Corporate Governance Case Studies Volume Three
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CORPORATE GOVERNANCE CASE STUDIES VOLUME THREE Edited by Mak Yuen Teen Corporate Governance Case Studies Volume three Mak Yuen Teen FCPA (Aust.) Editor First published October 2014 Copyright ©2014 Mak Yuen Teen and CPA Australia. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, except for inclusion of brief quotations in a review. The views expressed in this publication are those of the authors and do not necessarily represent the views of, and should not be attributed to, CPA Australia Ltd. Please contact CPA Australia or Professor Mak Yuen Teen for permission of use of any case studies in this publication. Corporate Governance Case Studies Volume Three Editor : Mak Yuen Teen FCPA (Aust.) Editor’s email : [email protected] Published by : CPA Australia Ltd 1 Raffles Place #31-01 One Raffles Place Singapore 048616 Website : cpaaustralia.com.au Email : [email protected] ISBN : 978-981-09-1544-5 II Contents Contents III Foreword V Preface VII Singapore Cases Airocean in Choppy Waters ...............................................................................1 A Brewing Takeover Battle for F&N ..................................................................10 Hong Fok Corporation: The Badger and The Bear............................................20 Olam in Muddy Waters ....................................................................................29 Sakae: Who Moved My Sushi? ........................................................................43 Asia Pacific Cases Bumi PLC: A Clash of Dynasties ......................................................................54 Pacific Brands: A Wrong Brand of Remuneration .............................................69 SK Group: Too Big to Jail? ..............................................................................82 Sun Hung Kai: Brothers (Up) in Arms ...............................................................97 III Global Cases BP and Russian Roulette ...............................................................................109 Cadbury: Opening Pandora’s Chocolate Box .................................................122 Chesapeake Energy: All is Well? ....................................................................135 The (Un)Social Network: The Facebook IPO ...................................................148 Formula One: A Race To The Bottom? ...........................................................160 GlaxoSmithKline: The Etiquette of Bribery ......................................................170 Goldman Sachs: Hello Lloyd, Meet Blankfein .................................................180 HP: Paying The Price for Autonomy ...............................................................191 HSBC: The World’s Local (Laundry) Bank ......................................................211 JP Morgan and The London Whale ................................................................221 The Price of Friendship: The KPMG Insider Trading Scandal ...........................235 Manchester United: Red Devils or Daredevils? ...............................................247 Shell In Nigeria: “Safe Sex?” ..........................................................................258 UBS: All Bets Are On .....................................................................................270 Wynn Resort’s Boardroom Brawl: Cowboy Versus Samurai ............................280 IV Foreword Globalisation is increasingly putting the spotlight on the evolving governance issues faced by companies, resulting in even greater pressure on directors and management of such organisations. Companies need to uplift governance and transparency standards as a strategic priority to excel in the marketplace. High standards of corporate governance are also critical in helping Singapore build its reputation as a global financial centre. Over the last few years, Singapore companies have made positive strides in reinforcing the values of good corporate governance, risk management and transparency, which are at the core of financial infrastructure and foundation. While there is room for improvement, it is clear that well-governed entities create sustainable value for organisations and are trusted by investors big and small. Corporate governance is not a destination. It is a journey where all stakeholders – regulators, directors, management, investors, industry groups and professional bodies – have a part to play. The on-going challenge is for boards and management to continue to embrace the highest standards of governance to meet the increasing expectations of various stakeholders – not just in letter but also in spirit. As a professional accountancy body with 150,000 members worldwide, CPA Australia believes that good governance is the foundation on which companies build their reputation. It is therefore critical for directors and management to provide effective stewardship for their companies to excel. V This is why CPA Australia is proud to partner well-known governance expert, Associate Professor Mak Yuen Teen FCPA (Aust.), in publishing Volume 3 of this collection of teaching case studies. We are grateful to Associate Professor Mak for supervising and editing the case studies produced by students of the NUS Business School. Our aim is to encourage rich debate and discussion to raise standards of governance and transparency in Singapore and international markets. We hope that this bumper collection of case studies will further serve this purpose and enhance your professional development. Associate Professor Themin Suwardy FCPA (Aust.) Divisional President – Singapore CPA Australia October 2014 VI Preface I started collaborating with CPA Australia on this corporate governance case studies publication in 2012 to address the dearth of good corporate governance cases, especially Asian ones. The response to the first two volumes of this publication has been quite remarkable and beyond our expectations. We regularly receive requests for permission to use the cases, from universities, professional bodies and other organisations providing training and education in corporate governance, in countries such as Australia, United States, Hong Kong, Malaysia, Philippines, Sri Lanka and Oman. For example, the Australian Institute of Company Directors has used one of our cases for its professional development programmes for directors and is considering using other cases. Chinese University of Hong Kong uses some of the cases for their executive MBA programme. Fordham University Graduate School of Business Administration in New York is using about ten cases for their International EMBA programme. This third volume is a bumper issue, containing 24 cases from Singapore, Asia Pacific and around the world. This is apt in light of this year being CPA Australia’s 60th Anniversary in Singapore. The cases were written by senior BBA (Accountancy) students in my Corporate Governance and Ethics class. They have shared with me that they have benefited immensely from writing the cases. It gave them an opportunity to develop a deep understanding of corporate governance issues in real companies and situations, and to identify and analyse these issues. The quality of the cases continues to improve. The fact that the best cases are selected for publication, thereby allowing their work to be exposed to a wider audience, provides students with that extra motivation to produce good work. Although the students in my course produce excellent work, there is still a fairly long process before the cases are published. Each year, I select another group of students to help me with editing the cases. In addition to the usual tasks such as checking accuracy and referencing and correcting for spelling and grammar, they are also expected to update the cases for recent developments if necessary. For this volume, I also hired a very capable editorial assistant, Amanda Aw Yong Zhi Xin, who helped me ensure consistency in format and style across the cases, and further editing. She has been a wonderful help to me. After the student assistants VII and Amanda have done multiple rounds of editing, I read through and edit every single case personally, which then results in further amendments, before the cases go to CPA Australia. I would like to share a bit more about how I use the cases. The cases included in this collection are meant to be self-contained. In other words, the case content and discussion questions should be sufficient to generate rich discussions of issues relating to corporate governance and ethics without having to gather additional information about the companies and situations. They can be assigned to small groups of participants in executive and director education programmes for discussion and debate. For degree-type programmes where the cases are used for analysis and presentation by students and which may constitute part of their course assessment, students can be encouraged to go beyond the content in the cases, and additional discussion questions can be assigned. For example, it may be useful to assign additional questions getting students to discuss how the cases would apply to their own countries and the applicable rules and regulations. CPA Australia has been a wonderful partner in this initiative. They have been generous in sponsoring the hiring of the student assistants and publication, and