Manfold Toy Essay

Question 1 Do you see the alternative of Directors at Manfold Toys as entirely suitable to an honest standing? Why?Many relevant corporate governance issues sneak regarding the com scene of Manfold Toys hop on of directors. With respect to the main exercise of a board of directors, we pick out to reflect on whether the elected directors were the opera hat possible representatives of stockholders interests. Additionally, we should analyze to what extent were the elected directors eager to accomplish their responsibilities/duties. To generate the analysis, we should study the process of directors election to the Companys board. Taking into account that 68% of Manfold Toy s simulate belonged to Joseph Wan, founder and electric chair of the company, he held enough majority to decide on the board composition. The stay stake was insufficient to refuse Joseph choices. Thus, Joseph choices could non be refused by the early(a) sh atomic number 18holders, even if they believed ther e could be better representatives of their interests on the board.According to the lease Financial Analyst (CFA), a global association of investment professionals, room members owe a duty to make decisions based on what last is best for the long-term interests of sh arholders. In order to do this effectively, board members need a combination of three things freedom, experience and resources. Manfold Toys board was composed by three INEDs (Independent Non-Executive Directors). These directors should comply with the rules of independence towards the company, so that they argon able to effectively perform their duty ensure that the interest of the shareholders are preserved in executives acts. However, if they are dependent in any course to the Company, their decisions and acts will bind external undesirable influences. Fred Wong Sau-lim, one of the Companys Independent Non-Executive Directors since 2001, and Chairman of the examine Committee, was the Director of On Yee Exports since 2000. On Yee Exports had undivided rights to distribute Manfold Toys products in Australia & New Zealand, which accounted for 17,8% of Manfold Toys sales.According to the independence rules for INEDs (HKEx), Fred could not be a Manfold Toys director due to its business relationship with the company. The Hong Kong Exchanges and Clearing (HKEx) state that independence is key to ensure a director clears fairly and with integrity. Due to its remainderrelationship with Joseph, Fred was aware of major operational actions that two senior executives were told to take in order to improve the financial statements for the audit. As Chairman of the Audit committee, Fred did not accomplish his role of monitoring the internal governance of the company. Fred should have ensured that the information present on the companys accounts was accurate and authoritative (HKEx), making him fail its INED responsibility of advocating shareholders interest (Rosenstein and Wyatt, 1990 Byrd and Hickman , 1992).Fred also violated the primaeval principles of the Code of Ethics for Professional Accountants. He was not honest, has he did not divulge the relevant financial information of the Company. With its position in On Yee Exports, he carried conflict of interest, which disallows him to be objective in its functions. Moreover, he disclosed confidential informationacquired as a result of his professional position in On Yee Exports to Manfold Toys Chairman, violating the principle of confidentiality.Fred was uncorrectly elected, not in the eyes of Joseph, to both of his positions on the board. He was not independent to the company, and thusly should have never become part of the Audit Committee.There are other directors violating the independence rules and compromising the effective accomplishment of its duties. For instance, Maggie Mok Su-yee, the Chairman of man-sized Capital, was performing a millionaire consulting work on Manfold Toy for Mitchell & Meyer, the possible upcom ing buyer of the first.Furthermore, Sherona Leung Ka-yi, an Independent Non-Executive Director since 2003, Chairman of the Remuneration Committee and particle of the Audit Committee was the President of generosity organization We Care. Joseph was the biggest contributor to its charity organization. This business relationship between Sherona and Joseph violates the independence guidelines as well. Sherona would have incentives to behave in a way that would please Joseph, so that he continues to food her charity organization.To conclude Non-Executive Directors should be independent to pursue their functions and responsibilities correctly. However, they entailed familiar or businessrelations with Manfold Toy and rules for independence were not respected. Due to the impingement of good standings in the selection of INEDs , they are not complying with its main duty, the disaffirmation of shareholders interests. Thus, the selection of Directors at Manfold Toys is not suitable to the ethical standings.