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Introduction
There are several issues in this case of Medicaments plc Company. Foremost, there is the problem of corporate governance within the management of the firm which is currently under the leadership of Mike Croft.
The second issue relates to non-compliance of the company with the UK corporate governance code in which we realize there have been few instances in which the company has failed to comply with the requirements of the code. Finally, other underlying issues in the financial department have to do with auditing and implementation of recommendations by the board of directors in which some of the recommendations are not reviewed.
Discussion
Corporate Governance Issues and Recommendation
Corporate governance can be defined as laws and rules within which any business is operated; it also involves all processes of controlling and operating the business including the issues of internal affairs (Colley, 2003). Several factors may determine the level of corporate governance within an organization and accountability is one of the factors that can be used as a yardstick to determine and predict the level of corporate governance. Generally, a firm that has developed a mechanism of ensuring proper accountability and transparency portrays an example of good corporate governance (Colley, 2003).
In this case study, we find that Croft, the CEO of the Medicaments plc Company is the one who sets the number of salary payments for all other board members and his salary as well. This is a clear situation in which there is poor corporate governance in the firm which is unjustified especially since the Company’s majority shareholder is the public.
According to the Company’s Act 2006, “the remuneration of the directors shall be determined by the directors” in the properly managed company; this means that the board of directors has the mandate to determine and set the salary package of the CEO of any firm (Legislation.gov.uk, 2011). Furthermore, the board members should jointly decide their pay since one of the functions of the board of directors is to set their salary and compensation.
Usually, the procedure followed involves the board of directors choosing a committee which is given the duty to set the salary of the CEO (Colley, 2003) but this is not the case in Medicaments Company since we can see that Croft is the one who has taken upon himself to determine the salary of the board members. This a clear evidence of poor corporate governance since the board directors are curtailed in exercising their duties fully (Amdur and Banket, 2002).
In addition, Medicaments plc Company is seen to be poorly managed in the manner by which the board of directors is appointed. In this case, the two non-executive directors were chosen and appointed under the influence of Croft.
According to the Company’s Act regulations, a well-managed company should be run by an effective board of directors who will have the responsibility of competitively appointing senior personnel. In doing so the board of directors should ensure that the non-executive board members appointed are impartial and performs their intended role of ensuring accountability of the firm (Amdur and Banket, 2002).
Besides that, Medicament Company has additional problems that have to do with corporate governance and ethics as far as the appointment of some board members is concerned, notably Angela King. In this case, there is a clear breach of ethics and general corporate governance regulations since the appointment of Angela King in the boardrooms of the two Companies is a clear act of conflict of interest.
This might have adverse consequences since Angela in her capacity as a board member might use her influence to manipulate the decisions of Medicament to have Zucipharmicals Inc continue receiving contracts. According to Ian, the regulations of ethic governance demand that no conflict of interest should exist in areas of business transactions and employees recruitment among others (2011).
According to the case study “no review of board policies and effectiveness is carried out”, what this implies is that there is a lack of proper corporate management which will mean that the Company is not run by the board members. To empower the board members Medicaments plc Company management must implement any recommendation that the board members of the Company might have made since they are acting as the representatives of the stakeholder’s interests.
UK Corporate Code Issues and Recommendation
The UK Corporate Governance Code is a summary of regulations that summarizes the principles that have been clearly outlined for good corporate management (Webster, 2010). Mostly, the code is designed for Companies that intend to have their shares listed in the London stock exchange; as such Medicament Company must also ensure its compliance with this code if it has to continue trading its shares at the London Stock Exchange.
According to this code, all the publicly listed companies should strictly adhere and fully comply with its various rules and regulations; in fact, all listed companies are regularly supposed to disclose in detail whether they are complying with the code or not (Webster, 2010). This means that companies are supposed to make a report of their compliance which details their nature, level of compliance, and reasons of non-compliance if any. In case of compliance with the code, for instance, companies are supposed to explain how they have adhered to the set codes.
There are three major and basic recommendations outlined by the UK Corporate Governance Code; one is that there should be a separation of the CEO and chairmanship duties in a publicly listed Company (Webster, 2010). However, according to the case study, these regulations have not been adhered to by the Medicaments plc Company because Croft is both the CEO and the chairman of the board; this is a clear breach of the code.
Secondly, the UK corporate code also recommends that a company’s board of directors be made up of a minimum of three non-executive directors to ensure there are fresh ideas within the Company (Webster, 2010). Again on this second regulation Medicaments Company has not adhered to the UK corporate code recommendation; this is because the company’s board of directors consists of five executive directors and only two non-executive directors which are below the recommended number.
The third regulation and recommendation according to the code are that every listed company should have a board that has an audit committee that consists of non-executive directors as well (Webster, 2010). Based on the case study, Medicament Company has no internal audit department that it has put in place; instead, it relies on monitoring of internal controls as its excuse for not instituting an audit department.
This again is a clear breach of UK corporate code as it is very clear and emphatic on why all publicly listed Companies should have an audit department in place. To an extent, Medicaments plc Company may have complied with this third regulation since we realize that they outsource external auditors to undertake auditing tasks.
Conclusion and recommendations
It is the responsibility of the company’s board of directors to ensure there is good corporate governance within the Company. This they can achieve by establishing proper procedures of management that best represents shareholders’ interests in the company; this is because the board of directors of any given Company is answerable to both shareholders and the Company itself (Amdur and Banket, 2002). To ensure accountability and transparency, Medicaments plc Company should put in place procedures of appointing the board members according to relevant laws to have the interests of shareholders well represented.
Additionally, the board of directors of this Company must constitute the various committees and departments as required by law which we have discussed above (Tricker and Mallin, 2010); these committees and departments are essential in overseeing good corporate governance. I recommend that this be done by the Company’s board through fair and open established standards. In the financial department, for instance, an audit committee should be established to ensure there is an internal control system. I also recommend that the various committees be made up of external personnel to act as the Company’s watchdogs.
Issues
Several issues are evident in this case study. These are issues to do with gender, age, pay, discrimination, and promotion at the workplace. In our discussion, we shall seek to undertake proper scrutiny of the facts that will inform justification of legality of promoting personnel in this Company.
To elaborate on the points that relate to this case there are four issues that we need to discuss in this case scenario. One is the issue that relates to employee promotion discrimination based on their age that Susan claims to be the case. Secondly, there is the issue of breach of the Equal Pay Act, which Joe claims have been breached under the circumstances and finally, there are issues to do with favoritism at the workplace that Joe also claims to be the case.
Based on the case scenario it is clear that employees like Susan and Joe feel that there have been instances of discrimination and unfairness such as the one discussed above and based on promotion when considering their training and commitment to the job. The validity of these claims and the legal position of relevant laws is what shall be our focus as we discuss these issues.
The second issue is the problem of discrimination and harassment, it is important to understand that employees are an asset to the company and therefore they should be given equal and fair treatment in terms of job allocation, payment, and job promotion at the workplace.
Applicable law
In the determination of the legality of the issues that Medicaments is being accused of we shall rely on three fundamental laws; the Equal Pay Act, 1970, other relevant legislation that governs labor laws, and finally the general employment policies that apply in such cases.
Analysis
The case of Joe
As a general rule, various employee-related statutes and employment laws categorically condemn and prohibit any employers from practicing acts of discrimination against job applicants or employees promotion based on; ethnicity, age, gender, and disability among others (Bononilawgroup.com, 2011).
The Equal Pay Act, 1970 for instance is very clear regarding issues of discrimination and related favoritism among employees at the workplace and states that this law is “An Act to prevent discrimination, as regards terms and conditions of employment, between men and women” (Legislation.gov.uk, 2011). According to this Act, there are three conditions that an employee has to certify before they can claim discrimination under this Act; these are
- that the work done by the claimant is the same, or broadly the same, as the other employee.
- that the work done by the claimant is of equal value to that of the other employee.
- that the work done by the claimant is rated the same as that of the other employee” (Legislation.gov.uk, 2011).
Now based on the case scenario let us determine if this is the case and whether indeed Joe can claim that Medicament has breached this law. One, it is clear that Helen despite her late entrance to the Company is already earning more than Joe by £3000, what is more, is that she is already being promoted to higher management levels than Joe even though they both appear to have been trainees in Medicament.
This I would say is enough grounds on which one can cite employee workplace discriminations. In any case, the Equal Pay Act in essence states that discrimination is probable where employees appear to perform similar duties but from which they are compensated differently for no other reason than their gender differences; under the circumstances, this appears to be the case. So on this basis of discrimination, it would appear that Medicament has indeed breached the Equal Pay Act regulations; but there is also a small fact against Joe that can be used by the Company as its defense.
The fact that Joe is indicated to have failed in his exams can be explained by Medicaments management as the reason for passing his promotions in favor of Helen, but this would still not explain the reason why Helen has been earning more than Joe despite her coming late to the organization. So it is likely that Joe’s case will prevail.
The Case of Susan
In the same way, it appears that Susan too has been discriminated against, but on this case probably based on age rather than gender; this is because both Susan and Helen are of the same gender. Based on the case study it is clear that Helen does earn more than Susan despite her late entrance into the organization for reasons that the Company cannot yet justify and neither can Helen’s promotions be justified either. Again based on the grounds of instituting discriminations under the Equal Pay Act, 1970 it is clear that Susan has indeed been discriminated against given that Helen’s job description does not exceed that of Susan.
But the ground that Susan intends to sue the Company is what would otherwise be referred to as “repudiatory breach of contract” which is the same as constructive dismissal (Compactlaw.co.uk. 2011).
To prove this has happened, the law requires that a person must prove three aspects to be existent in their work environment; one, that employee’s actions amount to deliberate frustrations on the part of the employee, which directly de-motivated the employee and finally that such actions are in contravention to the existing laws. Based on the circumstances of the case study this would appear to be the case which would mean that Susan might indeed prevail in suing the Company on this ground (Compactlaw.co.uk. 2011).
Negligence Law
Issue
Two pertinent issues pertain to this case scenario; one is the issue of negligence by the Medicament Company to repair the facility fence which is seen to have contributed to Sam’s accident. Secondly, there is the issue of psychological suffering that Kim is seen to be suffering from for having witnessed the gruesome accident. Finally, there is the issue of trespassing which is also seen to be the case because the victim, in this case, was trespassing at the time.
Applicable law
Negligence is described as a behavior or demeanor which is thought to have contributed to the injury of the plaintiff and involves direct or indirect jeopardy that endangers a person’s life (Lillywhite, 2011). By tort laws, negligence can be determined to have occurred in an accident through inference alone and without necessarily being directly linked to the cause of the accident (Lillywhite, 2011).
To determine whether negligence liability applies in a given the court will rely on a set of four conditions that must be satisfied to have been present at the time of the accident.
One, that the accident wouldn’t have occurred without the element of negligence which implies that a duty of care was owed but which was neglected by the defendant, two, that negligence is the probable cause, three, that an instrument controlled by the defendant resulted to the accident and finally that the plaintiff did not contribute at all to the accident (Saunders, 2009).
Based on the circumstances of the accident let us now determine if indeed negligence liability can be instated in this case against Medicament company it would appear that the accident does indeed satisfy all the conditions under which negligence can be claimed to have been the cause.
This is because were it not for the disrepair that existed at the facility then the accident would not have occurred, secondly an instrument controlled by the defendant was the sole and direct cause of the accident in this case which despite the trespassing cannot be attributed to the victim. In any case, the failure to perform one’s duty and responsibility can also be termed as a breach of duty (Smith, 2006). This is because the defendant failed to “avoid acts or omissions which can reasonably be foreseen”, which is the negligent aspect that directly led to the injury in question.
Additionally, Kim might also sue her employer the Medicament for emotional distress under the tenets of tort laws which is the same as what Sam would be suing the Company for. However, as a general rule of thumb, the law is very hesitant in awarding damages that are claimed based on psychiatric injury as it is impossible to identify and prevent fraudulent claims; it is, therefore, unlikely that the court would award damages to Kim on that basis.
References
Amdur, R. J. & Banket, A.E. 2002. Institutional Review Board: Management and function. Massachusetts: Jones & Bartlett learning.
Bononi law group. 2011. Discrimination. An over view. Web.
Colley, J. L. 2003. Corporate Governance. Washington, DC: McGraw Hill Publishers. Compactlaw. Web.
Christian, P. 2010. Employment Law Solution. Web.
Ian, D. 2011. Corporate Governance Statement. Web.
Legislation. 2011. Equal Pay Act, 1970. Web.
Lillywhite, B. 2011. “The Extent of Res Ipsa Loquitur.” The Modern Law Review, 22(1), pp. 82-83.
Smith, H. 2006. A treatise on Law of negligence. (2nd edition). New York: Stevens and sons press.
Saunders, T. W. 2009. A treatise upon the Law applicable to negligence. Charleston: BiblioBazaar publishers.
Tricker, B.& Mallin, C. 2010. Corporate Governance. Web.
Webster, M. 2010. UK Corporate Governance Code. Ohio: LexisNexis press.
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