Directors, Shareholders and Rewards - Essay Example

Directors, Shareholders and Rewards Report From: 11/10/2010 The Palin & Co., The Solicitors (P) Ltd ­­­­­­­­­­­­­­­­­­­­­­­­­United Kingdom To, The Board Members Medicaments plc United Kingdom. Subject: About the Corporate Governance and the compliance achievement. The respected, Presented a report regarding the various consequences of the company in terms of corporate governance when, listed in London stock Exchange. The London Stock Exchange (LSE) is the largest stock exchange in the world, where there are listings of many British Organisations. The LSE concentrates mainly in four areas of operations like the information science, finance, equities and the derivative markets. “London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses.” (London Stock Exchange, 2010). There are many benefits for the companies in terms of corporate governance when listed in LSE; corporate governance has an immense focus in the current scenario. The operation procedures of the London stock exchange are much active in the arena of corporate governance. The various benefits due to the listing are, like the companies to the Specialist market which are versed in the issuing of funds should have to suit themselves with the requisites of standards set by the European markets, this helps in the minimization of corruptions. The organization may have to deal with the legal structures which deal with the restriction in partnership. “The benefits make the AIM one of the leading markets in Europe.” (Boldyrev 2010). The corporate governance law transactions with the London stock exchange is in a competent manner to assure understanding along with the customers. The LSE is among the leading stock exchanges in the world and is a vital part of the UK finance market. The LSE provides to make certain that organized markets are in pace with the rules, principles , the transactions and market movements. The basic intend of the LSE is to construct accessible intermediaries and investors with attention-grabbing and coordinated markets to increase capital investments. The corporate governance denotes confident rules to be taken in the listing of LSE. There are rules related to the listing, prospectus and the policy written in the stock exchange. These rules relate to the transparency, instruction and communicate in terms of financial reporting. There are enormourous consequences for the Medicaments plc Company after listing themselves in the stock exchange; it will be useful in assessing the company in terms of the future opportunities and economic growth and developments. The LSE lists the results of the shares in each quarter and the results of the shares can help Medicaments Plc understand the financial position and the company opposition and make the moves according to that. The company has the advantages of getting operated in the market in terms of derivatives in the market and the equities of the organization. The LSE lets know the organization about the assets, liabilities, bad debts and the current financial situation of the Medicaments Plc. “The London Stock Exchange would point to its huge pool of international equity assets, its flexible listing regime and its analyst community as being reasons for it becoming what many lawyers and bankers believe is the premier venue for international companies post-Sarbanes-Oxley” (Turner 2010). The code of conduct is very vital. The available record systems necessitate involuntary companies to make detection in relation to the Code. In the first part of the statement, the company has to report on how it is applicable to perform under the principles of combined Code.” The Code contains main and supporting principles and provisions.” (Code on corporate governance: Preamble, 2003, p. 5). It is expected that the companies listed in the exchange will comply with the rules and regulations of the combined code. The business has to take up steps in considering the various provisions in the code of conduct. The Croft family is heading the organization, the head of the family Mike Croft was the CEO, and plays the dual role of board chairman of the company. The roles of chairman and chief executive should not be the same person according to the combined code of LSE. The other employees like the directors and the executive directors are appointed in the company by the recommendation of CEO, and they are the friends or relatives of the CEO .The remuneration is fixed to the employees according to the wish of the CEO and the CEO doesn’t consider any HR rules or policies in the salary fixation. The board of management did not consist of formal targets or the reviews on the various policies. The board had not formed any committee in the operations. The audit of the financial reports is done by an internal employee and there is no system of external audit of accounts. The compliance is very essential for the combined code and the Code is applied to the listed UK companies and its most important aim is to develop board efficiency and to improve financier’s self-reliance by elevating the principles of corporate governance. It describes the responsibility of the board, the chairman and directors; records procedures which are applicable to the board members, and strategy concerning the chairman, chief and executives of the company. “The combined code supersedes and replaces the Combined Code issued by the Hampel Committee on Corporate Governance in June 1998.” (Code on corporate governance: Preamble, 2003, p. 5). The Code has the policies which differentiates that diverse companies will have good motive for not complying with assured requirements and gives them the opportunity to explicate. The compliance gives the identity to each of the companies with the same procedures and patterns with which the listing has to take place in the LSE. Suitable recommendations for achieving compliance of the Medicaments Plc 1) The board should gather together effectively and recurrently to discharge the responsibility successfully. There is the need for a plan about the gatherings and discussions should be presented for other staff members. 2) The dual role of the same person should be discarded and a new committee should be formed to discuss the arising needs of the firm and the separate personnel management department should be incorporated to take care of the employees and to discuss the code of conduct and the arising principles. 3) The external auditor should be employed and the audit should be done twice by the organization at a regular interval. 4) The company should conduct meeting with the share holders and the stake holders to take up the suggestions from them regarding the new ideas. 5) The company’s HR and financial departments must be given the responsibility in selection, recruitments, remuneration to the employees and the internal audit. 6) The recruited person should not be an immediate family member of the director or any superior employee. 7) The company should make sure whether it follows the code of conduct and the adjoining principles. These are the points which we would like to bring to your attention. Hope this will be much beneficial to the company for the future and in being a successful firm. Thanking you. Palin & Co Question 2: contract law Business Report This is a classic illustration of Contract of Sale of goods by description under the English laws. Certain clauses in this new Law, viz. sale and supply of goods act, 1994. is a modification of the earlier “Sale of Goods Act 1979.” (Sales and supply of goods act 1994: Provisions relating to the United Kingdom, 1994). According to the provisions of Section 14 Sub section 2 of Sale of Goods Act, an implied clause exists that goods being pre-offered for sale are of “satisfactory quality.” (Sales and supply of goods act 1994: Provisions relating to the United Kingdom, 1994). This generally means of a kind that shows satisfactory condition of fitness when examined by a “reasonable man” of ordinary prudence and judgment, taking into consideration the specific description ascribed to the goods by the buyer, its price and any other relevant conditions. (Bicknell 2009). In case the buyer has specified any special characteristics for the product, it is necessary that the seller conforms to such specifications or special consideration of sale, and this could also underline the contractual covenant between buyer and seller, in this case being Grade 1 goods. Again, according to the Sale of Goods Act, 1979, if the buyer does not inform the seller about anything it does not conclude that the goods have been accepted. He also needs to be given reasonable time to inspect and examine the goods at his conveniences and inform the seller about it. When goods are to be sold by description, it shall correspond with description, and in event that it is not, it shall be deemed to be a major breach, which is void able at the option of the aggrieved party. In this case, it is seen that there is a clear breach of the implied clause to Sale and Supply of Goods, in that the goods ordered were of Grade 1, but supply was for Grade 2, a lower quality that the buyer may not accept. Thus, the buyer, may decide: 1. He may repudiate the entire contract and claim damages for losses incurred, £60,000 towards restoration and £15,000 towards interest charges. These charges would not have been payable had the conditions regarding Grading been adhered. 2. He may accept part of the performance that is the earlier two shipments which were in order and reject the third shipment and claim “reasonable amount of compensation” (The law relating to the supply of goods and services, 2006). For grade variation and losses incurred by him due to this lapse on the part of seller. 3. He could seek specific performance of the contract by the seller under which Sulphur Limited would need to replace Grade 2 with Grade 1 and bear all the expenses for rendering the same. The English Laws place a lot of emphasis and reliance on the contractual obligations between parties and their rightful performance. If there is material departure from contract on the part of either buyer or seller, this needs to be communicated to the other party for his due approval. Thus, In this case, it was necessary for Sulphur Limited to have informed Medicaments about the difference in grading. The failure of Sulphur Limited to do so in a way, is kind of fraud on their part, passing off Grade 2 Goods as Grade 1. However, Medicaments need to prove that all the costs and detriments suffered by this company was a direct result of the wrong grade being provided by Sulphur Limited. However, the Court would only allow the kind of recompense and repairs that could be reasonably attributed to the fault of the supplier, Sulphur Limited. At best the Courts would try to put back the aggrieved party, Medicaments, in a position, has the losses not occurred. According to law, “a product that was not of satisfactory quality at the time of the sale is returned to the retailer, the buyer is entitled to a full refund (if it is within a reasonable time of the sale), or, if a “reasonable time “has elapsed, to a reasonable amount of compensation, or to have the goods repaired.” (Consumer rights: How do I reject a duff car or get compensation for problems with a car I have bought from a dealer? After the first six months, n.d.). On their part, Sulphur Limited could seek protection under the limitation clause which clearly states that they could only be held responsible for the losses arising due to their direct negligence. Thus, the buyers have three options: 1. Irrespective of the situation surrounding the case, for which the buyers are not responsible, Medicaments needs to prove Sulphur’s negligence in court. 2. The company could rescind part, or whole of the Contract and claim damages and economic compensation for losses and damages suffered. 3. The company could direct specific performance –replace grade 2 with grade 1 at the cost and risk of sellers. Under Section 30(1) (3) of sale of Goods Act, “Where the seller delivers to the buyer goods he contracted to sell mixed with goods of a different description not included in the contract the buyer may accept the goods which are in accordance with the contract and reject the rest or he may reject the whole.” (An act respecting the sale of goods: Sale of goods, 1978, p.13). Question 3 (Employment Law): Susan and Joe have been in employment with Medicament plc for seven and five years respectively. Both Susan and Joe enjoy seniority in terms with respect to age as well as number of years of service experience than Helen who is the point of contradiction. Susan has stated that she will be filing a case for constructive dismissal. According to the UK employment laws; the Employment Rights Act of 1996 defines constructive dismissal as an act of termination of the working contract by an employee due to the unfair conduct of the employer which the employee equates to constructively dismissing from employment. “In such cases, the employee retains the right to seek legal compensation as having been dismissed unfairly.” (Constructive dismissal, 2010). The law of constructive dismissal requires the claims to be made due to any of the three reasons. The first reason is the employer changing the terms of employment contract as in the cases of deliberate cuts in payment or status. The second ground of a constructive dismissal claim requires the breaching of contract by the employer in the form of bullying or ignoring complaints. The third ground is the breaching of such rules which results to inequitable industrial practice. “This breach can be a fundamental one such as refusal to pay wages or alternatively a series of smaller ones with a final incident that breaks the camels back and prompts a resignation.” (Employment law explained: Constructive dismissal, 2007). Here the scenario in Medicament Plc is that Helen who is junior to Susan in terms of both age as well as work experience in the organization has been promoted to the position of finance manger while Susan who has been in the firm for seven years and also has a service experience of around twenty five years has been sidelined and now has to work under Helen. The conclusion that is reached by Susan is that she has been devoid of promotion because of the age factor and states that working under Helen is a harassment treatment by the company. Susan’s case is strong on the viewpoint that Susan has all the eligibilities for a promotion in terms of training as well as length of service in the company. Helen’s eligibility for promotion over Susan is not clear. When an employee resigns under such circumstances it is not considered by the law as a free will resignation but as a forcible coercion for resigning. “An employee can resign and claim Constructive Dismissal due to the employers behaviour, but the employer could turn around and say that he (The employer) breached the employment contract, but that it was done, for example, because of the reorganization of the business.” (Compact law free legal information: Employment law, 2010). The impact of the case is that it tarnishes the image of Medicament Plc. Susan’s case of constructive dismissal is legally strong. Joe’s case is related to the Equal Pay Act 1970 which is a sub division of the equal opportunities Act. Joe’s accusation is the company has made an indirect sex discrimination which is the reason for him denying promotion. According to the UK Equal Pay act of 1970 the law states that it is unlawful if discrimination in an organization occurs on the basis of remuneration or benefits that are provided to men and women employees. “The effect of a successful claim is that an “equality clause” is inserted into the claimant’s contract, following which, the employee is entitled to equality of pay and other terms and conditions with someone of the opposite sex, in a comparable job.” (Summary of the law on equal pay, 2009). Joe is a trainee accountant in the firm and Helen has been promoted to the finance manager. There are several designations in the finance department between the position of a trainee accountant and that of finance manager. This implies that the work capacities of both Joe and Helen are different. Therefore, to make Joe’s case stronger he has to prove that his and Helen’s work are equally rated by the employer. Here Medicament Plc can prove easily that Joe and Helen are not working in the similar designations and do not share the same responsibilities even though they both are working in the finance department. “Where men and women are paid at different rates for the same, or similar, work, the employer must prove that there is a reason for it which is not gender-related” (Equal pay: What is meant by equal pay? 2010). While filing a case of Equal Pay Act, Joe will be considering Helen as the comparator but the company can argue it on terms of the responsibilities and duties that both Joe and Helen are handling which made Helen eligible for promotions. But, the company can settle the matter in terms of stating that Joe’s and Helen’s working are not in equal capacity as needed by the Equal Pay Act, 1970 of the UK law. Therefore, Joe’s case according to the Equal Pay Act of 1970 is legally a weak case. Legally Susan’ case is a stronger than that of Joe’s case. Reference List  An act respecting the sale of goods: Sale of goods, 1978. [Online] The Sale of Goods Act, p. 13. Available at: http://www.qp.gov.sk.ca/documents/English/Statutes/Statutes/S1.pdf [Accessed 11 May 2010]. Bicknell, P., 2009. Section 14 of the Sale of Goods Act implies a term of quality. [Online] lawdit reading room. Available at: http://www.lawdit.co.uk/reading_room/room/view_article.asp?name=../articles/9946-section-14-of-the-sale-of-goods-act.htm [Accessed 11 May 2010]. Boldyrev, I., 2010. IPO on the London stock exchanges alternative investment market. [Online] Price Water House Coopers. Available at: http://www.pwc.com/ru/en/legal-services/ipo-london-stock-exchange-alternative-investment-market.jhtml [Accessed 11 May 2010]. Code of Corporate Governance, 2002. [Online] p.2.Available at: http://www.secp.gov.pk/corporatelaws/pdf/CodeofCorporateGovernance.pdf [Accessed 11 May 2010]. Code on corporate governance: Preamble, 2003. [Online] The Combined Code on Corporate Governance, p.5. Available at: http://docs.google.com/viewer?a=v&q=cache:bkM86Rd3JQIJ:www.fsa.gov.uk/pubs/ukla/lr_comcode2003.pdf+combined+code&hl=en&gl=in&pid=bl&srcid=ADGEESh5orWpkii_V5n2Q5rT9Zlity7apU4SriN77pVyofYxzxXJ5TF1S0HXXGC1ar_In_3DljoRp95S9FTnEhtvmg7R1r6DhaUqKEe0fImnrVjjaTT-iyJw1WliJZqr0WgAjboUKXkk&sig=AHIEtbR5uIq0qN2gGtQQpuzdTk0BT8Rxbg [Accessed 11 May 2010]. Compact law free legal information: Employment law, 2010. [Online] Compact Law. Available at: http://www.compactlaw.co.uk/free-legal-information/employment-law/constructive-dismissal.html [Accessed 11 May 2010]. Constructive dismissal, 2010. [Online] Business Dictionary. Available at: http://www.businessdictionary.com/definition/constructive-dismissal.html [Accessed 11 May 2010]. Consumer rights: How do I reject a duff car or get compensation for problems with a car I have bought from a dealer? After the first six months, n.d. [Online] Honest John.co.UK. Available at: http://www.honestjohn.co.uk/faq/consumer-rights [Accessed 11 May 2010]. Employment law explained: Constructive dismissal, 2007. [Online] Got the Boot .com. Available at: http://www.got-the-boot.com/law/law-07.htm [Accessed 11 May 2010]. Equal pay: What is meant by equal pay? 2010. [Online] CIPD. Available at: http://www.cipd.co.uk/subjects/dvsequl/equpay/eqpay.htm [Accessed 11 May 2010]. London Stock Exchange, 2010. [Online] Answers.com. Available at: http://www.answers.com/topic/london-stock-exchange [Accessed 11 May 2010]. Sales and supply of goods act 1994: Provisions relating to the United Kingdom, 1994. [Online] OPSI. Available at: http://www.opsi.gov.uk/acts/acts1994/ukpga_19940035_en_1 [Accessed 11 May 2010]. Summary of the law on equal pay, 2009. [Online] Thompsons. Available at: http://www.thompsons.law.co.uk/ltext/l1010001.htm [Accessed 11 May 2010]. The law relating to the supply of goods and services, 2006. [Online] dti: A Traders Guide, p. 6. Available at: http://www.bis.gov.uk/files/file25486.pdf [Accessed 11 May 2010]. Turner, M., 2010. Exchanges set their sights on listings by overseas clients. [Online] Financial News. Available at: http://www.efinancialnews.com/story/2010-03-15/exchanges-set-their-sights-on-listings-by-overseas-clients [Accessed 11 May 2010]. Read More