Bunga plc is a company listed on the Lusaka Stock Exchange. Bwalya is the Chief Operations Officer (COO) and a member of the board of directors. Bwalya owns a building that Bunga leases. The lease of the building is now due for renewal and renegotiation, and Bwalya is asking for a substantial increase in the lease rental.

Some shareholders of Bunga (all of them institutional investors) have expressed their concern about the fact that Bunga may continue to use a building owned by one of its executive directors. The concerned shareholders have so far been unable to persuade the company chairman to take action to prevent the lease from being renewed. However, the chairman is considering how he would respond to the concerns of the shareholders without creating unnecessary problems for the company and its board.

Required

a) As expert in corporate governance, write a report to the chairman of Bunga that explains the responsibilities of directors of listed companies with regard to transactions with with companies in which they have a personal interest.

b) The management of a company is often different from its owners. Explain the principle that underlies this separation and the challenges that often arise from this relationship.