Accounting

QUESTIONS 2 Awang Aqil (AA) took helm of the TESB in 2013 after the previous Chairman stepped down in the aftermath of a massive bribery and corruption scandal. Having worked in the company for the past 15 years, AA seemed to be the perfect candidate to turn things around for TESB. At the AGM a few vocal shareholders gave him a stern warning to at least break-even in 2014 and to ensure a consistent profit in the future or risk termination due to non- performance. He made several visits to every department. The following is the record of conversation with between AA and DD, the Chief Executive officer (CEO). AA: I noticed that our overtime cost is very high. It made up about 40% of the total manpower costs in 2013, which is a 10% increase from the previous year. Do you have any explanation for that? DD: Yes, I know but you need to understand our situation. We engage in mandatory and voluntary overtime, which is the most convenience solution to understaffing due to high staff turnover rate. I know that this is not a long-term solution but the shortage of employees has led to many operational issues such as higher medical leaves and an alarming number of workplace related injuries. In 2013 alone, there were twenty (20) accidents, an increase of 35% compared to 2012, which were attributed to fatigue as a result of working overtime. AA: But is it not in breach of the Employment Act 1955? DD: I know but my hands are tied. The employees are willing to work overtime because they could earn additional money. Some employees can earn double the amount of their monthly salary through overtime claim. So far, we have not received any official complaints from the employees. I know that the loop hole in the system is due to lack in supervision. One can easily forge signatures for attendance of another person therefore the high overtime claims does not mean the workers are working extra hours. A Fingerprint Biometric Time Attendance Management System was tabled for approval back in 2012 but it was rejected as the costs were too high and the Return on Investment (ROI) was not justified. AA: What is the staff turnover rate? DD: The rate is 19% but we are still actively recruiting potential candidates. If you ask my opinion, it is all about the money. Our salary is not competitive enough to retain AA: DD: talented and skilful employees. In comparison, the industry pays 36% higher than us. We hired fresh graduates in the past but they left within a year. Are we not giving our employees enough opportunity to develop their skills and for career advancement? We always organise training programmes for the employees but they are not interested because they feel that the training programmes do not increase their career value and help them to earn a higher salary. They are also concerned about the lack of a clear succession planning in our company. Many of them are in the mid-forties but we are not recruiting or retaining younger employees. REQUIRED: a) Describe stakeholder issues highlighted in the above case. (8 marks) b) Suggest how AA should address the stakeholder concerns in the context of corporate responsibility. (12 marks)