UNIVERSITI TUNKU ABDUL RAHMAN ACADEMIC YEAR 2013/2014 SEPTEMBER EXAMINATION ‘THICS & CORPORAT FRIDAY, 20 SEPTEMBER 2013 ‘TME: 2.30PM — 5.30PM (3 HOURS) BACHELOR OF ACCOUNTING (HONS) Instruction to Candidates: This examination paper is divided into TWO (2) sections. Section A: [Total: 40 marks} This section consists of ONE (1) Compulsory question. You are required to answer ALL the questions Section B: [Total: 60 marks] ‘This section consists of THREE (3) questions, ‘You are required to answer only TWO (2) questions. Where the candidate answers more than the required number of questions, only the first two (2) answers written under Section B in the answer booklet will be marked. The rest of the answers/part answers shall be struck out and ignored. is question paper consists of 4 questions on 6 printed pages2 UKML3043 BUSINESS ETHICS & CORPORATE GOVERNANC Section A: Case Study {Total 40 marks} Answer ALL questions (compulsory). a. Dhaka factory collapse: who will prevent another tragedy? The Rana Plaza factory disaster in Dhaka, Bangladesh was entirely preventable; management forced hundreds of workers to re-enter the building in order to ensure that production targets ‘were met in a timely fashion, There is no time to waste in shipping goods to the fashion giants who dominate orders from Bangladesh's clothing factories. A safety-related production delay of weeks could well make all of their clothing in the pipeline arrive in stores worthless because it would be late for the season, Fast fashion is an unforgiving industry. Lack of consumer concern In the shops that sell cheap clothing, no one has observed any drop in the brisk sales of €2.50 t-shirts, $19.99 jeans, or £5.90 king-sized duvets. Shares in Associated British Food, Primark’s parent company, were up 6.5% in the week after the collapse of the building which housed its manufacturing contractor. Between 22 April and 8 May, in spite of extensive Canadian coverage of the links between Loblaw's "Joe Fresh" brand and the collapsed factory, the company's stock was up nearly 15%, At the end of the first quarter of 2013, its quarterly profit was up 40%. It seems neither consumers nor investors have been willing to punish the companies whose clothing was produced in the Rana Plaza factories. Young consumers making low wages haven't shown any inclination to pay more for ethical pants. Investors haven't abandoned the revenue streams these young people generate. In short, neither the fashion nor the equity markets appear to be capable of solving Bangladesh's problems. Nearly everyone else is ready to take on the issue, however. The streets of Dhaka were filled with angry marchers seeking justice. The pope compared the working conditions in Bangladeshi factories to slave labour and warned against "only looking to make a profit." Myriad NGOs and unions have offered their solutions. The EU has begun to reconsider the tariff status of imports from Bangladesh Is there a regulatory solution? ‘The government of Bangladesh has not rushed to remediate the regulatory problems that underlie recent industrial catastrophes. Finance minister Abul Maal Abdul Muhith has said that the incident and the resultant risk to the garment industry is not serious. Christian Amanpour's interview with prime minister Sheikh Hasina reveals how little likelihood there is of legislative and regulatory change in Bangladesh, Governments of poor nations have little incentive to bring their health and safety standards to levels above competitor nations. The economy of Bangladesh depends on the co-operation of three actors: 100,000 clothing factories; the investors who have built them; and the foreign ‘This question paper consists of 4 questions on 6 printed pages.A UKML3043 BUSIN! STHICS & CORPORATE GOVERNANCE Section A (continued) retailers who outsource production to them, Not only is the economy locked into a single industry, 10% of the members of parliament own garment businesses. ‘The government of Bangladesh is now trying to determine how to reopen factories in and around Dhaka affected by labour unrest and by unsafe conditions. Without the capacity to reassure clothing retailers that Bangladesh provides a reliable labour market and adequate manufacturing infrastructure, in due course the contracts will go elsewhere. The government's concern for restoring retailer confidence appears to be trumping its desire to improve labour rights. In a regime characterised by such low levels of regulation, recently termed the "Wild East”, humerous companies have chosen to define a consensus level of socially responsible behaviour. The Ethical Trading Initiative, a consortium of labour, NGO and retailers, has produced a base code of conduct designed to reduce the most egregious abuses while permitting lucrative contracts to continue to be signed. Many clothing retailers are members. Primark features its membership on its corporate information pages. The ETI code has been a step in the right direction, but clearly has not been able to prevent an escalating series of industrial deaths in Bangladesh, Less than a week after the collapse, Loblaw and Primark stepped forward to say that they planned to compensate the survivors of the dead factory workers, a commitment no other retailers have made at the time of writ Galen G Weston, the executive chairman of Loblaw, told the press: "I am shaken by the events in Bangladesh last week. And I am deeply troubled ... lam troubled by the deafening silence from other apparel retailers on this issue. As many as 30 international apparel brands were having goods manufactured in this building — yet only two have come forward and publicly commented.” (Source: Alison Kemper and Roger Martin, Friday 10 May 2013, obtained from hitp://www.guardian.co.uk/sustainable-business/dhaka-factory-collapse-prevent-another- tragedy ) In relation to the above article, answer the following questions: (a) State FIVE (5) stakeholders and explain how they are affected in the Dhaka factory disaster (‘disaster’) (5 marks) (b) The companies which ordered clothes (‘retailers’) to be made in the Rana Plaza factory are blamed partly for causing the disaster. Discuss the corporate responsibilities of such companies in relation to their suppliers and their workers by relying on the Pyramid of Corporate Social Responsibility introduced by Carroll, You can use examples found from the above article. (10 marks)4 INESS ETHICS & CORPORATE GOVERNANCE MIL3043 B Section A, Question 1 (continued) (©) Explain the Five (5) stages of corporate social response which can be undertaken by the retailers which face media criticism in relation to the disaster. ( marks) (@)__ Explain FIVE (5) ways in which such disaster can be prevented in the future. (10 marks) (©) Discuss FIVE (5) advantages of corporate social responsibilities with reference to this disaster. (10 marks) [Total 40 marks} This question paper consists of 4 questions on 6 printed pages.UKML3043 BUS! Section B 5 ETHICS & CORPORATE GOVERNANCE [Total: 60 marks] Answer only TWO (2) questions. QI. Answer the following separate and independent questions: @ (b) ABC Bhd (‘the company”) has been listed on the Main Market since 2000. It is one of the longest established biscuit manufacturing factories in Malaysia. It has successfully marketed its products locally and internationally, particularly to other Asian countries, The following are the details in relation to its current Board of Directors: There are six directors in the company, Anna, Kong, Muthu, Ahmad, Gilbert and Lim, Anna holds the position of Chief Executive Officer (CEO) cum Company Chairperson for the last 10 years. In fact, the company was set up by Anna and her late husband. Kong is the Chief Financial Officer. There are two independent directors, Gilbert and Lim. Gilbert is a practising accountant and he was appointed to the board last year. Lim is the CEO of a business consultancy company. Lim has been an independent director of the company for the past eight years. He also holds directorship in another four listed companies. The remaining directors are non-executive directors The company has an Audit Committee chaired by Gilbert. Ahmad and Lim are the other members to the audit committee. There is no Nominating Committee and Remuneration Committee. The reason for the omission of these committees is due to the fact that the current board is able to perform the roles played by these two committees adequately. In relation to the above information, discuss whether the company has fulfilled the Bursa Malaysia Listing Requirements of the Main Market and the Malaysian Corporate Governance Code 2012. (20 marks) There are two types of board structure i.e. the unitary and the two tier board structure. State the type of board structure that you prefer and the reasons behind your choice. (10 marks) [Total 30 marks] Q2. Answer the following separate and independent questions: @ Explain the protection provided to corporate whistleblowers by the Whistleblower Protection Act 2010 (‘Act’). Provide ONE (1) problem in relation to this Act and ONE (1) recommendation to solve this problem identified. (15 marks) ‘This question paper consists of 4 questions on 6 printed pages.6 UKML3043 BUSINESS ETHICS & CORPORATE GOVERNANCE ection B Q2. (Continued) (b) “There are a number of legal rules and best practices to counter against the threats which could undermine the independence of external auditors.” Discuss. (15 marks) [Total 30 marks} Q3—_ Answer the following separate and independent questions: (a) Explain the meaning of institutional shareholders and give TWO (2) examples of these shareholders in Malaysia, (4 marks) (b) Explain the recent best practices and rules introduced or proposed by the regulatory bodies to improve shareholder rights in Malaysia. (10 marks) (©) Discuss the impediments against activism among institutional shareholders in ensuring listed companies adopt the best practices of corporate governance. (16 marks) [Total: 30 marks] in paper consists of 4 questions on 6 printed pages.