Law of Organization
Question 1
Discuss the composition of the Board and whether you consider the makeup of the Board could have implications for company performance.
The Daily Planet has two groups of board directors. One group is the executive board of directors, and the other one is Non-executive directors. The following composes the executive director board of views. The CEO of the company is Stuart Burdock. He is 76 years old and inherited the company from his father. Jimmie Burdock is 33 years in age; he is the manager of The Planet Plus. The CFO of Views is Maria Sloane, a 42-year-old lady and has qualifications in the accounting field. Kerr White, 54 is the Editor and has been a journalist for 34 years and an editor for over eight years old. Clark Bent is 32 years old and has been the journalist and an employee of The Daily Planet. The Non-executive directors consist of Stockland Burdock is 36 aged and has been on the board for three periods of the three years. Kelly Coyote is 48 years old, and he is a lawyer as well as a former politician. It is his first time on the board. Anwar Siddiqui, 27 is the hedge finance manager, working at Waran Capital Management Ltd. The last board member is Noel Stein; Noel Stein is 67 years and is the CEO of the Forthright Insurance Limited.
However, there may be some positive implications on the performance that may be brought around by the composition of the board. The non-executive directors are positioned to challenge the existing executives on improving their performance, and they also polish up their way of management. These non-executives are believed to have a better understanding of interests of benefit to the company and can ideally settle any conflict of interests among the current board of directors. The performance would significantly improve as some non-executives will attract positive public relations as they are likely to have prior experience that would promote a positive exposure and also a symbolic value about the entity. The executive directors, in regard to their age, are elderly directors and are equipped with quality knowledge about the management of the firm, thereby performance will be boosted. (Davies, 2016).
Question 2
Having an Assumption that Clark is a shareholder as well as an employee. Discuss options he may have under the Corporations Act to address his grievances with the company.
According to the Corporations Act, the shareholders have an entitlement to various options that they can use to air out grievances that are not met satisfactorily by the firm they work for. These options include voting on the decisions of the company. They can vote for a wide variety of the corporate issues that pertain the voting officers, acquisitions of the business, and mergers or the liquidation of the entity’s assets. ( Dey, Das, 2016). They have the right to change a non-performing leader, thereby electing a body of flexible management who is flexible to adjust to the changes in the firm. Additionally, they have an option to inspect the financial status of the firm. This inspection gives them a chance to view the performance of the entity.
The other option is the entitlement to the business dividends as every shareholder has the right to receive them, and in case of failure, they can claim from the management. Also, Clark will have the right to sue the company for any wrongdoings to him by the managers an example of failure in receiving dividends. He can check with the local authority for further legal proceedings. Finally, Corporation Acts always has the intention to promote fairness to all shareholders. In recent years there has been issuing of dual stocks which are given to unsophisticated investors to protect them; hence, will be given more significant consideration in the business.
Question 3
Discuss what Action the company could take about the sale of the printing works at an undervalued and the non-disclosure of Stuart’s shareholding in Printon Ltd.
Sale of a business at an undervalued price implies that securities involved or any other type of investment underway that is the selling price is assumed to be below the investment intrinsic real value. It can be valued by taking a study at the underlying firm’s financial statements, followed by the analyzing process of the fundamentals such as cash flows and returns on the assets. Whereas, the Non-disclosure terms will mean a legal contract that will keep one party from revealing the secrets of another party.
In case the Daily Planet has intentions to sell their printing at an undervalued and non-disclosure terms it is worth noting that they will have no guarantee that the business asset that has an appearance of being undervalued will appreciate. Also, there is no exact method to calculate the correct intrinsic value of their assets. The value investors may emphasize the acquisition of the investments as a way of pulling into returns that will be reasonable for the low initial cost. On the other hand, the advantage of the non-disclosure terms will be that it will stop people from making profits on secret information of the business. Also, it prevents employees from sharing out confidential information that may be regarded as trade secrets, information about clients, proprietary knowledge, the strategic plans of the business, or information about the product. In conclusion, the non-disclosure terms are more concrete in comparison to oral agreements when it comes to the market and the conduct of its employees. ( Al-Ajmii, Al-Mutairi, 2015).
Question 5
Discuss the implications of the misclassification of liabilities in the Balance Sheet of views ltd and the fact that this Misclassification was noticed by the auditors.
Misclassification of liability in the balance sheet can create a dramatic impact on the balance sheet and also paint a misleading picture. False liability reporting can lead to distortion of a business computation of profit margins and can even lead to over-reporting to creditors. Misclassification can make the firm to include loans that have been already paid, making it hard during reporting to the management about the business situation with its creditors. Other than that, it increases costs that are associated with the correction of the errors as it is time-consuming for the employees who are already busy working on the end of the year reporting. ( Wilcox, Lightstone, 2014).
Wilcox and Lightstone further explain that late loan payment and invoices that had recently been misclassified and only to discover later during the accounting cycle may be past due and will result in the attraction of additional fees and interests. Also, misclassified liabilities may lead to inaccurate reporting for the business during the accrual accounting period. Matching debts appropriately with the benefits they are generating to avoid inconveniences. The managers were lucky to have detected the misclassifications that some short-term loans had been recorded as long-term loan as it saved the business from a massive crisis and the fact that it was able to restore the relationship with its creditors positive. Also, no late fees that would be drawn as the error were detected right on time. In the future, they should hire experts and train the staffs accordingly.
Question 6
Assuming the failure of the new consumer finance products resulted to a loss to the company of $30m (plus any damages required to be paid to the BEME Bank in the event of successful action).
Discuss whether the loss is the responsibility of the board of directors.
The loss that may occur during the trial of new products is the responsibility of the board of directors because; before a new finance product penetrates the market, it is always advisable for the management to carry out intensive research about the product technology requirements before it decides to launch it. The new product service may have been of low quality, set at a higher price than expected, inappropriate timing, the product could have inherited a defect during the production process. Further is that the extent of competition could have been intense, thereby posing a challenge in the market placing the new product. Additionally, the product may have lacked measures of promotion; thus popularizing the brand was not introduced at this stage of product marketing.
Also, a faulty distribution system may have been used during marketing, making it difficult in reaching out to the right market. The firm may have produced a product that the spare parts were not available in the market; thus, it failed drastically. Addition to that is that the managers could have used a poor quality after sale services. Finally, the new product could have possessed a lot of limitations during its launching, which made them prone to vulnerability, and the average buyer had difficulties in differentiating the genuine from the fake one. ( Fuller, 2016). All these reasons for failures are clear that the management could have solved to meet customer satisfaction through doing thorough research.
References
Al-Ajmii, M. Al-Mutairi, A. (2015). Corporate social disclosure practices in Kuwait.
Dey, S.Das, A. (2016). Role of corporate governance on firm performance: a study on large Indian corporations after implementation of Companies’ Act 2013. Asian Journal of Business Ethics.
Fuller, G. (2016). New food product development: from concept to marketplace.
Wilcox, K. Lightstone, K. (2014). Misclassifying cash flows from operations: intentional or not?
Davies, A. (2016). Best practice in corporate governance: Building reputation and sustainable success. taylorfrancis.com.