Corporate Governance

Executive Summary of Foreign Ownership and Performance

ABC International was introduced in 1968 as the maker of electrical parts and phone hardware equipment in Hong Kong. On the request of the chairman of ABC International the executive director of ABC International (Mr YK Chan) decided to join the company as the board of director but it is important to have complete details of the company as well as the financial structure to take the right decision which would help Mr Chan to execute his skills and talent in the new and more challenging position. The board of directors are responsible for the right decision making of the company hence it is an important position to handle. By the help of this report, the responsibilities, work structure, duties and accountability of the company can be clearly understood. This report will provide a deep understanding of the active rules, laws, regulations, and policies on which the company is working. The findings of this report will provide detail information about the roles of the director and audit committee which would help Mr Chan to consider this opportunity. This report will also provide an overview of Hong Kong board style and structure of the company.

Contents

Executive summary.

Introduction.

Work responsibilities of the Director

Business and financial situation of the company.

Committee Work.

Board structure.

Transparency and Accountability of the Company.

Introduction to Foreign Ownership and Performance

According to the case study, ABC International electronic company came into working in 1968. It works as a manufacturer for other companies and provided them with electrical and telephonic types of equipment. The company is based in Hong Kong. ABC International electronic company came into action along with an Australian group which was dealing in telecommunications project in the year 1979. ABC International along with the Australian telecommunications company opened a factory and a warehouse in Shenzen. The work nature of the factory is to manufacture the electric and the telecommunication product and pieces of equipment. The company also completed all the procedures which were required to manufacture or to sell the electric or telecommunications and pieces of equipment in Hong Kong and also in China. However, this was a successful step taken by the company which helps the company to grew and to achieve the profits and turnover rate of the company. The company is also part of the Hong Kong stock market from the year 1997. The aim of this report is to assist Mr Y.K. Chan in his decision of making the director of ABC organization. It also gives the brief detail about the responsibilities of the director as the key roles of directors are much critical and responsibilities.

Work Responsibilities of The Director

Business and Financial Situation of The Company

Before joining as a director, it is always better to know the key responsibilities handled by him within the company. The shareholders and the board of directors are two integral part of the company on which the company is dependent on various ways (Bentivogli and Mirenda, 2017). The board of directors are responsible for the business within the company (Cavaco et al. 2017). They are also responsible to make the decisions for the company and to ensure that the company is meeting the targets. Directors are hired by the shareholders to manage the day to day activities. There are certain powers and resources allocated to the directors to manage the company. As a director, it is important to use the power for the right use. The director of the company should have strategies which can bring positive changes to the company which can promote growth. The director is also responsible for the consequences of the company. Here it is important for Mr Chang to take all over the responsibility of the company which also include to take critical decisions of the company and to form healthy relations with the manufacturers and suppliers for the good and easy sales for the company (Wang et al. 2017). It is also important to see the quality of the product and bring changes to them if needed. As a director, it is important to form healthy relations with the chairman and the other directors of the company. Mr Chan has already having a healthy relationship with them as Mr Alan K.M. Yau has invited Mr Chan to be one of the independent non-executive directors. However, all the directors of the company whether its executive or non-executive holds a similar responsibility within the company. The director has many responsibilities like planning, decision-making, and to plan all the related strategies which help the organization to grow (Whitler, 2018). The director also oversees the daily monitoring of activities. He holds one of the highest ranking professional within the organization.

According to the case study, the manufacturers of ABC international provide various pieces of equipment of telecommunication systems which are mostly purchased by the small organisations. These telecommunication pieces of equipment are installed in offices and homes and gives good business to the company. The market buyers can be the industrial customers, military, government, and also the retail stores (Jindal et al, 2015). The corporate market of Hong Kong and China is increasing in sales and growth. There are a lot of business opportunities which can help the company to expand itself in the Asia Pacific after having an Australian partner. After forming the joint venture both the companies completed the procedures. The software, product, and various devices are licensed from the United States. However, now ABC international is planning to introduce their own products and systems in the market wherein there will be no interference of the Australian partner. Telecommunication products have a variety in the market and the new entrants include manufacturers, telephone companies, and other network providers.

The financial position of ABC international shows that the profits and success of the company are very less than expected. Mr Alan K.M. Yau (the chairman of ABC international) has reported that the profit was expected as $6,693,000 by the analysts but touched only $237,632,000. The company focussed on the development of the product and to expand the capacity of the company in terms of productivity. According to the case study and the Hong Kong financial information company the financial balance of shareholdings at present are divided into many companies like Goldbarb (The registered company in Bermuda) holds 38% of the share, Transelec (A registered company incorporated in Australia ) holds 15.6% of shares, and other Public shareholders like Investor (Institutional) holds 8.8% of shares, Investor (Other institutions) holds 10.2% of shares, Other Investors holds 25.6% of shares which is altogether 100% of shares wherein Goldbarb is the company which is holding the family investment and Transelec who is working with ABC international as a joint venture partner from Australia.

Committee Work

The audit committee holds the responsibility in presenting the financial reporting of the company. However, the manager is also responsible to provide the financial statements of the company and also to maintain internal control over financial reporting (ICFR) by the manager. The audit committee is basically responsible for presenting their thoughts and reviews on the financial position and the flow of cash within the company. They also have the responsibility to evaluate effective internal control over financial reporting. The audit committee should have a detailed overview of the processes and the control management and their operations. The audit committee monitors the daily financial activities of the company for which they can either rely on the management or can hire an independent auditor. The committee can also identify the account policies and can even change them if needed. Discussions can be done between management and the audit team in order to understand the financial activities or difficulties of the company. The auditor can collect all the information of the company as well as financial details by the management. The audit committee chooses GAAP methods (Hunton 2016). The final financial reporting and the judgements are also prepared by the audit committee. Not only financial but the audit committee also go through the technical and social difficulties faced by the company which should also be discussed in the financial statements as per the audit committee. The management plans should be discussed with the audit committee which can help in forming social and technical guidelines and procedures for the company. The annual and quarterly report is submitted to the audit committee which discusses the company’s operations, financial details and preferences but the audit committee should also see the transactions of the balance sheet before forwarded for the execution. The audit committee plays an integral role to achieve the organizational direction and control. Audit committee take cares of both internal and external audits, financial reporting, social compliances and the risk within the company. The audit committee comes under the board of directors as both board of directors and audit committee depends on the organization management for daily operations (Krause et al. 2016). The audit committee works similarly in public, private and other profit or non-profit organizations. Auditors are of two types of internal auditor and external auditor. As per the case study, the auditors of ABC international company are Deloitte Touche Tohmatsu and Hong Kong (Deloitte, 2016). Internal auditor are the ones who are independent within the company wherein the financial statements are prepared with more accuracy and the incentives and compensations are also paid to the organization’s employees fairly (Basuony et al., 2014).

Board Structure

The work structure of the board of members is to supervising the task done by the management and to protect the shareholders of the company (McKinsey, 2016). Shareholders can attain or can remove the board of directors any time they want. The removal rights of shareholders are achieved by them in the majority which can also be changed any time and for any reason. Shareholders are like the team leaders of the board of directors and evaluate their performance from time to time. The board of directors are the team of experts hired by the shareholders. These board of directors are very beneficial for the shareholders as they protect the right of the shareholders, execute the policies of management and to resolve the issues faced by the organization. The board of directors implement a number of responsibilities such as creating different policies, has the power to hire and even to terminate the senior-level employees, establishing healthy relations with executives so that the task can be completed before the deadline, they even support the team members regardless of their position for the growth of the company, the resources within the company is also managed by the board of directors as they fulfil the requirements of tools and equipments needed by the company for official purposes, to generate the goals for the company as well as to prepare strategies to achieve it. According to the case study, and as per the latest annual report there are in total eight members who are listed as the board of directors which include the executive directors like Mr Alan K. M. Yau (working as the president in the company), Mr Peter Y. M. Chow (working as a vice president), Mr Charles K. K. Lau (working as the director of operations), Mr Johnny Y.K. Ho (working as the director in finance), Dr Andy H. S. Woo (working as the Director Development) and Ms Rebecca H. S. Sun (working as the director personnel). Apart from this, there were two independent non-executive directors which are Mr Abraham P. K. Lau and Mr Frederick W. L. Ho along with Ms Rebecca S. S. Cheung (working as the company secretary). However, there are different steps how the board of the directors are selected which can vary company to company. The shareholders and the management is represented by the board of directors which include both external and internal members of the management. The major task of the board is to monitor the daily revenue, sales, resources, and operations of the company along with the shareholders, senior leaders, and employees.

Transparency and Accountability of the Company

The board has the complete responsibility of the organization and the accountability of its performance which also means that the board of directors will be responsible for the consequences of the actions taken by the company. Accountability is the relation of expectations between two people or parties wherein one has expectations on another. It also means the expectations to take action or to meet the expectations one has for another. Accountability can be understood as two parts Answerability (which means to provide information to the other which can help one to fulfil the expectations) and the other is enforcement (which means to accept whatever will be the result of meeting those expectations). The overall meaning of accountability can be understood as the board of directors would have to fulfil the expectations and planning of the shareholders and also have to accept the blame, failure, or any other bad consequences which will come while fulfilling the expectations. However, the accountability rules should also be clear from the starting as who will be responsible for which department or to whom. The documents of accountability should also be provided to the shareholders which should be clear from the starting. Transparency is important to achieve accountability. It is important to have a healthy and transparent relationship between the board members and the shareholders as they are somewhere linked to each other. In ABC International all the directors whether its executive or non-executive are working together but still there is less transparency between all. The board of the organization is responsible for the overall accountability of the company such as activities and performances. Accountability refers to the nature or behaviour of the performance. It refers to the representation of the responsibilities of the organisation’s performance. It can be segmented into two parts such as Answerability and Enforcement. Transparency refers to the honest operations which means that the business operations are done with full transparency which also create a healthy relationship within the employees, directors and with partners. However, the accountability and transparency are interlinked with each other. Here the information and product details are transparent for the public which is available for the public and automatically increase loyalty. The board of directors are also accountable for the task like making policies and regulations, to handle the government and non-government bodies, to provide quality material for clients and customers, and so on (Srinivasan et al. 2018).

Conclusion on Foreign Ownership and Performance

It is concluded that on the request of the chairman of ABC International Mr YK Chan decided to join the company as the board of director. As the board of directors are responsible for the right decision making of the company hence it is an important position to handle it was very important for Mr YK Chan to have a complete overview of the company by which the decision making can become easy. In this report, we already gathered the laws, regulations and future requirements of ABC International Ltd. This report clarifies that the laws and regulations of the company are successful in the Hong Kong market. It is also been stated that the board of the director has to handle all the responsibilities of the company but can be terminated any time as he is also responsible for accountability. Company affairs and daily operations are also the responsibility of the board director. The telecommunications laws, rules and regulations are changed dramatically in Hong Kong so it is important that the board of director should be updated with each and every change done by the telecommunication sector. It has been seen that there are various challenges which will be faced by Mr Y. K. Chan after accepting the post of Board of the director. By taking the position of non-executive director at ABC international will not be a suitable offer and should be declined. Accountability is the relation of expectations between two people or parties wherein one has expectations on another which is highlighted clearly in the report. The board of directors are responsible for the decision making of the company hence it is very important position to handle for the director who has to take care of the complete overview of the company by which the decision making can become easy. The director must know the laws, regulations of ABC International Ltd and how it works with other partners. It is very important for Mr Y. K. Chan to know every positive and negative part of the company before becoming a director.

References for Foreign Ownership and Performance

Basuony, M.A., Mohamed E.K.A., and Al-Baidhani, A.M. 2014. The Effect of Corporate

Bentivogli, C. and Mirenda, L. 2017. “Foreign ownership and performance: evidence from Italian firms”, International Journal of the Economics of Business, (24), pp. 251-273

Cavaco, S., Crifo, P., Rebérioux, A. and Roudaut, G. 2017.“Independent directors: less informed but better selected than affiliated board members?”, Journal of Corporate Finance, (43), pp.106-121.

Corporate Ownership & Control, 11(2), pp.178-191

Deloitte (2016).“Strategy, Risk Oversight and Board Selection: Top Issues for Boards,” The Wall Street Journal Retrieved from http://deloitte.wsj.com/cfo/2018/02/23/strategy-risk-oversight-and-board-selection-top-issues-for-boards-2/ [Accessed on 26 Sep 2020]

Germann, Frank, Ebbes, Peter, Grewal, Rajdeep. 2015. “The Chief Marketing Officer Matters!” Journal of Marketing, 79 (3), 1–22. [Accessed on 26 Sep 2020]

Governance on Bank Financial Performance: Evidence from the Arabian Peninsula.

Hunton, J.E. and Rose, J.M., 2016. Retracted: Effects of Anonymous Whistle‐Blowing and Perceived Reputation Threats on Investigations of Whistle‐Blowing Allegations by Audit Committee Members. Journal of management Studies, 48(1), pp.75-98.

Jindal, Niket, McAlister, Leigh .2015.“The Impacts of Advertising Assets and R&D Assets on Reducing Bankruptcy Risk,” Marketing Science, 34 (4), pp.555–72

Krause, Ryan, Semadeni, Matthew, Withers, Michael C.2016.“That Special Someone: When the Board Views Its Chair as a Resource,” Strategic Management Journal, 37 (9), pp.1990–2002

McKinsey. 2016. “Toward a Value-Creating Board,” Retrieved from https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/toward-a-value-creating-board [Accessed on 26 Sep 2020]

Wang, Rui, Gupta, Aditya, Grewal and Rajdeep .2017.“Mobility of Top Marketing and Sales Executives in Business-to-Business Markets: A Social Network Perspective,” Journal of Marketing Research, 54 (4), pp650–70.

Whitler, Kimberly A., Krause, Ryan, Lehmann, Donald R. 2018.“When and How Board Members with Marketing Experience Facilitate Firm Growth,” Journal of Marketing, 82 (5), 86–105.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

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