Issues On Corporate Governance Essay

Questions:

1.Compile a Board Skills Matrix for the ideal recommended board structure for Kate once it is listed. The board should consist of eight members. Explain how you think your proposed board complies with Principle 2 of the Corporate Governance principles.
2.Prepare the related party note for Willbed. Explain any exclusions that you have made.

Answers:

1.The issue that has been raised in the question is that when Sam and Mack, the founders of Willbed Ltd decide to list the company so that they get a market to sell their shares and collect funds for building the boat. Now for the purpose of listing a certain company the guidelines or regulations mentioned by the ASX should be followed strictly, otherwise the shares of the company will not be allowed to be listed. Thus Sam and Mack need to make sure that the company complies to the laid down regulations. As mentioned in the question Willbed needs to have a board of directors that add value to the company and for this purpose a board skills matrix needs to be created (Clune et al, 2014).

Before creating a Board Skills Matrix the necessity or needfulness of the board of directors need to be understood. An efficient board of directors is very important in an organization. The board of directors has direct authority to control the management of the company, therefore can implement and exercise new and improved policies and systems in order to increase the efficiency of business (Trautman, 2012).

Therefore the Board Skills Matrix may be prepared in the following way:

Board Member

Age/Gender

Independent (yes/No)

Executive (yes/No)

Qualifications

Experience

Description of background

Steve O'Neil

43(M)

YES

YES

MBA in Managerial Finance; Phd in Company Manangement.

More than ten years experience as an employee and apprentice in the same industry and then experience as a CEO

Steve O'Neil has been a sincere student and a talented individual who has worked with much effort and has climbed the ladder of success very quickly.

Sam Peterson

62(M)

YES

YES

Masters in Financial Accountancy

Whatever experience Sam has gained it is from his own company, Wellbed

Sam has been a determined and sincere student at first and a person of principles later. He has a keen eye on whether the boook of accounts has been maintainrd properly.

Mack Peterson

63(M)

YES

YES

Masters in Company Management

The experience obtained by Mack is from Wellbed as well.

Mack has been dedicated to his work since childhood and this has shown in his achievements. Though Mack had been appointed by a different company earlier but he did leave the job in order to set up his own company.

Alex Pho

45(M)

NO

YES

Masters in Company Management

Alex has been in the company for the past 15 years and knows the tips and tricks of trade.

Alex has been the 30% Indonesian shareholder and a key customer.

Peter Bravo

41(M)

NO

YES

Masters in Financial Accountancy

Peter though hired in the past five years, has experience in the same industry for more than ten years and has a strong business sense.

Peter has been the marketing head of the company.

Ryan Peters

36(M)

YES

YES

Phd. In Human Resource Management

Ryan is totally fresh in the industry and has an experience of total five years.

Ryan though appointed as a employee relationship executive has climbed the ladder very fast due to his strong business sense and ability to see things differently.

Elisa Glee

48(F)

YES

YES

Masters in Company Management

Elisa has been the risk assessment manager of the company for the last 15 years.

Elisa being the risk assessment manager has a strong knowledge about the loopholes of the company and the meethods to mitigate them.

Julia Brown

32(F)

YES

YES

Masters in Pschychology and MBA in Company Management.

Julia has also been a total fresher and has worked in the company for the last 6 years.

Julia being a very talented individual, understands the mindset of the employees and is very efficient in handling them.

Therefore as the Board Skills Matrix suggests all the members are competent enough to participate as a member of the Board. Each and every board member has an expertise in different domains, thus they will be able to provide valuable inputs in all areas of business. This will definitely add value to the Board and comply with the ASX rules and guidelines (Fadzil, Faudziah and Ismail). The Board Skills Matrix drawn above adheres to the laid down principles of ASX specifically principle 2 and 2.2. The board is built in such a way that it lays a strong foundation for oversight and management. According to Principle 2 and 2.2 of the ASX an organization that is being listed should develop the respective responsibilities of the members of the management and board and the way in which their effectiveness is evaluated should also be judged. The principle 2.2 demands that the structure of the board should be such that it adds value to the organization. The other recommendations of the Principles are that the members of the board should act with enough responsibility and ethics. The integrity of the corporate reporting should also be maintained. The disclosures should also be published by the Board at regular intervals. All these requirements are met by the above Board Skills Matrix. All the members are enough experiences and know the knits and grits of the company. Even the gender ratio has been maintained and the talented young guns have been given a chance to excel. The members are skilled enough to control the limitations of the Board and plan accordingly. The different members of the Board has expertise at different levels therefore is able to be vigilant on all the aspects of the business. Julia being a student of psychology will especially prove to be advantageous for business. Thus Willbed covers all the criteria’s in order to be a listed company.

2.The related party note for Willbed for the entry related with Jessica Peterson is as follows:

the name of the transacting related party – Jessica Peterson

a description of the relationship between the parties - wife of Sam Peterson

a description of the nature of transactions - One of the farms currently owned by Willbed is to be sold to Jessica Peterson.

volume of the transactions either as an amount or as an appropriate proportion - $4 million.

any other elements of the related party transactions necessary for an understanding of the financial statements – Jessica do not currently have the funds to pay therefore has been provided with a time period of 12 months.


the amounts or appropriate proportions of outstanding items pertaining to related parties at the balance sheet date and provisions for doubtful debts due from such parties at that date – The entire amount is due for now and an interest will be charged for 10%.

This is done as per the standards of ASB 124. The laid down standards mention that two parties can only execute a related transaction when the other party with whom the concerned company is doing business have certain shares in the company or is a director of the company. Moreover the above transaction is done between related parties because the party on the other hand is the wife of the founder.

The other three transactions are not covered under related party disclosures. This is because amount paid to S&M Superannuation fund does not involve any related party.

The next entry related with Jasmine might have fallen under the related party disclosure if she did have any shares in Willbed. As she did not have any share in the company it will not fall under related party disclosure.

Alex Pho as no longer remaining a director will no longer be a related Prty to the company, hence not covered (Kanget al., 2014)

References

Clune, Richard, Dana R. Hermanson, James G. Tompkins, and Zhongxia Shelly Ye. "The nominating committee process: A qualitative examination of board independence and formalization." Contemporary Accounting Research 31, no. 3 (2014): 748-786.

Fadzil, Faudziah Hanim Bt, and Syed Soffian Bin Syed Ismail. "The Influence of Corporate Ownership Structure and Board Members' Skills on the Accounting Conservatism: Evidence from Non-Financial Listed Firms in Amman Stock Exchange." International Journal of Accounting and Financial Reporting 4, no. 1 (2014): 177.

Kang, Minjung, Ho-Young Lee, Myung-Gun Lee, and Jong Chool Park. "The association between related-party transactions and control–ownership wedge: Evidence from Korea." Pacific-Basin Finance Journal 29 (2014): 272-296.

Trautman, Lawrence J. "The matrix: the board’s responsibility for director selection and recruitment." (2012).

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