Does the company appear to have an effective corporate governance structure in place? Please explain the shortcomings? B. In light of the available information, what specific recommendations can you make to the company?
Mona and Hamad work for the Sports Products Company, a major manufacturer of boat equipment and accessories. Mona works as a clerk in the accounts department, and Hamad works as a packing agent in the shipping department. And one day during lunch they talked about the company. Hamad complained that in his business he is always careful not to waste packaging and always does his job efficiently and cost-effectively. Despite the efforts of he and his division colleagues, the company's stock price has fallen to about $2 per share over the past nine months. Mona indicated that she shares Hamad's frustration, especially since the company's profits are increasing. Neither of them knew why the company's stock price had fallen despite the increase in profits. Mona indicated that she had seen documents describing the company's profit-sharing plan, according to which all board members are partially compensated based on the company's profits. She also indicated that profits may be an important factor for management; It directly affects the salaries of its members. Sheikh Hamad said, "This saying is meaningless, because the shareholders own the company. Shouldn't the management do what is best for the shareholders? Something is wrong!" ona replied, “Well, maybe that explains why the company itself doesn't care about the stock price. The only dividends that shareholders get are cash dividends, and the company hasn't paid a dividend over its 20-year history. So, we as shareholders don't benefit directly from the dividend, The only way to benefit is if the stock price goes up.” Hamad shook his head and said, “This may explain why the company is being sued by local environmental officials for dumping pollutants into the nearby river. Why is the money spent to reduce pollution? It increases costs and reduces profits and thus reduces management returns!
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D. Does the company appear to have an effective corporate governance structure in place? Please explain the shortcomings?
B. In light of the available information, what specific recommendations can you make to the company?
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