Chief Executive: “I am deeply concerned that if this fall in profit figures is disclosed in the next annual report, there will be all sorts of problems with the shareholders. We may even lose several big investors.”
Non-executive director (also the cousin of the Chief Executive): “(Sigh) Well, I suppose we could always find a way of making them look better.”
Chief Executive: “How? I cannot see a way at all.” Non-executive director: “Well, we could make them just slightly higher than last year's figures by including the proceeds of the sales of our toothbrush division.”
Chief Executive: “But the sale does not go through until October.”
Non-executive director: “No, but it will … and it doesn't make much difference, we need the money on the books now.”
Chief Executive: “But when the accounts are signed off, won't that be fraudulent?”
Non-executive director: “Not really. I don’t see why. It is a manipulation of timing rather than numbers.”
Chief Executive: “OK. That sounds good to me. Let us sort it out now.”
John heard one of them move towards the door, and quickly slipped back down the stairs. He left work worrying about what he should do. He decided he would anonymously ask the company secretary how he should deal with this situation, and bring the issue out into the open.
3.1 As company secretary you receive a report from John, about the overhead conversation. Write a summary for board members of the corporate governance problems which are evident from the conversation which was overheard.
(10)
3.2 Based on the above scenario, explain the role of a whistleblower and the whistle-blowing protection mechanisms available in South Africa.