Corporate Governance Issues and Responsibility
On the basis of the principles and rules outlined by the New Zealand Security Commission and code of ethics adopted by NZFSU and PGGW Wrightson in their company’s prospectus, they have failed to follow good corporate governance in their companies. In this case study, there were many corporate governance issues and some of them are highlighted below
Board Composition and review: There was imbalance of independent and non independent directors in the board. Craig Norgate, who was the Chairman of PGG Wrightson failed to promote cooperation and efficiency amongst the board members, and was unsuccessful in trying to maintaining good ...view middle of the document...
In the case of NSFSU, the company did not mention the complete biography of Paul Grogan who had an investment and farming background, in contrary to the other two incompetent nominated directors at NZSFU, where their profile was highlighted to attract the shareholders interest.
Lack of Transparency in financial reporting: There was lack of transparency and clarity in the financial reporting of the PGGW Wrightson and NZFSU. They had misled the shareholders and stakeholders about the actual standing of the company in terms of financial holding and stability. PGG Wrightson had falsely reported its property values worth $165.4 millions as on June 08, compare with the prospectus forecast of $48.3 millions. Also they did not go in line with the strategy of the company, where they mentioned slow and steady acquisition, but later moved to accelerated purchase of assets which is a breach of corporate governance code for the company. Similarly, NZFSU who had ran into losses manipulated the accounts and showed revenues, and diverted the shareholders attention in paying the huge management fees to PGG Wrightson and land acquisition of Uruguayan farms.
Lack of planning: There was lack of monitoring of the performance and evaluation of the process for the policies and principles
Risk Management and ethics: NZFSU and PGGW Wrightson are running in huge amount of loses. The Chairman of both the companies should adopt proper risk management to avoid bankruptcy and proper code of ethics should be followed to report the actual situation of the company and not misleading the shareholders of the company.
Corporate Governance issues from Investors point of view
The board did not provide a sound internal control system. The directors have failed to fulfill the fiduciary duties towards the investors of the company. Good governance requires the structure of an organization that should promote the independence of the auditors from the board and executive. The Chairman of the board of NZFSU and PGG Wrightson, interfered in the audit process and manipulated statement of accounts, and over applied the value of assets, showed less income and did not disclose correct information to the investors. The composition of the board is such that, it does not have skilled, knowledge and experience to address their shareholders or investors. The board is equally responsible for the quality and integrity of the financial reports. Describing governance structure and behavior of any organization will enable the investors and stakeholders, to make right assessment of the governance of the organization. Keith and Norgata did not disclose the full profile of suitable directors to shareholders, in the elections, which did not enable them to choose the right person for the post. The other constraints are the mindset of shareholders of public limited company which is very passive, and they are afraid to select a director from outside in addition to the limitation that’s, New...