Reference no: EM133613144

CASE STUDY: It was 30 June 2020 and furniture manufacturer, Dysoft Global Bhd is having an Extraordinary General Meeting. Ali is the single largest shareholder with a 25% stake in Dysoft Global. He is also the non-executive Chairman. The second largest shareholder is Baharudin with a 10% stake. He has relinquished his position as Executive Director and President in March 2020. Other than these two directors, the board consists of three independent non-executive directors. Cecilia is the managing director of Dysoft Global but she is not a shareholder. She was first appointed as an independent director three years ago. She was re-designated as an executive director four months later and then, further re-designated as managing director a year after that. Cecilia revealed during the EGM that Dysoft Global received letters a few weeks earlier from minority shareholders who claimed that there have been unlawful activities and wrongdoings in the company. The letters alleged that Ali and Baharudin had misappropriated RM150,000 and RM120,000 collectively for their own salary advances from January to July last year. Baharudin allegedly had also misappropriated a total of RM200,000 for his travelling expenses, allowance and office rental advances for the same period. He authorized the payment vouchers and signed the cheque as one of the signatories. Cecilia claimed that she was forced to sign the cheque and issued the payment to Ali and Baharudin. She was fearful of being removed from her position if she did not comply with the instruction. The letters have also revealed that Baharudin had created a false valuation report for the company's office premises to allow him to charge the company an unreasonable rent. Baharudin owns the fourth floor of the building and Dysoft Global is located at the third floor. However, the rents for the both floors have been grossly inflated and were charged by Baharudin's own company to Dysoft Global. When the matters were brought up during the EGM, the Chairman decided that there shall be no further action taken.

QUESTIONS:

a) Comment on the weakness of corporate governance framework of Dysoft Global?

b) Do you agree with the decision of the Chairman in the light of Malaysian Code on Corporate Governance? Explain your reasons based on Chairman's responsibilities to the company.