI weight. Seagate provides for the rights of all of its individual shareholders. The company recognizes the ownership role of all its shareholders, it allows for easy access to information and keeps a thorough registrar of all the shareholders. The shareholders have a right to transfer shares and participate in the governance of the company by voting, taking part in the GSM and are protected by receiving dividends from the company.
The governance structure should protect shareholder rights including registering shareholders, decision making, and electing members of the BOD. Shareholders have the right to vote, attend general meetings, as well as have access to all share ownership information.
Seagate, however, fails to provide a written policy and procedure to extend preemptive rights to its shareholders in relation to offerings of shares in a private placement to new investors. This policy would have allowed for the placement of priority to its current shareholders.
Category II: The equal treatment of shareholders (9/10)
In assessing the treatment of shareholders, the company excelled in many areas. The company gives out party related information on the acquisition, mergers and insider trading to its shareholders. There is full disclosure of information to all the shareholders and they all have a right to vote on the basis of one share equals one vote. The only failing in the survey is that the company does not have a system that allows for the representation of smaller stakeholders on the board of directors.
Legal precedents require that stakeholders can participate in all shareholder meetings and to vote depending on the number of votes they own on issues proposed at these meetings. OECD CG guidelines also require for shareholder participation in important administrative decisions, such as the election of the board members.
Category III: The role of stakeholders (10/10)
Seagate provides a system to protect the interests of its shareholders. Employees also benefit from a reward policy that includes bonuses and promotions. The creditors are also protected by the company by the establishment of policies that serve to better the interests of both the stakeholders and the creditors. Customers' roles are clearly written down and respected. Finally, the company allows for the voicing of concerns by stakeholders. Social responsibility is also used to measure this aspect of corporate governance.
Written notice should be circulated in advance to all shareholders with the minutes of the previous meeting and agendas clearly stated. This will allow the shareholders enough time to adequately prepare and attend.
Category IV: Disclosure and transparency (17/20)
The information disclosed by the company to its stakeholders is of high quality and thorough. Regular audits are carried out every fiscal year, and the information is made public to all stakeholders to increase transparency. A regular meeting of the auditing team is done annually to review the operations of the company.
The company, however, does not hire an independent auditor to carry out regular checks. It has become normal practice for many companies to get audits from independent firms to ensure maximum transparency in all its operations.
Category V: The responsibility of the BOD (38/40)
The BOD comprises of not more than 11 members, with at least one-third of the members being independent as stated in the US laws. The chairman holds no executive role and whose term, along with the board ends after every GSM. BOD members are first vetted and their performance assessed by an independent body.
SWOT analysis
The company’s strengths include its good stakeholder relation, its large market share in the information storage market and its transparency in relation to its fiscal operations.
Weakness: The Company is not flexible in its operations and faces competition from other companies offering storage services including cloud-computing technology.
Opportunities: the company can improve its relations with the stakeholders and thereby increase the value of its stock and number of investors by putting up structures that allow for the compensation of shareholders who experience loss and guarantee of diligence.
Threats: Advancements in cloud computing pose a real threat to traditional methods of storing data.
Findings and conclusions:
The company’s strengths include its good stakeholder relation, its large market share in the information storage market and its transparency in relation to its fiscal operations. In addition, it is made of 11 directors in the board and 10 of them are independent directors. This stands out as a major strength of the company. It assists Seagate in ensuring the BOD reviews its business operation and make better decision. There is one lead independent director who will help chairman to improve board performance. Strength is its complete compensation regulation.
Weakness: The Company is not flexible in its operations and faces competition from other companies offering storage services including cloud-computing technology.
Opportunities: the company can improve its relations with the stakeholders and thereby increase the value of its stock and number of investors by putting up structures that allow for the compensation of shareholders who experience loss and guarantee of diligence.
Threats: Advancements in cloud computing pose a real threat to traditional methods of storing data
Available mechanisms to improve the governance include allowing for external audits and separation of duties of BOD and the CEO. Global best practices suggest an annual audit should be conducted by an independent, competent and qualified auditor in order to provide external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the company in all material respects(Monks & Minow, 2004). BODs should consider assigning a sufficient number of non-executive members capable of exercising independent judgment to tasks where there is a potential for conflict of interest. This will especially be significant if the chairman is a non-executive professional member.
Actionable Recommendations
The company policy should be rectified to include company policy in each of the areas including stakeholder rights to registration, monitoring, participation in the decision-making process at the GSM, voting and accessing information. The GSM should be used to update shareholders about company activities, achievements, and future plans, and to involve shareholders in important decisions. Shareholders must be notified of the Annual GSM by either conventional mail or emails. Proper advertisement of the same is also crucial. The company should initiate strategies to properly insure the full compensation of all dividends to its members. The dividend paying policies should favor the aspect of reinvesting into the company thereby building trust with shareholders.
In conclusion, Seagate scores a 5 for excellent governance policy after scoring a 93% in the CG scoring done after answering all aspects of the questionnaire. This score has a good implication for all stakeholders involved. There is transparency in all interactions within the company since shareholders get due payments and are free to trade shares. The transparency creates an atmosphere of continued growth within the enterprise.
References
CompanySpotlight. (n.d.). Seagate Technology Plc Investor Kit | Company Spotlight. Retrieved from http://www.companyspotlight.com/viewer/18167
Monks, R. A., & Minow, N. (2004). Corporate governance. Malden, MA: Blackwell Pub.
Seagate LL. (n.d.). Investors Overview | Seagate. Retrieved from http://www.seagate.com/investors/overview/
Seagate. (n.d.). Seagate Technology - Other. Retrieved from http://investor.shareholder.com/seagate/secfiling.cfm?filingid=1104659-09-55184&cik=1137789
Seagate, & United States. (1900). Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Scotts Valley, CA: The Company.
