Forever Plc is a medium sized retailer of fashion goods with some 500 outlets spread throughout the Malaysia. A publicly quoted company on the Malaysia Stock Market, it has pursued a growth strategy based on the aggressive acquisition of a number of smaller retail groups. This growth has gone down well with shareholders, but a significant slowdown in retail sales has resulted in falling profits, dividends and, as a consequence, its share price.

Forever Plc had been the creation of one man, Ahmad, a high-profile entrepreneur, convinced that his unique experience of the retail business gained through a lifetime working in the sector was sufficient to guide the company through its current misfortunes. His dominance of the company was secured through his role as both Chairman and Chief Executive of the company. His control of his board of directors was almost total and his style of management such that his decisions were rarely challenged at board level. He felt no need for any non-executive directors drawn from outside the company to be on the board. Shareholders were already asking questions on his exuberant lifestyle and lavish entertainment, at company expense, which regularly made the headlines in the popular press. Ahmad's high-profile personal life also was regularly exposed to public scrutiny and media attention.

As a result of the downturn in the company's fortunes some of his acquisitions have been looked at more closely and there are, as yet, unsubstantiated claims that Forever's share price had been maintained through premature disclosure of proposed acquisitions and evidence of insider trading. Ahmad had amassed a personal fortune through the acquisitions, share options and above average performance related bonuses, which had on occasion been questioned at the Shareholders' Annual General Meeting. His idiosyncratic and arrogant style of management had been associated with a reluctance to accept criticism from any quarter and to pay little attention to communicating with shareholders. Recently, there has been concern expressed in the financial press that the auditors appointed by Ahmad, some 20 years ago, were also providing consultancy services on his acquisition strategy and on methods used to finance the deals.

1. Explain the nature of the agency problem that exists in Forever Plc
2. Assess the extent to which Forever Plc's corporate governance arrangements and situation fail to constitute governance best practice.