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Corporate responsibility and governance LB 5231: ASSIGNMENT 2 – EDITORIAL ESSAY This assignment involves two opposing editorial views on the approaches t

Corporate responsibility and governance LB 5231: ASSIGNMENT 2 – EDITORIAL ESSAY

This assignment involves two opposing editorial views on the approaches t

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Corporate responsibility and governance LB 5231: ASSIGNMENT 2 – EDITORIAL ESSAY

This assignment involves two opposing editorial views on the approaches to corporate
responsibility (i.e. covering ethical, financial, legal and discretionary) by senior management
(for instance board members and directors of the company) from two different newspapers:
“The Straits Times (Singapore) (ST) and “Economist” (E).

You are expected to read two articles (reproduced below), the first a case study of a private company that went bankrupt in Singapore, and the second on corporate governance in Asia. You will use both sources to support your writing of the editorials

The Straits Times is a Singapore based English newspaper (available in digital and printed
version) and owned by Singapore Press Holdings (SPH) correspondents bring world news
helping readers to appreciate world events from a Singaporean perspective. The paper often
been mentioned as being as “mostly pro-government” referring to the ruling government or
People’s Action Party (PAP). A link is attached http://www.straitstimes.com . The “Singapore
Perspective” may be described as “soft authoritarianism” or “state-centred approach to
development” which emphasizes society’s welfare rather than individual welfare. Society’s welfare
is as defined by government leaders rather than individual thinkers that are independent of
government. So business responsibility is often determined by the government’s view on societal
welfare, and one distinctive approach in this point of view is that individual welfare is not the guiding
principle but only a component of overall societal welfare.

The Economist is a UK- based international newspaper and its perspective on corporate
responsibility is based on its deep identification with the liberal project which has long proved
influential throughout the world. The philosophy of individual liberty connotes both a desire for
freedom from state regulation in economic matters (often described as “liberal”) and a
demand for the state to insure a minimal degree of social and economic justice. A link is
attached https://search-proquest-com.elibrary.jcu.edu.au/publication/366256

Liberalism has been described as “combined economic freedoms—the right to unconditional
private property; low taxes; no internal tariffs; external free trade—with political freedoms: the
rule of law; civil equality; freedom of the press and assembly; careers ‘open to talent’; and
responsible government”. Hence, instead of focusing on when a corporate business is acting
responsibly or not, contemporary theories of justice should focus on the ways in which political
and social institutions can help businesses be responsible, in both economic and
noneconomic ways.

Write two editorials (500-word limit for each editorial), one for ST and the other for E that have
different perspectives on corporate responsibility. You are expected to write each editorial
giving regard to these differences. Within the limited word count, you are required to mount a
lucid and convincing argument about the topic from two points of view. Remember these are
different points of media view and therefore should have a different expected outcome. Also
note, that since there are two different expected outcomes, there are different discussions that
lead to that outcome.
This is an academic piece, with a different format. Hence in text citations are not required,
however (and this is important) you must include a bibliography. A bibliography includes all
places where you have found information about the topic, even if you have not included any
specific information in your work.
Submissions:
Please take note of the following:
1) You will get TWO chances to submit your assignment through an Assignment Drop Box.
2) The Submission Deadline will be 1800 hours on 19 September 2020.
3) Please ensure you submit your Assignment a day before deadline to avoid any issues at
the 11th hour on account of time differences etc.
4) This Assignment will be marked using a Rubric that is in the Subject Outline. Please study the R
ubric in the Subject Outline carefully to understand how you will be assessed.

Article 1

Hin Leong Trading directors risk lawsuits over hidden losses

Associate professor with the National University of Singapore Business School Mak Yuen Teen said that Hin Leong’s failure to disclose US$800 million in losses is a serious lapse in corporate governance

AUTHOR

Toh Han Shih

DATE

May 6, 2020

Some directors of troubled Singaporean firm Hin Leong Trading are facing potential lawsuits over the cover-up of US$800 million (S$1.1 billion) of losses, which is considered a serious lapse in corporate governance.

The oil trader’s founder, Lim Oon Kuin (OK Lim), said he had ordered his company’s finance department not to disclose the US$800 million losses incurred from oil futures, according to a filing with Singapore’s High Court. The Commercial Affairs Department (CAD), the white-collar crime unit of Singapore police, is investigating Hin Leong, one of Asia’s largest independent oil traders, according to media reports.

Singapore’s Accounting and Corporate Regulatory Authority (ACRA) is monitoring this case and will assess if further action is warranted, an ACRA spokesperson told the Independent.

“The payments made by HLT (Hin Leong Trading) to satisfy margin calls made in respect of such losses were reflected as ‘accounts receivables’ and remained recorded as such after the losses were realised,” Lim, who is roughly 75 years old, said in the court document.

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Creditors will likely seek legal remedies against directors of a company, if these directors knew or should have known that the company’s financial accounts, for which they are responsible, were fraudulent or false, David Webb, a Hong Kong-based corporate governance activist, told the Independent.

Hin Leong has three directors who are also shareholders of the company, according to Singapore corporate records. The three directors are OK Lim, his son Evan Lim Chee Meng and his daughter Lim Huey Ching. OK Lim owns 75 percent of the company which has an issued share capital of S$30 million, while Evan Lim owns 15.4 percent and Lim Huey Ching owns 9.6 percent.

On April 17, Hin Leong filed an application in the Singapore High Court for temporary legal protection from creditors. On April 27, the High Court granted the company interim judicial management.

Hin Leong owes over US$3 billion to more than 20 banks including HSBC. Three leading Singapore banks – DBS, UOB and OCBC – are owed over US$600 million by Hin Leong, reported Business Times. Other banks which are creditors of Hin Leong include Societe Generale, ABN AMRO and Sumitomo Mitsui Banking Corporation, according to Singapore corporate records.

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The court filing cites a collapse in oil prices and the COVID-19 pandemic which severely slashed demand for oil and increased costs for Hin Leong. The pandemic caused US oil future prices to fall below zero for the first time in history on April 20.

As far as civil lawsuits are concerned, suspicion of fraud causing financial loss would be grounds for legal action by parties who suffered the financial loss against the fraud suspects, said Webb. “You can’t sue somebody just for bad luck.”

“I expect the auditors will have to answer for their apparent failure to detect the hiding of the losses,” Webb added.

Hin Leong’s auditor Deloitte & Touche did not reply to the Independent’s questions. A Singapore-based spokeswoman told Reuters, “We stand behind the quality of our work. Our audit was performed with the highest standards of audit and compliance with the information made known to us at the time.”

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Since Hin Leong is an exempt private company, auditor requirements are far less strict compared to listed companies, said Mak Yuen Teen, associate professor with the National University of Singapore Business School.

Hin Leong’s failure to disclose US$800 million of losses is a serious lapse in corporate governance, said Mak. “The US$800 million is apparently just undisclosed losses from futures trading. But the hole appears much bigger.”

According to the court document, the firm’s total liabilities in April were US$4.05 billion while its unaudited total assets were US$714 million, far less than its audited assets totalling US$4.56 billion as of October 31, 2019. In less than six months between last October and April, the company’s assets dropped dramatically by more than 80 percent.

“Covid-19 and the drop in oil prices may have contributed but do not explain the US$800m in undisclosed future losses and the allegations of margin calls being recorded as accounts receivables,” Mak added.

If Hin Leong is not an exempt private company but a listed company, the lapses would have shown up earlier, Mak pointed out. Being an exempt private company, Hin Leong’s audited accounts are not publicly available.

In Hin Leong, there are no checks and balances like a board overseeing management – the board and management are the same and they are the family members, Mak noted. There are no independent board members in Hin Leong, corporate documents show.

“To me, one of the major problems here is that even though it is very large with more than US$20 billion in revenues, it could still be considered an exempt private company because it has fewer than 20 shareholders and no corporate shareholders. To me, that is a big gap. The family has the protection of limited liability of a company with very few safeguards. A recipe for disaster,” said Mak.

Hin Leong did not reply to questions that were emailed to them.

Toh Han Shih is a Singaporean writer in Hong Kong.Follow us on Social Media

Article 2 is a PDF (“TRACKING CORPORATE GOVERNANCE IN ASIA”) which is listed in the Assignment 2 folder

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