EXAMS OFFICE USE ONLY ------------------------------------------------------------------------------------------------------- University of the Witwatersrand, Johannesburg Course or topic No(s) ACCN5030A Course or topic name(s) Paper number & title Strategic Business Leader Test to be held during month(s) of Faculty/ies presenting Candidates Internal examiners and telephone extension number Special materials required (graph/music/drawing paper, maps, diagrams, tables, computer cards, etc) Mock April 2024 Commerce, Law and Management W Mohamed (011 717 8181) Zubair Wadee Computer Time allowance Instructions to candidates Time 25 minutes Refer to page (2) for instructions. 1 General instructions 1. Read the following instructions carefully and follow them precisely. 2. This question paper is ONE integrated case study and ALL parts of the question (tasks) must be completed 3. All tasks contain marks for professional skills and technical skills 4. This paper consists of 8 pages including the cover page and including this page 5. The total marks are 10 and the time allocated is 25 minutes which includes reading time 6. Candidates will forfeit marks for the use of non-standardised abbreviations 7. All answers must be typed on Microsoft Word 8. Answers must be submitted on Ulwazi (Canvas) 9. Answers must be submitted by uploading the answer as a PDF 10. Each student is responsible for the legibility of work 2 (10 Marks; 25 minutes) Question Dripping Diamonds (DD) is a publicly-listed company that operates in the country of Eveland in the jewellery retail industry. DD is a successful company that has created a globally distinctive brand, the motto of which is “Simple yet personally sophisticated”. Since its incorporation in 1945 in Eveland, DD specialises in the design, manufacture and retail of high-quality, luxurious jewellery pieces. DD has remained committed to quality by producing jewellery items from high-quality metals that include gold, silver, and platinum. The brand logo of DD, the picture of a brilliant turquoise diamond, was designed upon its establishment. DD has its major manufacturing plant in the country of Faisha. Jewellery items are sold via concept stores (see Note A, Exhibit 2) situated in 150 countries. DD Concept stores are designed with minimal furniture, art, and fashion, and counters that display jewellery items are glossy and white. The turquoise diamond logo is displayed on each counter. The current financial year is the year-ended 30 March 2022. The information presented in the following exhibits is relevant. Exhibit 1: Background on Eveland and its regulatory environment Exhibit 2: Results of customer survey of DD customers worldwide (01 March 2022) Exhibit 3: Management structure at DD Exhibit 4: Headlines of various well-known online newspaper articles The case requirements are as follows: 3 2. You are a professional accountant who has been asked to appear as a guest speaker on a popular weekly Podcast series. The topic of the upcoming podcast is the link between the corporate governance (CG) of an entity and its approach to corporate social responsibility (CSR). Required: a. Discuss, using the agency theory, how the corporate governance structure at DD may affect the CSR of DD (8 marks) Professional skills marks are available for evaluation skills in assessing the link between CG and CSR within the context of the agency theory by reference to the DD (2 marks) 4 Exhibit 1: Background on Eveland and its regulatory environment Corporate environment Eveland is a country of much natural beauty and resources. Many people consider it a quality-of-life country as people are friendly and have a fairly relaxed attitutde. The corporate environment within Eveland is regulated primarily by the Eveland Fair Business Practice Act (EFBP). In recent years the EFBP has undergone several reforms with the latest amendments being the requirement for entities listed in Eveland to adopt in its entirety the Eveland Code of Corporate Governance (the E-code). This code was developed based on worldwide standards of corporate governance, although it is considered to be less stringent than other corporate governance codes applied in other countries. One of the areas of emphasis is on the social and environmental aspects of an organisation’s operations. Eveland policy makers are in the process of making further changes to the E-code in so far as the setting and disclosure of executive remuneration is concerned, as the current guidance surrounding executive pay in the E-code is considered weak and deserves attention. The Eveland Fair Business Practice Act (EFBP) also requires companies that are registered on the Eveland exchange to comply with the standards and policies that are developed by the Organisation for a Healthy Market Economy (OHME) (see note 1 below). Companies listed on the Eveland Stock Exchange are required to have a small group of representatives that liaise directly with the OHME secretariat. Failure by an entity to implement OHME policies may lead to penalties and fines. Note 1: Organisation for a Healthy Market Economy (OHME) The OHME is an Eveland-based organisation. Its mandate is the development of policies that relate to social, economic, and environmental wellbeing within Eveland to sustain economic growth. The OHME has a key partnership status with the Global Economic Reform (GER). The GER is an international organisation with 130 member countries. It is responsible for the development of global policies to address major global challenges that are of an economic, social and environmental nature. 5 Exhibit 2: Results of a customer survey of DD customers worldwide (01 March 2022) The results of the survey from all participating countries are presented below. The metric is measured out of 5. Question 1. To what extent do you identify with the DD motto: “Simple yet Mean metric Percentage out of 5 out of 5 4.6 4.6/5= 92% 4.95 4.95/5=99% 4.82 4.82/5= 96.4% 4.80 4.8/5=96% 4.80 4.8/5=96% personally sophisticated”? 2. How well is the DD brand logo, the picture of a brilliant turquoise diamond, known to you? 3. How would you rate the DD brand in terms of uniqueness, sophistication, and quality 4. Rate your experience in DD concept stores (out of 5) Note A 5. To what extent do you notice DD concept store personnel wearing DD jewellery? The following is an extract of the main themes about DD that was analysed from the “comments section” in the survey data: 1. Dress code of DD staff: • The perception of the DD policy that concept store personnel dress in all black was positively received. • The perception of the DD policy that head office personnel dress in formal attire was positively received. Note A A concept store is a type of retail store format that is experienced-based. A concept-store setup is usually linked to the support of a certain type of customer and his/her journey with an organisation’s product and goes beyond just offering a customer the direct sales of an organisation’s goods1. The atmosphere created through art, fashion and other aesthetics are usually carefully chosen. 6 Exhibit 3: Management structure at DD Board of directors Executive Management DD adheres to the legal requirement to apply the E-code. The board of directors (BOD) is independent and diverse in terms of gender, member skillset and member experience. The BOD has established an Audit Committee and a Remuneration Committee. During the 2022 financial year, the audit committee met five times and the remuneration committee met one time. During the remuneration committee meeting, a policy was proposed to link executive pay and corporate social responsibility activities. The following are the responsibilities of the audit committee: • Oversight over the process of financial reporting • Oversight over internal control and risk management systems The following are the responsibilities of the remuneration committee: • Oversight of remuneration policy • Consideration and approval of incentive payments applicable to Board and Executive Management 7 Exhibit 4: Headlines of various well-known online newspaper articles Staff at Dripping Diamond manufacturing plant speak out: inflexible hours and payment at minimum wage -Global post (02 March 2022) 8