Question Tag: Stakeholder Relations

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  • 10 Marks

CSEG – Nov 2015 – L2 – Q4c – Corporate governance framework

Explain five issues typically contained in corporate governance reports.

Reporting on corporate governance is one way of ensuring transparency. Based on recent corporate governance concerns, explain FIVE (5) issues that are contained in corporate governance reports. [10marks]

Issues contained in corporate governance reports.

All corporate governance reports (included Ghana’s Code of Best Practices in Corporate Governance) state that board directors should explain their responsibility for preparing accounts. They should report that the business is a going concern, with supporting assumptions and qualifications as necessary.

In addition, further statements required include:

  1. Information about the board of directors: the composition of the board in the year, the role and effectiveness of the board, information about the independence of the non-executives, frequency of, and attendance at, board meetings, how the board’s performance has been evaluated. For example, the South African King Report suggests a charter of responsibilities should be disclosed.
  2. Brief report on the remuneration, audit and nomination committees covering terms of reference, composition and frequency of meetings.
  3. Information about relations with auditors, including reasons for change and steps taken to ensure auditor objectivity and independence when non-audit services have been provided (Ghana’s code requires that audit and non-audit fees are disclosed).
  4. A statement that the directors have reviewed the effectiveness of internal controls, including risk management. Also sufficient disclosures should be given for shareholders to understand the main features of the risk management and internal control processes. Board should also give details of, or at least confirm, any action taken to remedy significant failings or weaknesses. (This is required by Ghana’s Code).
  5. A statement on relations and dialogue with shareholders.
  6. A statement that the company is a going concern. (This is required by Ghana’s Code).
  7. Sustainability reporting, defined by the King Report as including the nature and extent of social, transformation, ethical, safety, health and environmental management policies and practices.
  8. A business review
  9. A statement detailing the compliance by the organisation with corporate governance, legal and statutory requirements. (This is required by Ghana’s Code)
  10. Ghana’s Code of Best Practices in Corporate Governance also requires the following disclosure:

The board should also ensure that information is disclosed on the following matters in the annual report insofar as they are relevant to the period under review –

(a) All management fees paid by the corporate body with details of the names of the parties and their relationship to the compote body;

(b) The identities and percentage holdings of substantial shareholders;

(c) significant cross shareholding relationships;

(d) Related party transactions;

(e) Details of incentive schemes, such as stock option scheme;

(f) The fees paid to the auditors of the corporate body for audit and non-audit related work; and

(g) Any other material issues concerning employees and other stakeholders such as creditors and suppliers.

  • 10 Marks

CSEG – May 2019 – L2 – Q4b – Business ethics

Assess the significance of Wakanda Ltd’s CSR stance in addressing the impact of a product contamination crisis.

Wakanda Ltd is a listed multinational company which manufactures and sells fruit juice. Last year, Wakanda Ltd received criticism in the national press in Ghana and in other countries as a lot of customers were hospitalized after purchasing some of its fruit juice which was contaminated. This resulted in low patronage of its products and a huge fine by the Government.

The Board of the company believes in improving relationships with groups such as suppliers, customers, and employees in order to regain its reputation. It has come out with the following corporate social responsibility (CSR) initiatives in order to correct the shortfall in sales:

  • Paying all bills of hospitalized customers and reducing prices of the products for customers.
  • Sourcing high-quality raw materials from suppliers and providing suppliers with capital to produce more.
  • Using efficient processes and motivating staff to give their best.
  • Maintaining the highest standard of hygiene and complying with the standards issued by the Ghana Standards Board.

Required:
Assess the significance of the CSR stance taken by the Board.

Significance of Wakanda Ltd’s CSR Stance:

  1. Reputation Management:
    • The CSR initiatives taken by Wakanda Ltd, particularly paying the medical bills of hospitalized customers, aim to restore and protect the company’s reputation. By addressing the health impacts directly and showing a commitment to customer well-being, the company seeks to rebuild trust and loyalty among its customers.
  2. Product Quality and Safety Enhancement:
    • Sourcing high-quality raw materials and maintaining high standards of hygiene demonstrate Wakanda Ltd’s commitment to preventing future incidents. These actions address the root cause of the crisis and show that the company is serious about improving product safety and quality, which is crucial for long-term business sustainability.
  3. Supplier and Employee Engagement:
    • By providing capital to suppliers and focusing on motivating staff, Wakanda Ltd is strengthening its supply chain and workforce. This ensures that the suppliers can produce high-quality materials consistently and that employees are dedicated to upholding the company’s standards, leading to better overall performance and product reliability.
  4. Compliance with Regulatory Standards:
    • Adhering to the standards issued by the Ghana Standards Board not only helps in preventing legal issues but also enhances the credibility of Wakanda Ltd. Compliance ensures that the company meets all the required safety standards, which is essential for maintaining market access and avoiding further fines or penalties.
  5. Long-Term Strategic Value:
    • The CSR stance taken by Wakanda Ltd goes beyond immediate crisis management and has long-term strategic value. By improving relationships with key stakeholders—customers, suppliers, and employees—the company is laying the groundwork for sustained business success. This approach helps in mitigating future risks and positions the company as a responsible and ethical market leader.

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