Why fix it when it is not broken?

ABS is a public listed family owned company under the

leadership of its Executive Chairman. Mr Cando took over the
leadership of ABS from his father who was the original
founder of ABS. The company has been performing well
under the leadership of Mr Cando. He has been grudgingly
complying with the listing requirements .He is of the view
that some of the requirements are unnecessary especially in
the context of Eastern culture of business and that
duplicating principles and best practices of the West is not
how public companies in the East should be governed.
According to him, family owned companies with
concentration of ownership and the culture of networking
and harmony requires different approach to governance
compared to the Western system where share ownership is
dispersed and separated from management of the company.
In ABS, compliance is regarded more as a box ticking exercise
rather than as best practice for the company. He is of the
view that the comply or explain principle allows him and the
board to explain to the shareholders why some of the best
practices of the code of corporate governance can be
disregarded as they may not be in the interest of the
company and the shareholders in this part of the world.It
may even lead to higher cost and dampen the ability of the
board to make quick decisions to exploit opportunities. He
feels that this comply or ‘explain principle’ provides
opportunity to explain to the minority share-holders that
conformance may affect performance of the company.
To avoid time consuming process of appointing senior staff,
Mr Cando and Mr Wildo the CFO led the selection
committee which included three non- executive directors .
One recent appointment involves the chief internal auditor
Mr Howdo.Since his appointment , Mr Howdo have been
regularly reporting to Mr Cando and to the audit committee
also led by Mr Wildo. His interaction with the audit
committee has been limited to the quarterly meetings where
the internal audit report is presented and it is mainly
confined to fraud detection and prevention activities.
Mr Musdo who has been an independent non- executive
director of ABS for the last two years has been requested by
Mr Cando to take over the chairmanship of the audit
committee after the coming AGM.He is aware of his duties
and responsibilities as director and board member to
promote the success of the company as a whole which
includes long term share -holder value. In his discussion with
peers, Mr Musdo is also aware that the listing requirements
on governance best practices are critical for ABS when
shareholders become more actively involved in the affairs of
the company. However, he is also aware that this approach is
not favoured by Mr Cando.He is planning to meet Mr Cando
to convince Mr Cando that it is in the interest of ABS to move
in the direction of compliance not as box ticking measures
but as the best way to properly govern a public company. But
then he cannot counter the point by Mr Cando that ABS has
been performing well thus far and why fix it when it is not
broken.
Required

a) Describe and evaluate the governance culture and

practices of ABS under the leadership of Mr Cando.

b) What are the duties of a director? Are these duties

being breached by the directors of ABS?Explain your
answer.

c) Provide Mr Musdo with arguments why the

governance principles and best practices of the
corporate governance code are in the interest of ABS
and the shareholders.