Section B – TWO questions ONLY to be attemptedPlantex is a large international pharmaceuti

Section B – TWO questions ONLY to be attempted

Plantex is a large international pharmaceutical company which has been at the forefront of research into developing cures for many tropical diseases. The nature of its business means that continuous and significant financial investment is required for research and development activities, for which its shareholders expect sizeable returns.

At a recent meeting of the board of Plantex, the finance director, Rachel Tang, submitted a paper on integrated reporting <IR> for discussion and consideration. She advised the board that Plantex had only ever disclosed the minimum information which it was required to by law, but recent developments in the International Integrated Reporting Framework has made a very strong case for broadening the amount of published corporate information.

The primary objective of <IR> is to demonstrate the clear link between a firm’s competitive strategy, governance system and financial performance, alongside the social, environmental and economic context within which the firm operates. Rachel Tang claimed that by integrating these different areas, the board of Plantex would be in a far better position to allocate its valuable resources more effectively and thereby make more environmental and socially sustainable decisions.

The chairman was highly supportive of the proposal as he had been trying to encourage a corporate citizenship agenda at recent board meetings. He suggested that <IR> would demonstrate that Plantex took corporate social responsibility seriously by being more transparent, accountable and responsive to its stakeholders’ demands.

Rachel Tang further asserted that <IR> would have the effect of simplifying published financial information, with excessive detail being removed and critical information being highlighted. If Plantex voluntarily adopted <IR> , its shareholders, and other stakeholders, would better understand how the firm was really performing and so be able to make a meaningful assessment of the firm’s long-term strategy. This openness could encourage further investment and strengthen the firm’s competitive position.

The chief executive, Stanley Broadway, suggested that this all sounded very good in theory, but he found it hard to justify the extra expense without any recognisable return to shareholders. He said it was ‘just another costly management fad that distracted the company from its real purpose – making money for its shareholders!’


(a) Explain the concept of corporate citizenship and assess the rights and responsibilities of Plantex as a corporate citizen of society. (7 marks)

(b) Describe the differing opinions about integrated reporting of Rachel Tang and Stanley Broadway and assess them using the relevant Gray, Owen & Adams positions on social responsibility. (6 marks)

(c) (i) Describe the advantages to Plantex and its stakeholders of adopting . (6 marks)

(ii) Explain how using an approach will provide information about the six capitals including the resources and relationships on which Plantex depends. (6 marks)


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  • 发布时间:2018-02-26
Branscombe Co has been supplying and fitting premium bathrooms and kitchens in hotel chains throughout Effland for the past 20 years. The company started as a small family concern, but because of the rapid growth it experienced and an associated need for additional capital, it was recently listed on the national stock exchange by an initial public offering.To remain fully compliant with the Effland corporate governance code, the board established audit, remuneration and nomination committees which were solely populated by independent non-executive directors. However, it did not consider it necessary to create a separate risk committee because the board believed that the remit of the audit committee included all aspects of risk management policy. This explanation was formally submitted to the shareholders at its first general meeting, who agreed with the board’s proposal.As part of its expansion strategy, the board of Branscombe Co decided it needed to enter overseas markets, and in particular the developing country of Geeland. The reason that Geeland was selected as a suitable market was because it had experienced rapid economic growth and domestic prosperity following the discovery of rich, offshore mineral deposits. Unfortunately, this small island nation has never enjoyed stable democratic government and is notorious for corrupt business practices, with customs officials regularly demanding bribes from both importers and exporters. As a result, Geeland has a poor international credit rating. In order to attract both domestic and foreign inward investment, the government of Geeland operates with very low levels of indirect tax, which has stimulated the island’s tourist industry and led in turn to a significant increase in hotel building.Following a successful tendering exercise, Branscombe Co was awarded the contract to supply all of the bathroom equipment for a 200-room hotel, currently under construction in a remote area of the island. The total value of the supply contract amounted to Geeland $1,800,000, and it was to be paid in three equal instalments as the bathrooms were delivered to the hotel. The contract assigns responsibility for shipping the goods the 3,000 km from Effland to the island solely with Branscombe Co, and no payment will be made until an agreed volume of goods clears Geeland customs. A further problem is that the Geeland dollar is quite volatile, but recently it has been strengthening against the Effland dollar. As all contract payments are to be made in Geeland currency, Branscombe Co is exposed to foreign exchange risks.The many contract-related issues amount to significant risks to Branscombe Co requiring effective management if the supply contract is to be a success and contribute to the company’s ambitious growth targets.Required:(a) Explain the function and roles of a risk committee within an effective corporate governance framework, and discuss the advantages which a risk committee could add to the governance of Branscombe Co. (10 marks)(b) Explain the term risk appetite, and assess how the risk appetite of Branscombe Co has influenced both its corporate strategy and the risks it has chosen to bear. (7 marks)(c) Explain how Branscombe Co could effectively control the strategic and operational risks which arise from the Geeland supply contract. (8 marks)
When MRA was shortlisted for a valuable contract for the development of a coastal defence system for another country, it was contingent on the payment of a facilitation fee to an official in the defence ministry. Clearly this was an unusual request but it was also made very clear that MRA would not be awarded the contract, worth $2 billion over 10 years, unless the relatively modest sum of $1 million was paid immediately.Recently, business activity in the defence sector had been very slow, and MRA was about to announce around 500 staff redundancies. Therefore news that this contract was about to be awarded came as a great relief to the board of MRA, as the jobs would now be secured. However, only the chief executive officer (CEO) and operations director knew about the facilitation fee, so an emergency meeting of the board was convened with only one item on the agenda.Due to the very sensitive nature of the matter at hand, it was decided not to make a formal record of the discussions at the board meeting. This was more likely to result in a frank exchange of views and encourage all directors to express their opinions openly.The CEO, Charlie Desborough, explained the dilemma to the board, making it very clear that without this contract there would be no way to protect jobs. The finance director, Jake Neilson, said that he was personally very uncomfortable with the idea of paying a facilitation fee, which was in effect a ‘bribe’. As a professional accountant he was bound by a code of ethics which strictly prohibited making such payments, therefore he could not sanction the payment under any circumstances.The HR director, Sarah Shue, took a far more pragmatic stance. She acknowledged that any form. of corruption was utterly deplorable; however, it was a fact of life in many countries. She asserted that if the board of MRA decided not to make the payment and forego the contract, then it could be assured that a competitor would not adopt such a high-minded position. The net effect was that by avoiding a relatively small payment, the firm would be doing a disservice to both its employees and its shareholders, who would undoubtedly suffer a reduction in their shareholder value. She maintained that sometimes it is necessary to take difficult decisions in business that are for the greater good, and so suggested that the payment to the official should be made.Required:(a) (i) Compare relativism and absolutism and explain the significance of individual or personal differences in guiding ethical behaviour under each approach in a given scenario such as the situation at MRA. (5 marks)(ii) Explain the ethical theories of deontology and teleology or consequentialism, and analyse which of the approaches have been adopted by Sarah Shue and Jake Neilson. (6 marks)The involvement of directors in bribery and corruption can seriously undermine the relationships of trust upon which corporate governance is based.Required:(b) (i) Assess how bribery and corruption could undermine confidence and trust in MRA, with reference to the principles of corporate governance. (8 marks)(ii) Describe best practice measures which could be employed by MRA to combat bribery and corruption. (6 marks)



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