CASE STUDY

2 ANSWER ALL QUESTIONS IN THIS SECTION (20 MARKS)

According to www.icsa.org.uk Hink Limited is a successful family-run business. The board of directors is led by the founder of the company, John Hink , who is both chairman and chief executive officer (CEO). The other board members, a finance director and two non-executive directors, are also Johns brother and daughter. The members of the Hink family own all the share capital of the company. The company does not have a company secretary, and its auditors are a local firm of accountants in the town where Hink has its head office. John is proud of his entrepreneurial success. He has been prepared to take big risks with the companys strategy in order to grow the business and, when necessary, he has been willing to cancel the annual dividend to shareholders to spend money on investment or to accept temporary decline in profits for the sake of longer-term success. He is aware that the company does not have a good reputation as an employer, but he believes that the company exists for the benefit of the Hink family and employees should be grateful to have their jobs. John wants to retire in a few years time. He would like his daughter to take over the running of the company, but he would also like to take the company public and get it accepted on to AIM, the junior stock market in the UK. He is aware that the governance of the company will have to undergo substantial change for this to happen, but he does not want to retire until all the changes have been made and the companys shares are being traded on AIM. He also knows that AIM companies are not required to comply with the UK Corporate Governance Code but are, nevertheless, expected to have high standards of governance.

Corporate Governance