3.

NEDs

Explain the purpose of a two tier board and discuss the advantages and

disadvantages of this type of board.

The two tier board occurs when the non executive directors sit on the upper

board called the supervisory board, and the executive directors sit on the lower

board called the operating board. The upper board will then supervises the

operating boards performance and also sets the strategic direction for the

company.

Advantages Disadvantages

Segregation of duties Difficult to administer

Clear separation between those that The supervisory board may not have

manage the company and those that access to the information it needs on

own it or must control it for the a timely basis.Usually investors and

benefit of shareholders. shareholders are reluctant to discuss

Shareholder Involvement many issues in the presence of

Implicit shareholder involvement in employees representatives.

most cases since these structures are Stakeholder involvement

used in countries where insider Dilution of power through stakeholder

control is prevalent. involvement.

Stakeholder involvement Agency problems between the two

Wider stakeholder involvement boards.

implicit through the use of worker Agency problems between the two

representation. board may lead to a unsatisfy

Independency decision making .

Independence of thought, discussion Added bureaucracy and slower

and decision since board meetings decision making.

and operation are separate. The more the bureaucracy the higher

Management Controls the chance of the decision making

Direct power over management between the two boards, as the

through the right to appoint members decision have to be relied on both

of the management board directors.

Decision of the management Reliance

the supervisory board controls the Reliant upon an effective relationship

decision of the management and between chairman and CEO.

reviews the management by Executive commitee

inspecting the books, reviewing the executive directors do not take place

annual report, issuing and overseeing in committees. As the management

the work of an external audito, board is already separated there is no

analyzing the information provided by executive committee like there is in

the management board and reporting the one-tier structure

to the general meeting. In addition, Capabilities

the supervisory board also has An uninvolved supervisor might lack

standing for court actions against the the information or knowledge needed

management. to exert efficient supervision on

executive actions.
b) Explain the purpose of non executive directors and discuss the advantages

and disadvantages of Non executive directors in a listed company based on the

unitary board structure.

Non executive directors are the one who are not involved in day to day

operations. The purpose of the non executive directors are to scrutinize the

performance of the management in meeting agreed goals and objectives and

monitor the reporting of performance. The non executive director should also

making sure of the integrity of financial information and the financial controls

and systems of risk management are robust and defensible. The non executive

directors are also responsible in determining the appropriate levels of

remuneration of executive directors and have a prime role in appointing and

where necessary removing executive directors and in succession planning. Risk

role of the NEDs is to ensure the company has an adequate system of internal

controls and system of risk management in place.

Advantages
i) Monitoring:
They offer a clear monitoring
role, particularly on
remuneration committees to
dampen the excesses of
executives.The NED can serve
as intermediary for the other
directors when necessary.
ii) Expertise:
To expand this resource
available for management to
use. The NED can provide a
sounding board for the
chairman
iii) Perception:
Institutional and watchdog
perception is enhanced
because of their presence.The
NEDs can appraise the
chairmans performance and on
such occasion as are deemed
appropriate.
iv) Communication:
The implied improvement in
communication between
shareholders' interests and the
company.The shareholder can
contact with NGOs in case if
they have concerns which
contact to the normal channel
of chairman that has failed to
resolve.
v) Discipline:
NEDs may have a positive
influence on the success or
otherwise of takeovers.
Disadvantages
i) Unity:
Lack of trust and needless
input can affect board
operations.
ii) Quality:
There may be a poor gene pool
of NEDs willing to serve.
iii) Liability:
The poor remuneration with
the suggeste removal of stock
options from the package
coupled with the equal liability
in law for company operations
might lead some to question
whether they want the job or
not.
iv) Understanding:
NEDs does not understanding
the nature of the business of
the company.
v) Information:
NEDs does not have sufficient
information on the operation of
the company.
vi) Challenging:
The non executive directors
did not challenge the board
when they made the decision.
vii) Directorship:
NEDs should not taking on
more than one non executive
directorship in a FTSE 100
company nor the chairmanchip
of such a company.
4. Stakeholder
a) Identify five stakeholders group and discuss their financial and
other objectives.
A corporate stakeholder is an individual or group who can affect
or be affected by the actions of a business. The stakeholder
concept was first used in a 1963 internal memorandum at the
Stanford Research Institute. It defined stakeholders as "those
groups without whose support the organization would cease to
exist. This are the few stakeholder and their interest

i) Employees
Employees are categorized as the internal stakeholder. Employee
are one of the most important stakeholder, this is because
without the employee, the organization could not survived and
the employee satisfactory could lead to the image of an
organization. Employees are interested on earning money and
stay employed. Employees are also concern regarding their
demand on fixed and variable salary, where the higher the salary
the more motivated the employee will be.

ii) Government
The government are consider as the external stakeholder. The
government wants the business to pay taxes, employ more
people, follow laws, and truthfully report its financial conditions.
The government interst is also very important to the organization
as their actions can affected the organization as a whole, For
example if the government filed a legal suit to the organization,
this fine can cause a damaged in the organization.
iii) Local community
Local communities are the external stakeholders. The roles and
responsibilities of an organization toward local community may
provide staff or customers for the organisation or have an interest
in its buildings and any by-products of production. The impact of
good relationship between stakeholder and community is that it
can make it ease of doing business. Their concerns are building a
good reputation for organisation. Can feel aggrieved by, for
example, redundancies, building expansion and lack of care for
the local environment.

iv) Shareholders / investors

Shareholders are considered to be an internal stakeholder.Their
roles toeard the organization are to provide funds for the
organisations operations and/or growth.If the relationship
between the stakeholder and the shareholders are great, they
will continue to provide funds by investing in the company. Expect
an appropriate return for their investment; if not they may sell
their shares which could negatively affect an organisation.
Shareholders also have the right to vote at company meetings
and good communication will help ensure they vote in line with
the management.

v) Suppliers
Suppliers are considered to be the external stakeholder. Their
roles are to provide the resources needed during a campaign,
e.g. designers or printers. The suppliers will require clear
communication about exactly what you need and when, and how
and when the supplier will be paid. Building a good relationship
between your stakeholder, will make you receive good-quality
resources at reasonable prices. If the relationship between a
stakeholder and a supplier are bad they may withdraw supplies
and pass on negative information about an organisation that
deals with them in a reckless or unprofessional way.

b) Discuss the extent of which good corporate governance

procedures can help manage the problems arising from the
divergent of multiple stakeholder groups in private sector
companies in the UK.
Corporate governance is the system by which
organisations are directed and controlled. Where the power to
direct and control an organisation is given, then a duty of
accountability exists to those who have devolved that power. Part
of that duty of accountability is discharged by disclosure both of
performance in the normal financial statements but also of the
governance procedures themselves.
The UK Corporate Governance Code is an example of
a principles based code. The UK corporate givernance is based on
the principle of comply or explain provision. This meant that
companies must follow all of the general principle of corporate
governance, but if they cant comply with the principle than they
will have to explain on their non compliance, in their annual
report. Much of the corporate governance regulation in the UK
(including the Corporate Governance Code) has therefore focused
on the control of this group and disclosure of its activities. This is
to assist in controlling their ability to promote their own interests
and make more visible the incentives to promote the interest of
other stakeholder groups. A particular feature of the UK is that
Boards of Directors are unitary board, where the board is usually
called as the single tier board, where the executive directors and
the non executive directors sit on the single board.
Particular corporate governance features in the UKS Corporate
Governance Code include:
i) The independence of the board
Board independence is considered key to the effectiveness of
board monitoring because of their dependence on the
organization. Independent directors are thought to be most
affective at monitoring because of their dependence on the
orgsnization. With the independence of the board, there will be
no bias and silent reward given to the board. The board will
make decision with a robust and truthful decision making. The
control of the management will become more better as the
board given appropriate judgement toward the management
decision or conflict. The board will also take account the
stakeholders interest on the decision made by the
management.

ii) adequate quality and quantity of independent non-

executive directors to act as a counterbalance to the
power of executive directors (at least 50% of the board)
With a balance in the quality and the quantity of the executive
directors and non executive directors, the board will be able to
control the independency of the board. The stakeholder position
will be more understandable as the non executive director will
make sure the importance of the stakeholder.
 iii) The remuneration committee (to decide on the
remuneration of executives) that is 100% independent
non-executives
Executive directors remuneration should be designed to
promote the long-term success of the company. Performance-
related elements should be transparent, stretching and rigorously
applied.With the transparent performance related element, the
stakeholder would be satisfy with the remuneration given to the
director, this is because, if a higher remuneration given to the
director without porper reasons, the stakeholder will question the
credibility of the remuneration given to the director and this will
cause conflict between the stakeholder and the oranisation.
iv) Dialogue with institutional shareholders and encouraging
private investors to participate in the annual general
meeting (AGM)
There should be a dialogue with shareholders based on the
mutual understanding of objectives. The board as a whole has
responsibility for ensuring that a satisfactory dialogue with
shareholders takes place. The board should use general
meetings to communicate with investors and to encourage
their participation.With a good relationship and continues
dialog between the shareholder and the organizational, this will
increase the interest of the shareholder and build stakeholder
confidence.
Overall, the visibility given by corporate governance
procedures goes some way toward discharging the directors
duty of accountability to stakeholders and makes more
transparent the underlying incentive systems of directors.
6. ZXC Company

Identify and explain the sources of business risk that could affect ZXC. For each

of those risks evaluate the impact of the risk on ZXC and where necessary,

discuss how that risk can be mitigated by ZXC.

ZXC new development for passengers aircraft to have two decks along the

entire aircraft that will enabled faster loading and unloading of passengers from

both deck at the same time, will revolves around few business risk.This

business risk includes the internal and external factor.

a) Internal risk

The process of dealing with suppliers or customers.

To develop a faster loading and unloading of passengers from both deck at the

same time, requires the improvement of the facility of the gate. The

improvement of the facility of the gate could rises the business risk which is

getting the approval from the airport side to expand the gate. This will also

impact ZXC on the ability to operate the dual loading of the new airliner and

even if they get the approval to expand the gate, ZXC will required more

expenses on the new gate. To get the approval form the airport, the airport will

have to overlook the worthiness of expension of the gates by considering the

amount to spend on the expansion of the gate and to see either the expansion

of the gate would be useful to other normal airliner. This risk somehow can

mitigated by transferring the operation of ZXLiner to other airport that already

had a bigger gate to operate.

Employees
The improvement of the gates, will alos lead to a management risk interms of

the efficient of the gate operating and the number of employees to managed

the large passengers loading and unloading form both decks at the same time.

The impact of this risk, will lead to the higher expenses on managing the

passengers and this will also lead to the timing and delayness of the flight to

take off. This risk somehow, can be mitigated by reducing the risk with having a

proper control in the airport. More control must be done to ensure the efficient

of the gate operation.

Reliance on a dominant chief executive.

The ZXCs chief executive has just resigned taking a leaving bonus of around

two years salary. This will then gives problem on knowing who will continued

operating this Zliner and whether the new substitute chief that will replaced

him, has the skills and competency to managed the Zliner. The only solution for

this is to reduce the risk by, appointed a credible and competence chief

executive that have an experienced on handling flights and airport

management. With this skills, it could give an advantage for ZXLiner to operate.

Cash Flow

Based on the article, ZXC has a 4 billions loans from various bank and has made

loss of 2.3 billion. With a high debt and a loss on its financial statement, this will

impact ZXC cash flow on financing and operation. This will also impact on the

credibility of the credit rating of ZXC, that will eventually, causes many

problems on getting a new loans and the approval form the new suplliers. In

addition, the ZXLiner has yet to fly or be granted airworthiness certificates, and

has ordered 25 aircraft from the HTC company. This will then eventually

increase their debt and lengthens the time of Zliner to operates.

Excessive reliance on one of a few products, customer, and suppliers.

ZXC new strategies to use the new alloy which is zinmin, to decrease

maintainance cost will somehow depends on the price of the zinmin. As the

supplier for zinmin has only one supplier the supplier will probably trigger a

higher price, since they are monopoly.Another risk related, is getting approval

from the suppliers. This will overlook on the demand of the zitnim and also the

contractual side of the company.This risk will impact ZXC, where the risk of high

price of zinmin will lead to high expense for ZXC. If there is a non approval from

the supplier side and the limitation of output on the supplier side will mitigate

ZXC to avoid the business as it will not be able to decrese its maintenance cost.

b) External risk

Changing interest rates

Since ZXC has many components suppliers based in Europe, there will be a

high chance that the components from the suppliers will charged with high

interest. This high interest on the component will lead to high expense on

component of the airline, as all the important components are a must for ZXC to

purchase. This risk however, can be mitigated by outsource the components in

a more cheaper lower interest company.

Changing exchange rates

As ZXC company does obtain about 25 % of the subcontracted components

form the companies in the USA. There would be a high risk in the foreign

exchange. As the foreign exchange from USD to pound, will lead to a high cost

for ZXC to buy the subcontracted components in the USA.

Environmental Factors (Public Opinion)

With the new airliner enabling faster loading and unloading of passengers form

both decks at the same time.This will somehow lead to a negative public
opinion on the hygiene and the comfort of the customer. The public will issued

on the hygiene, since the loading on the new passenger will eventually cause

the new passenger to sits on the unloading passenger waste like all the rubbish

that the unload passenger left. The public will also issue the safety of the

airplanes on handling two passengers of the loading and unloading as this will

required effective and efficient of the operation.This risk could impact the iage

of the ZXLiner if the case of unsatisfy customer increase. This risk somehow can

mitigated by reducing the risk, which is having a clean deck for the new

passeneger, and a proper marketing about the positive side of the dual loading

and unloading,