Business Structure of YCP Company - Assignment Example

Why do you think the YCP Company had been able to grow in just over five years? The existing base of the small telecommunication tradersand manufacturers of telephone apparatus / other equipment that merged together to form Youth Phones Ltd was the first share of customer base enjoyed by the newly established firm. Moreover, the year of establishment of this company was the era of the evolution of telecommunication industry into the internet age. The advancement was of immense attraction for the young generation and so were the marketing focus of YCP. Thus, the Core reason behind the fast growth in the initial years of establishment were excitement of new generation led by the new technology, followed by the easy availability at low price and last but not the least the alluring advertisements. 2. What impression have you found of Corporate Governance of YCP Company? Corporate Governance plays the role of sight and foresight for an organization. Particularly, in the case of YCP Company the structure possessed some basic flaws in the distribution of duties and power according to the Code of Corporate Governance. The most obvious a blunder is allocation of 60% of voting equity to Kong and Watson. Furthermore, according to the detail illustrated the absence of remuneration committee and nomination committee followed by the weak structure of Board were some of the fundamental errors of the structure of Corporate Governance. 3. What is your opinion of the ownership structure in YCP, in the light of the fact co administrators Kong and Watson retain 60% of the voting equity. Can group of small shareholders make a significant contribution to the governance of the company? What about large share holders. A diverse and balanced ownership structure is the key to keep transparency and authenticity breathing in organizational management. However, the very aspect was absent in case of YCP, the imbalance of major share owner ship and voting rights is evident error. In addition, the fact that minor share holder’s were totally neglected and the other share holders with major contribution had other businesses to look after and their presence in the administration was a mere formality. The dire need of YCP that is obvious in the structure of YCP was that of rationally designed attribution of power and authority along with voting rights based on the fact that when the voting rights of controlling shareholders exceed the cash-flow rights, the incentives for asset diversion are magnified. 4. What is your opinion of the structure of the board have had before approving the construction of the private telephone network for YCP right after the company went public The expansion planned in the very short period after establishment should been backed with strong supporting strategies. In the case of YCP the segregation of management and supervision was the seemingly lacking feature. Hence, after the registration company into the stock exchange a strong structure of Corporate Governance was the essential need of time. Furthermore, evident is the fact from the description that investment in construction was an element of the chairman’s show off rather than strategical opportunity. Therefore, the strategy of expansion on the grounds of serving ego without any exit was more an evidence of Board structure rather than mismanagement. 5. What information should the board have had before approving the construction of the private telephone network for YCP. The feasibility and relevance to the vision of the company was the main area to be focused by board in the evaluation of proposal of construction. Furthermore, funding requirements, timeline, return on investment rate, cost benefit analysis, alternative plans, competitors analysis , PESTEL analysis and an exit plan were the mandatory analysis to be investigated by the board. Hence, the most important feature to be considered was the exploration of the potential of company to support such a gigantic project along with usual business in terms of time, efforts and resources. 6. What role did the board members played in the case of YCP collapse? Refer to each member’s role separately The role of each of the board member in the collapse of YCP is in evident, some of the main perceptions are illustrated below; President and CEO MR. Jeo Kong; Mr Joe Kong and Mr. Jeff Watson can easily be mentioned the core reason of the collapse based on the fact that unfair clauses were added in their contract that secure the high compensation of executives regardless of the financial health of the company. Also the decisions of board were influenced with fake information that clearly holds the claim on the personnel. Hence, apart from all the betrayal the final stroke of erotic investment on lame strategy was another slither that lead the company on the path of bankruptcy. Vice president and Deputy CEO Mr. Jeff Watson; the vice president was as much a contributor of the mistrust as the president by supporting the fake information and hiding the facts of the company from board members. In addition, his understanding of the facts and figures related to company status was also inadequate to view the upcoming disaster, which he subside with his convincing skills and communication power. Executive member and CFO Mr. Cat Chris; The CFO of the company can be regarded the equivalent scandalous on the basis of the fact that maintenance of the accuracy of accounting records applied with principles and standard is the major function of CFO which was overlooked by him. In addition, the monitoring and evaluation of the accounting figures were also pathetic, resulting in regular deficiency in liquidity. Hence, absence of control system to restrain unlawful number games on financial statements was the other failure that played a role in the eventual collapse of the company. Non executive members Mr. Park (Representative of Media Company large shareholders); Mr. Johnson (Representative of Apparatus man / Res large share holder) Mrs. Bell (Rep of shareholder minorities) Ms. March ( Rep of share holder minorities) The major fault of the non executive directors was ignorant attitude towards operations management. The essential aspects of investigation to explore the interest of the board members and establishment of subsequent committees (such as remuneration committee, nomination committee, audit committee) as monitoring bodies for undue favor was an entirety missing characteristic in the non executive members of board that contributed in the collapse of the company. 7. Do you believe that the role of the financial controller had a decisive impact on the outcomes and how do you suggest he could have had avoided them; The importance of the role financial controller in an organization cannot be under estimated apart from projection of financial constraints and budgetary obligations; the excess to corporate funds imposes the fiduciary responsibility on financial controller. The better are the financial controls of a company the improved will be its performance. An efficient performance of financial controller is the evidence of strong management with tight control on operational management. The absence of an efficient financial con troll system laid massive disastrous impact on the performance of company that enables the traitors to play with data and project misleading information to the shareholders and stakeholders 8. What is your opinion of the statement made in the case that , “ The accounting function is a joke, there are no rules, no directives , no job description and you can see segregation of duties everywhere. The concept of control seems to be for gotten as there is no accounting system” An efficient accounting function plays the role of screen of existing scenario in an organization. Any irregularity in the system can mislead the corporate strategies concluding with disastrous results. Moreover, the job descriptions, rules and directives altogether play the role of motivators for effective transformation of work place. An absence of these significant element portray the ambiguous strategical vision of corporate objectives amongst the workforce that imposes negative impact on employee engagement / contribution and the growth , profitability and productivity rate of the company. As illustrated above financial control are the key of successful operational management that assists and support strategies of the company. Hitherto, in the case of YPC financial data was more a puppet play that depicts the data in the manner the CEO and Deputy CEO Desires which was only possible in the absence of authentic and documented accounting system and policies. 9. What is your opinion of the external auditors do you think the outcome in YCP company suggest that they performed their duties according to the auditing standards? Do you think that auditing firms in their struggle to secure contract or lose a client are entitled to act more as consultants and less as auditors. Please justify your answers. The job responsibilities of internal / external auditors include the detection of fraudulent movement and signs. They play an important role in the establishment of efficient regulatory and corporate structure in an organization. The prime concerns of internal / external auditors are to dig into the accountability of shareholder for safeguarding financial stability and investors interest. Based on the fact that the primary function of external auditors is to justify the accuracy of accounts and authenticity of internal controls. The hiring bodies of internal / external auditor together devise a system to secure the objectivity and interest of the internal / external auditors. In the light of this notion the external auditors in YCP were successful in their assigned task. However, auditors are only auditors that can possibly not play the role of consultant for saving a client or a contract, which is against the ethics of their conduct. If the auditors would have tried to do so, it could have resulted into another episode of disaster intensifying the magnitude of loss. 10. Do you believe there are issues / breaches in the case leading to in appropriate management compensation; creative accounting ; failure of directors and managers to exercise due diligence; lack of adequate regulation and lack of independence in audit function? If yes how could these have been avoided? Please justify your answer. The efficacy of corporate Governance is highly dependent on the authenticity of financial statements. Attached figure intends to illustrate the point of view briefly1 To secure the accuracy and authenticity of the financial data, adequate evaluation is necessary to establish and monitor financial controls. An efficient audit committee can play the role of steering wheel of operation management. Audit Committees are established to induct internal control through introduction of activities that encompasses preventive, detective and corrective components of management. An effective structure of Corporate Governance assures reliability of various interrelated components of management that includes efficacy of underlying categories. Effectiveness of the board: the credibility of board can be enhanced with the assistance of Corporate Governance through progressive promotion of corporate vision and company mission. The Chair man: an effective corporate governance structure enables the Chairman to successfully practice ethical leadership. Nonexecutive Director; Non executive directors play an important role in successful emergence of corporate governance through successfully commanding high standards of veracity by assisting chairman and board with high quality information. Professional advice: An authentic professional advice as the outcome of high quality information is the core benefit of efficient structure of Corporate Governance. Directors Training: The areas in need of training of the top management can be visualized with the assistance of corporate governance activities to construct dynamic personalities to boost corporate performance. Director’s responsibility for the presentation of Financial Statements; An effective structure of Corporate Governance equip the directors with the most authentic view of company’s current status and capabilities for positive advancement on matters of strategy. Recruitment Compliance Report: Listed companies are abided by recommended practice from UK Corporate Governance Code. An effective corporate governance structure provides guidance for compliance of the same. Internal Control: Fair judgment for reliance and manipulation of conflicts of interest are the core benefits of a successful corporate Governance Structure supporting internal control profitably. Committee Structures for Board Nomination: Board recruitment is the most sensitive and crucial task achieved through effective Corporate Governance that enables company to achieve vision and mission rigorously. Audit Committee, Remuneration Committee etc: Decision making structures in the shape of audit committees and remuneration committees are the positive contributions of a valuable structure of Corporate Governance to ensure productive outcomes. 11. How successful entrepreneurial character like Kong and Watson be controlled to protect shareholders? A rational distribution of responsibilities among non executive and executive directors is the first and the foremost characteristic of the board that can add to the efficacy in decision making. Hence, the fact is that there are due limitations of the impact of non executive directors with executive once. Therefore, introduction of double tier management system is a suggestion for the referred situation, which is to be applied with several conditions to secure the interest of minor shareholders. This include exploration of a mechanism of decision making to avoid the show running by a certain group of people bypassing the interest of the others. 12. In your views should the neighbor countries governmental authorities have had arranged a bailout program me for YCP and why? The constructive role of Governments in ensuring the fundamental influences of productivity is conducted through induction of public policies and programmes with the objective to shape up the extent to which the immediate determinants of productivity growth evolve. It encompasses the level of competition in a market, trade and investment openness and general supply and demand conditions. The industrial growth in the global market is interconnected in nature in the contemporary global market. The failure of a company can bring in negative consequences on the market by triggering the fall of other peer organizations. Hence, in order to secure the market alignment in favor of the other players a bailout programme for YCP can be raised by neighbor countries governmental authorities. The other reason in support of governmental authorities of neighboring countries in favor of YCP is to secure the share of tax which is considerable high if the consumers use YCP. While, in case of dissolution of YCP the consumer base will automatically shift to other international companies which have high rates that will subsequently restrict the use of service and eventually will lower the tax return of government. Read More