managing your business
Fred is an operations manager at Fair Loans Limited a publicly listed low doc home and credit card provider.
His managing director is so impressed by Fred’s performance he is invited to join the board of directors as an executive director of the company.
Fred has always been concerned about the company’s finances and hires Charlie Wong to check the company books.
She finds that the managing director has been spending $200,000 per month on “motivation “ expenses such as gold watches, trips, cars, lunches and jewellery given to staff and finance brokers who sell the company loans.
Charlie also discovers that the auditors of the company Crook & Greed had not checked to see whether the borrowers could verify their income, so that many of the loans may never be able to be repaid. This may mean that the company may be insolvent. He reports this to Fred.
During the time of Charlie Wong’s investigation the shares of the company are going up, and the senior management and directors are pleased as their bonuses are linked to market share price not profit performance.
On the same day Fred discovers that a foreign exchange dealer working for the company did not go to work and there is a rumour that the dealer may have purchased foreign currency without the permission of the Chief Financial Officer.
At the board meeting Fred decides to tell the board what he had found. Before Fred is able to ask any question, the chairman of the company proposes to give Fred $1 million bonus and 1000,000 shares as a reward for his performance. Fred is humbled by the proposal.
The next day the investors who provide the funds to the company to lend out stop the line of credit to the company. Fred calls the company lawyers Freeguys & Co who tell him that the company is probable insolvent but not to worry the company’s assets have been sent overseas to another sister company until the credit crisis settles down.
On the same day, the rumours about the demise of the company hit the media; the government is concerned that if the company goes broke it will affect the financial markets.
Fred calls the Prime Minister who he had met at a dinner he attended a few weeks earlier and begs him to get his government to provide an emergency loan to the company. The Prime Minister announces a line of credit and the use of the government’s credit rating to save the company.
The next day Fred orders the calling in of all non performing loans. Many of the borrowers are evicted from their homes, three commit suicide. Three months later, the crisis stabilises, the board rewards itself with a bonus and Fred’s salary is doubled. Have any laws been breached. Your answer should refer to case and statute law and any ethical considerations that may support your argument.
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