DPA 50173 - PROFESSIONAL ETHIC

CASE STUDY

SUBMISSION DATE : 26 DECEMBER 2021

ANSWER

a. Poor corporate governance

Corporate governance meaning is about a separation of the power and

responsibilities of ownership, governance and management in companies.
Ownership belong to shareholders. Governance is the responsibility of the board of
directors & management is delegated to the CEO and a team of officers to guarantee
fairness, accountability and transparency. Perhaps one of the most important things
to ensure the viability of a business it should have a good corporate governance.
Benefit of having a good corporate governance;
 Ensures that the management of a company considers the best interests of
everyone
 Helps companies deliver long-term corporate success and economic growth
 Maintains the confidence of investors and as consequence companies raise
capital efficiently and effectively
 Helps to create a strong brand reputation
 Most importantly, it makes companies be more resilient.

As the situation given, Serra Pandan Sdn. Bhd. is facing a poor corporate
governance. Having a family business is not an easy things. It requires good faith,
trust and good business sense. It also can be a pitfall to the failure of a business if it
does not establish healthy relationship boundaries between work and family. Impact
of having a poor corporate governance, maybe only leads to a company failing to
achieve its stated goals but the worst thing is it may lead to the collapse of the
company. Furthermore, having a poor corporate governance can pose conflict
towards shareholders. An example for ineffective corporate governance stem from;
 Non-independent and under-qualified board members
 Poor ethical leadership
 Lack of integrity
 Management who exhibit ineptitude
 Inconsistent distribution of duties and responsibilities
 Fraud

Poor corporate governance could cripple even the best businesses. A

systemic failure of corporate governance means the failure of the whole set of
regulatory, market, stakeholder and internal governance.
In conclusion, to ensure the business continuity, Serra Pandan Sdn Bhd need
to remain disciplined, transparent, independent, accountable for their actions,
responsible and be fair. They should formalize leadership roles. One way to avoid
this poor governance is by putting everything on paper. Make the leadership
structure formal so that everyone knows exactly whose instructions to follow on a
daily basis. Consider bringing in professional management from outside of the family
while instituting changes in leadership. As well, Serra Pandan Sdn. Bhd. should
avoid nepotism at all costs. Family businesses can sometimes also be nepotistic
because we placing loved ones ahead of better performers.Hence they should avoid
it. In that way, the business will be protected.
Without an effective governance, companies will no doubt feel the
consequences either financially, legally or incur reputation harm. Good corporate
governance plays a key role in enhancing the integrity and efficiency of companies,
as well as the financial markets in which the company operates. Poor corporate
governance weakens a company's potential and can open the way for financial
difficulties and fraud.

b. Whistle blower
c. Company remuneration

d. Conflict of interest

Conflict of interest is a conflict occurs when an entity or individual becomes

unreliable because of a clash between personal Interests and professional duties or
responsible.
It will happen when interest of manager interfere with professional judgement
of manager. In the other side, unethical conflict of interest occurs when personal
interest hinder that judgement.

Conflict of interest has two types:

 Primary interest- principle goals of the professional activities.
Example: protection of clients, health of patients.
 Secondary interest- its include motivation such as desire of professional
advancement.

From the situation given there have a conflict of interest. First of all is
nepotism. It means giving favors to relatives and close friends. In this case in Serra
Pandan Sdn Bhd, one of the family member has moral ethic related to the business
family. Their behavior ethics has affected the project. Business family is very
challenging for board of directors outside of family members. They over spend
business allowance for personal use.
Secondly, self dealing. Self dealing is when someone acts in their own
interest rather than the interest of the organization. For example, shareholders only
interested on company profit because it may have affected their wealth via dividend.

Main threats to ethical behavior:

Familiarity threat:-
That threat that due to a long or close relationship with client or employee, a
professional accountant will be too sympathetic to their interests or too accepting of
their work.