Corporate Governance at ROMA Group Limited - Case Study Example

Corporate Governance Name Institution Course Date Quality Financing Disclosure and Reporting Introduction ROMA Group Limited is a company that came into existence in 20111(Roma annual report 2013, 2014 and 2015)2. All the three reports indicate performance of the company. The company boasts of a capable board, an efficient system of accounting, and an ingrained culture for development of business. The company adopts corporate governance code stipulated in the CG code (A21). In the past three years, ROMA Group LTD installed a code of conduct. This code relates to transactional securities. The rules are stated in GEM. The reports also give assurance that; confirmation has been sought from all directors regarding the needed levels of dealings. ROMA Group LTD has a well established board of directors3. The board of directors includes the executive directors and the independent non-executive directors (Thornton and Yourself, 2014). The executive further comprises of two officers; the chair-man and chief executive; and chief financial officers. For the three years, there have been resignations and appointments of independent non-executive directors. The company requires all independent non-executive members to give a documented assurance of independence every year Accounting policies Share option schemes best known as the pre-IPO was introduced in 2011. The IPO has several requirements. Its main function is to encourage capable individuals and enhance growth of the business. The IPO prevent aggregated shares from going beyond a tenth of the total shares. There is also no set length of time for buying the shares. The board always decides on such time. However, the board ensures that the length of time is not more than ten years. The board also has power to decide in the least time of holding on options. Grant bids are accepted within twenty eight days of its application. Little fee is levied upon acceptance. The company has also come up with a means of establishing prices of shares4. This is calculation 90 percent of the HK. This is strictly duty of the board. These prices of shares are included in the stock exchange market share index. This terms and conditions on shares encourage many to invest in the company. Just like the previous policy, it is attractive in nature5. The pre-IPO share option plan comes to a close every 31st March of every year. Granting of options remained at 30 percent during the first two years but rose to 40 percent in the third year. However the price determined for shares by the third year are too low. For instance one individual accumulates 1.8 million shares trading at HK$ 0.027. Independence of Directors Independence increases quality of corporate governance. This can be through Appointing of non-executive directors that have field experience. Roman company has hired experienced staff in this section. Mr. Chan Ka Kit is chairs the audit committee. He is a graduate from City University of Hong Kong (1997) in accountancy. Since 2005, he has been certified as a public accountant. His experience in project management within companies in China dates back 13 years. Mr. Chan also has wide experience in taxation and moderation of control systems within set of companies. He has worked for various companies. They include; Sparkle Roll Group Limited (2008-2010); North Asia Resources Holdings Limited (2010-2011); Lijun International Pharmaceutical. All these companies trade in the stock exchange. Another non executive director is Mr. Ko. His appointment was made in 2014. He is a graduate from Simon Frasser university in Canada as well as University of Leeds, England. He holds a degree in science and law respectively. He has previously worked for an international law firm. He was also a partner in the same firm. Mr. Ko has experience in corporate financing. He can work as a legal counsel in England and Wales. Currently, he serves as a non-executive director in several firms. This firms include; Global tech holdings; Singapore Exchange security Trading limited; China Bio cassava Holding; and Li Heng Fibre Technologies Limited. (Global tech holdings and Li Heng Fibre Technologies Limited trade in the stock exchange. Mr. Ng Simon is another appointee as a non-executive directorate. His appointment was back in 2011 during the juvenile stages of the company. He is a graduate from Wilfred Laurier university, Korea. He holds a degree in economics. He boasts of 16 years work experience in three fields of economics. This includes corporate financing, capital markets and principal investments. Within the 16 years, he has worked on various countries including; Taiwan, Korea, and China. He also has vast specialization in three fields. This is merger, acquisitions and turnovers. At the moment he is a registered SFC member (Hooray Security Limited). He has worked for CIL holdings limited as an executive director. In the year 2013 to 2014, he worked for Cheer Time enterprise Company Limited as a supervisor. This two companies trade in the stock exchange. The work experience that this individual has makes them suitable to work as non-executive directors. An independent non-executive director has to have competent academic qualification to handle a given job. However they have in recent years worked as a shareholder, an auditor or an employee this disqualifies their independence. Secondly, Mr. Chan is an appointee in another company. This makes the boards of the related companies to be intimate. It can also result to conflict of interest. Therefore this condition also jeopardizes independence. These facts therefore prove absence of independence. Mr. Lahm before his resignation was also an independent non-executive director. During his service, he also worked for other companies. This makes him technically independent but practically not independent. Analysis and questioning of the financial results From the reports, the directors and auditors examine the financial results and statements. In all the auditors opinion, it is stated that the report is pictures the state of affair. However, the auditor’s opinion in all the reports is identical. The wording is the same so is the auditor. This gives a picture that the report content is a copy paste6. For this reason, one might conclude that the audit team is not competent to produce a new statement. Therefore it creates doubt as to whether the audit was conducted effectively. The reports indicate that the two directors (Mr. Luk and Mr. Luk and Mr. Yue) have approved the financial statements. This is done on behalf of the board. This includes the consolidated statements of cash flows, statement of financial position, and changes in equity. However, the audit team has accomplished most of its tasks. It has made recommendations on remunerations. It has highlighted major areas of concerns7. The audit team has also made significant adjustments especially on cash flows from operating activities. According to the codes, the management ought to provide explanations to the board concerning finances. This is meant to ease the assessment. The directors also have to develop accounting concern. This can include potential risks. Financial capabilities of board members The company has a board of directors that consists of two levels. The executive directors and the independent non-executive directors. The two executive directors are Mr. Luke Kee Yan Kelvin and Mr. Yue Kwai Wa Ken. These are the chief executive (chair) and the Chief Financial officer respectively. The second level consists of Mr. Chan Ka Kit, Mr. Lam Pak Cheong and Mr. Ng Simon. Mr. Luk holds a masters degree of marketing business. He graduated from University of technology Sydney (2010). He has experience in marketing and corporate communication. This is after working. He has no financial qualification academically. Kwan pursued a master’s degree in finance from Hong Kong Polytechnic university. He majored in investment management. He has previously worked as an analyst in an industry of finance. He is capable of handling valuation and advisory. This is after serving the same purpose for over one hundred companies worldwide. These valuations included natural resources such as minerals. He has also been involved in valuation of assets and various businesses. This positions him with enough financial experience despite his young age8. Most members of the independent non executive directors have financing experience (Roma audit report, 2015). Only Mr. Ko has academic specialty in the field of law. Mr. Chan for instance has a huge experience in financing. He holds a degree in accounting. He is also a certified public accountant. He has worked in various sectors that require financing skills. This include; the taxation institute; Sparkle Roll Group Limited; North Asia Resource Holdings; and Lijun International Pharmaceutical Holding Company limited. Mr. Ko is qualified in the field of law. However, he has worked with several financial institutions. This has defiantly given him exposure in the field of finance. He has previously worked with Global Tech Holdings as a non-executive director. Mr. Ko has also been employed at the Singapore Exchange security trading limited. He currently serves as an independent executive director in two firms. Mr. Lou was appointed as an independent non-executive director in 2014. He holds a degree in business administration from Hong Kong Polytechnic University. He boasts of twenty years of experience in the field of financing. He specifically majored in corporate banking and financing9. These Biographical details indicate that the directors have gained experience in financing. They have been involved in various companies. Some of these companies trade in the stoke exchange and have a stock code. Sparkle Roll Group limited with a stock code of 970. The North Asia Resource Holding Limited has a stock code of 61. Lijun international pharmaceutical has a stock code of 2005. This is the companies Mr. Chan has worked for. Global Tech Holdings has a stock code of 143. China Bio Cassava holdings limited have a stock coed of 8129. Mr. Lou has not worked for a company that has a stock code. The biographical information does not elucidate the financial impact these directors have had in other firms. Financial performance measures/evaluation Performance of the board is evaluated using financial performance measures. Reviews and updates of policies relating to finance is one of them (Tricker, 2015). A good board of directors should review these policies to establish efficiencies. Budget for operations and the company’s capital should be approved annually. This is also an important platform for evaluation. A competent board should develop goals and policies that can boost the financial status. To affect this, the board has to consistently receive financial reports for review and scrutiny. Evaluation of a board also checks on insurance program10 (Razae 2008). A competent board should be able to maintain and update the current insurance policy of a firm. The board can also be evaluated against policies relating to shares and dividends, equity of members. A competent board has to set criteria for annual audit11. Importance evaluating board financial performance Evaluation of the board enhances financial performance can enhance board governance. It is important to understand that positive evaluation results can build confidence (Ibedrola, 2015). Negative results will alarm the board of governors. It is important for the board to understand financial performance. This will help the board develop or improve on policies. The board can develop means to compete favorably. This is especially in the stock exchange. According to Ibedrola (2015), evaluation can indicate areas for financial improvement. Such areas can be areas of expenditure. The board can also establish necessary assets to improve productivity. The evaluation results can be the basis for setting financial goals competencies. A good evaluation can indicate if it is necessary to change leadership. At times leadership can be the cause of financial failure. Financial performance and accountability In most companies decisions are made by the board. Often decisions are developed after extensive consultations and meetings. Any decision made is the voice of all the board members. This therefore means that every board member is responsible. In terms of financial performance, a transparent board will be informed. There is always flow of such information. However, in some instances, corrupt members can make crafty decisions. It is necessary for a sound board member to fish this out. .Conclusion Since the company came into existence, its financial performance has significantly improved. The company has been able to adopt the Hongkong Financial Reporting Standards (HKFRSs’). This has been instrumental in the stability of the company. Accountability and openness has also been evident. This can be seen in the way meetings are conducted, appointments, decision making and conduction of financial audits. Directors are independent as far as decision making in the company is concerned. Board members however, need not to have mandatory financial skills. However, regular training and seminars are initiated for this purpose. Bibliography Thornton Grant and Yourself Tare. (2014). Corporate Governance. An Overview Around the globe. Retrieved on 20-9-2015 Basel Committee on Banking Supervision. (2010). Principles for Enhancing Corporate Governance. Bank for International Settlements. Retrieved on 21-09-2010 < http://www.bis.org/publ/bcbs176.pdf> Ibedrola. 2015. Corporate Governance system. Retrieved on 20-09-2015 < http://www.iberdrola.com/webibd/gc/prod/en/doc/gobierno_corporativo.pdf> Tricker Robert Ian. (2015). Corporate Governance, Policies and Practices. London. Oxford University Press. Rezaee, Zabilhollah (2008). Corporate Governance and Ethics. New York. John Willey and sons publishers. Roma Group Limited (2013). Annual Report. 2013 Roma Group Limited (2014). Annual Report. 2014 Roma Group Limited (2015). Annual Report. 2015 Read More