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WORD LIMIT: 2500 words (excl. executive summary, TOC & references) Case: ABC International Ltd. ABC International Ltd. was incorporated in 1968 as a manufacturer of electrical components and...

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WORD LIMIT: 2500 words (excl. executive summary, TOC & references)

Case: ABC International Ltd.

ABC International Ltd. was incorporated in 1968 as a manufacturer of electrical components and

telephone equipment in Hong Kong. In 1979 ABC entered into a joint venture with an Australian group

in the telecommunications field and opened a factory in Shenzhen to manufacture components.

Subsequently rights were acquired to manufacture and sell a range of telecommunications equipment in

Hong Kong and China. This proved to be a very successful arrangement and ABC grew substantially in

turnover, profits and employees. The company was listed on the Hong Kong stock market in 1997.

Business performance and prospects

The company manufactures and markets a range of equipment for large telecommunication systems, a

proprietary telecommunication system for smaller organisations, and a range of telecommunication

devices for the office and home. These markets include government, military, and industrial customers,

as well as retail outlets. Growth is expected in each of these markets in Hong Kong and China. A mail

order facility through the internet is being designed for direct sales. The business also has the potential

to expand geographical throughout Asia Pacific, but a covenant in their joint venture agreement with

their Australian partner prevents growth elsewhere in the world.

New products developments come from the Australian joint venture partner, who has also licensed

various products, devices, and software from the United States. ABC is currently considering a strategy

to develop a range of its own products and systems.

Competition for the existing range of products is high, except in the military field where there are

various restrictions. Moreover, there are a number of new technologies, including wireless

communication, computer based systems, and telecommunication systems convergence, that could

have strategic implications for ABC. New entrants into the market could include computer

manufacturers, telephone companies, and media network providers.

ABC imports some specialised electronic components from Australia, Japan, and the United States,

manufactures other equipment and assembles the products and systems in its Shenzhen factory.

In his annual report to shareholders, the chairman said that:

“We expect the PRC to maintain its prudent approach to stable financial and monetary policies so as

to strengthen and improve the effectiveness of its austerity measures. Your company will benefit

from the growth of infra-structural investment at government and industry level and from the

increasing spending power of consumers” A recent report in the financial press said that:

“The shares of ABC International raced up yesterday with a bullish report from Salmon, Smith

Barney. The company’s recent announcement, of its latest range of telecommunication products,

supports this confidence. Growing optimism on consumer spending and booming sales in electronic

products in both the office and home markets also fuelled the enthusiasm. The company’s earning

prospects seem bright and it will also benefit from lower costs on imported products due to the weak

Japanese yen and the economic slowdown in the US.” Financial position

In the latest published accounts the chairman of the board reported that turnover in 2004 had exceeded

expectations at $237,632,000, but that profits were lower than analysts’ expectations, at $6,693,000,

due to one off write-offs of obsolete stocks. The company did not pay a dividend this year, ploughing

back profits into product development and expanding production capacity.

Employees ABC International reported 1,280 employees at end 2004: 370 in Hong Kong, 910 in Shenzhen. Labour

productivity had steadily improved in recent years, partly due to investment in capitally intensive

manufacturing and assembly methods.

Shareholdings

According to a Hong Kong financial information company the balance of shareholdings in ABC at present

is: Goldbarb (a company registered in Bermuda) 39.8%

Transelec (a company incorporated in Australia) 15.6%

Public shareholdings

Institutional investor XXXXXXXXXX%

Other institutional investors XXXXXXXXXX%

Other investors 25.6% 44.6%

100%

The investment report states that Goldbarb is the holding company for the founding family’s investment

in ABC and that Transelec is the Australian joint venture partner. Transelec is the wholly owned

subsidiary of a company incorporated in Delaware in the United States and listed on the New York Stock

Exchange.

Share price history

The floatation in 1997 the ABC share price had risen from 19.80p per share to 63.5p, with an 11%

growth over the year 2004.

Board of directors

The latest annual report states that the board had eight members:

Executive directors

Alan K M. Yau President

Peter Y. M. Chow Vice President

Charles K. K. Lau Director Operations

Johnny Y. K. Ho Director Finance

Dr. Andy H. S. Woo Director Development

Rebecca H. S. Sun Director Personnel

Independent non-executive directors

Abraham P. K. Lau

Frederick W. L. Ho

The company secretary is Rebecca S. S. Cheung

Corporate governance report / annual report includes the statement that:

“In the opinion of the board, the company has complied with the code of best practices as set out in

Appendix 14 to the Listing Rules throughout the accounting year covered by this report. An audit

committee was established with terms of reference which deal clearly with its authority and duties in

Paragraph 14 of Appendix 14 of the Listing Rules, including a review of the company’s financial

reporting processes and internal audit systems and the review of audited financial statements. Two

independent non-executive directors have been appointed to the audit committee and a third

member is being actively sought.”

The company’s auditors are Deloitte Touche Tohmatsu, Hong Kong.

Your task

Mr. Y. K. Chan has sought your advice. He is a qualified accountant, employed as the Finance Director of

Dim Sum Ltd; a Hong Kong listed company in the food industry.

Mr. Y. K. Chan has been asked by Mr Alan K.M.Yau, the Chairman of ABC International (another Hong

Kong listed company), whether he would consider joining the board of ABC as an independent non-

executive director. The Chairman also suggested that Mr. Chan should join the company’s audit

committee.

Mr. Chan tells you that he does not know the Chairman of ABC very well. He was introduced to him by

Mr Johnny Y. K. Ho, the ABC Finance Director, who serves with Mr. Chan on a committee of the Hong

Kong Institute of Certified Public Accountants. Mr. Chan subsequently had dinner with Mr Yau

(chairman) at the China Club, where the growth of ABC, its current activities, and its prospects for the

future were described.

Mr. Chan is an executive director of Dim Sum, but has no other experience of serving on boards of

directors. He holds no shares in ABC, but would be prepared to invest up to HK$100,000. He believes

that his wife’s father also has some ABC shares. As far as he knows Dim Sum does not have business

dealings with ABC, although he thinks the Dim Sum internal communications system uses ABC

equipment.

Questions

Mr. Y. K. Chan has asked for your professional advice. Please write a report to him discussing the

matters he should consider, in particular related to:

1. Duties, rights and competences of a director (10 marks)

2. Committee work (10 marks)

3. Board structure and styles (10 marks)

4. Transparency and accountability of the company (10 marks)

Guidelines

Your paper is to be written in report format (for case studies, i.e. it should consist of an executive

summary, table of contents, introduction/case background, body of analysis, conclusion and the

reference list - see the quick guide ‘Writing reports’ in the ‘Assessment Tasks and Submission’

section), observing Harvard referencing style and a clear and logical structure, along with the ability

to express yourself clearly and succinctly.

Your arguments have to be based on concepts and tools discussed in the topics of this unit and must

be supported through direct reference to (academic) literature (recent peer-reviewed journals

preferred). The report will be assessed based on your ability to develop arguments supported by

relevant and valid sources (please also refer to marking criteria). You are expected to use at least 5

academic sources (excluding the textbook) to support your viewpoints. All sources must be

properly referenced.

In addition to the academic references, and in case you want or need additional information about

the case, feel free to engage with non-academic literature, i.e. in order to gain a broader and more

detailed understanding of the case study environment, you can mention and use information and

facts from valid newspapers, magazines and/or official reports. Again, all sources must be properly

referenced.

Assignments strictly have to be within the word limit (- / + 10 %)

Where cases of plagiarism are found, students will be sanctioned in accordance with university policy


Answered Same Day May 26, 2021

Solution

Akash answered on May 30 2021
134 Votes
MANAGEMENT
CASE: ABC INTERNATIONAL LTD
Executive Summary
Management across the globe play an integral role in the growth of the business. The case of ABC International Limited has been discussed in detail and the financial performance of the company has been analysed. The rights and duties of a director have been
ief discussed along with the competencies of a director. The work of different committee has been elaborated in detail along with the board structure and its style. Relevant discussion about the transparency and accountability of the company has been done to enable the readers have an in-depth knowledge about the topic.
Table of Contents
Executive Summary    2
Introduction    4
Company Profile    4
Financial Performance of the Company    4
1. Duties, Rights and Competences of a Director    5
Duties of the Director    5
Rights of the Director    6
Competences of the Director    6
2. Committee Work    7
3. Board Structure and Styles    8
Board Structure and Styles    8
Importance of Independent Director    9
4. Transparency and Accountability of the Company    9
Transparency and Accountability    9
Recommendations    10
Conclusion    10
References    11
Introduction
A director of a company is a person who manages all the day-to-day transactions and operations of the company. A director takes part in decision making of the company for the benefit of its employees, shareholders and its members. A director must act in the best interest of the company and must involve in all the operations of the company honestly. A person must be professionally qualified to become a director. Not every person can become a director of the Company. A person who is not mentally capable to take decisions in the company is further disqualified to become a director in any company. The director must not involve in fraud and in any criminal activities. A Director of the company must not give any undue advantage to any of the outsiders.
In the instant case, the director of Dim Sum Ltd, Mr. Y. K. Chan has sought our advice that whether he should accept the offer of becoming an Independent director in ABC international Ltd or not considering the fact that he has no understanding of the business of ABC international and has never met the directors of the company. Hence, an in depth analysis of the qualities, roles, rights and other characters of the directors have been discussed so as to guide Mr. Y. K. Chan that he should accept the offer of the ABC International Ltd and become the independent director in the company or not.
Company Profile
For the purpose of this Assignment, ABC International Ltd, a Hong Kong based Company was formed in the year 1968. Before proceeding further, it is important to have a
ief idea about the profile of the company. The Company ABC International is engaged in the business of manufacturing the telephonic equipment and electrical apparatus. In 1979, ABC International Ltd. joined hands with an Australian Group of companies for selling a wide range of equipment and electrical components in China and Hong Kong.
Financial Performance of the Company
The Company has noticed that the share price of the company has risen with 11% of the growth from 19.80p per share to 63.50p over the year 2004. There was a drastic increase in the labour productivity of the company. Labour Productivity has been improved firmly over the years due to the increase in the worker productivity. In spite of an increase in the share price of the company and labour productivity, the profits of the company in recent years were considerably low. There was decline in the profit of the company at $ 6,693,000. As per the directors report, this is mainly due to written-off of inventory as the same has become obsolete and expired. Moreover, according to the board, the turnover of the company has risen over the years.
1. Duties, Rights and Competences of a Directo
Duties of the Directo
According to Adams (2017), the Company’s Director is appointed by the Board to perform all the functions and duties in accordance with the provisions of the Act. The Director must be professionally qualified having expertise and special knowledge about the corporate governance, accounting, finance and law. The directors all together are collectively called Board of Directors. The qualities of the directors have been mentioned below:
· The director has to act in the best interest of the company.
· The director has to be honest and competent.
· Director needs to comply with all the policies of the company.
· It is its duty to control any conflicts within the organisation.
· It is the responsibility of the director to see whether all the documents have been filed with the Registrar.
· Director should not make any unofficial use of the company’s property.
· It is the duty of the directors to avoid the benefit given by third parties.
· Director should implement policies and procedures in the Organisation.
· The Director must assure that no fraud occurs in the company.
· It is the duty of the Director to call for the meetings of the shareholders.
· He must assure that the Assets of the company are more than the liabilities.
· In addition, Director should not make any personal or secret information from the Business.
· Director to act according to his powers as specified by the Act
· Director should ensure company’s success over the period.
· Director provides unbiased opinion.
· It is the duty of the director to not to indulge in related party transactions, which could hamper the goodwill and reputation of the company.
From the above it may be seen that it is the duty of the director to work for the betterment of the...
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