CASE 1: DIGEST

FACTS:

Ms. Sonia tan, the fund manager of Sentosa House which is an investor or a part-owner for about 13% of the Eastern
products is worrying about the way the new chairman, Mr. Thomas Hoo is managing the company. For the past two
years, there has been frequent change in the number of the board due to lack of confidence in the management
which is caused by the chairperson who is characterized as an autocratic aggressive risk-taker. He had removed the
risk management committee because he deemed it unnecessary and there is insufficient number of non-executive
directors. Upon calling the attention of Mr. Hoo, the chair proceeded to boasting that he outperformed the sector in
terms of earnings per share and that should be enough reason to trust him and his decisions.

Possible Questions to be asked:

What do fund managers do?

Answer:

Why is there a need for Sonia to have trust with Eastern Product’s Chairman?

Answer: Sentosa house owns about 13% of the Eastern Products stocks and if this kind of person as the chair, aggressive
and autocratic risk taker, perhaps this may affect the company’s performance and profitability for the long run.

What is “principles-based jurisdiction”?

What is the function of the risk management committee?

What would be the effect of the insufficient number of NEDs?

How can NEDs fill in the issues about knowledge gap and conflict of interest?

What is EPS?

Is EPS enough indicator of a successful management of a company?

CASE 2: DIGEST

FACTS:

The recent international meeting of business leaders had gave birth to contradicting ideas regarding universalized
standards for corporate governance in terms of the separation of the chairman and the chief executive officer. One
businessmen namely, Seamus O’brien, argued that there could be some family-related ties that allowed this two
different positions as one person and that the OECD and ICGN are silly for attempting to have harmony. On the other
hand, Alliya Yongvanich, sided with the OECD and ICGN because the end goal of the separation is to promote
accountability to shareholders. Lastly, Vicent Viola suggested that each states shall have the liiberaality tto set up their
own corporate governance provisions.

Possible Questions to be asked:

Which one for you is the best idea/stand regarding this matter? Why?

Why is there a need to separate the role of the chairman and the CEO to different individuals?

ANG ISUWAT SA YELLOW PAPER

CASE 1: ANSWER
 A. Due to the separation of powers, this phenomenon had caused the birth of agency costs wherein these
expenses incurred are with the end goal of uniting or joining the typically different interests of the
shareholders and the management team. Agency costs are mostly divided into three aspects namely the
Monitoring Costs, which are incurred in order to attain objectivity in a punitive manner, Bonding Cossts,
which are somehow an antonym of monitoring costs due to its “reward-system” approach and lastly, the
effect of the maanagement’s wrong decisions or the Residual Losses. With this said, there are series of
possible and common conflicts that could raise these kind of expenses and in the case of Eastern Products,
it would be the costs of devising and enforcing director’s contracts since there has not been stability of
tenure in the past two years due to the new Chair, Mr. Thomas Hoo. The probability of increasing the
residual losses is of high occurrence as well because of the aggressive attitude of the chair upon facing risks
as well as the possible payments for the incompliance of the codes of corporate governance in the issue
about the insufficient number of non-executive directors.

B. Non-executive directors are those individuals who do not have any executive management responsibilities in
a certain institution or company. They are commonly the executives of other companies from different fields
may it be medicine, construction, finance, marketing, etc. In short, they are not employees of the company
which is a positive thing because this promotes objectivity upon facing dilemmas regarding the management
of the company. The presence of a risk management committee composed of Non-executive directors
would have gained the company various ideas as to how to solve each management problems from
different perspectives because tons of heads is better than one. Innovation sprung mostly from group brain
storming and this activity would be better if each individual composing the group would have his own field
of specialization in order to have diversity in ideas as to how to solve dilemmas which could further result to
the increase of Sonia’s confidence to Eastern Product.

CASE 2: ANSWER