CONFIDENTIAL AC/DEC 2019/CRG650/520

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE BUSINESS ETHICS AND CORPORATE

GOVERNANCE

COURSE CODE CRG650/520

EXAMINATION DECEMBER 2019

TIME 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of two (2) parts PART A (4 Questions)

PART B (2 Questions)

2. Answer any THREE (3) questions from PART A and ALL questions from PART B in the
Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:

i) the Question Paper

ii) an Answer Booklet - provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 6 printedpages

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 CONFIDENTIAL 2 AC/DEC 2019/CRG650/520

PART A

QUESTION 1

Latex Sdn Bhd is a glove manufacturing company. It provides jobs opportunity for many
people in town C, where employment is difficult to find. Over the years, the company has
developed a good reputation in the town. It is popularly known for its continuous
commitment in taking care of the well-being of the community, employees and
environment. Nonetheless, the manufacturing process of the rubber gloves produces a
by-product that flows directly into the town river. Although the by-product has been
considered harmless but some people who live near the river have reported illnesses due
to the impact of the by-product. The victims have agreed to lodge reports to the authority
and would claim for compensation from the company.

Required:

a. State any four (4) factors that would affect public expectations for ethical business
behavior.
(4 marks)

b. With reference to the above case, explain any two (2) critical issues based on Milton
Friedman's theory of profit-making.
(4 marks)

c. In the perspective of a deontologist, you are to analyze Latex's action in releasing

the by-product into the town river.
(6 marks)

d. Explain Latex's action in releasing the by-product into the town river in relation to
axioms of Islamic ethical philosophies; (i) Responsibility and (ii). Equilibrium
(6 marks)
(Total: 20 marks)

QUESTION 2

Nadia has been working in a life insurance company as a sales representative for almost
five years. She is one of the top sales agent in the company and frequently receives the
excellence reward for her outstanding achievement. In July 2019, the company introduces
a new policy that combines savings and insurance as a package to the clients. The product
promises to protect the family of the insurance holder in the case of premature death as
well as a good return on investment. The language used in the insurance contract is difficult
to understand and most of Nadia's clients do not read the contract thoroughly and simply
trust Nadia's explanation on the insurance policy that they purchase. The product is
expensive and as an insurance agent Nadia knows that the policy is a scam because the
policy provides very minimum protection in case of premature death and offers a low return
on investment upon its maturity.

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Required:

a. Identify any two (2) stakeholders with their respective stake.

(4 marks)

b. Based on the above case, discuss briefly the elements of Sage and Pig that could
dictate Nadia's behavior as described by Al-Ghazzali.
(4 marks)

c. Determine Nadia's situation based on Kohlberg's Cognitive Moral Development,

Stage 1: Punishment and Obedience Orientation.
(6 marks)

d. Based on consequentialism theory, discuss two (2) negative outcomes Nadia may
face for not revealing the truth about the insurance package to her clients.
(6 marks)
(Total: 20 marks)

QUESTION 3

Ethical corporate social responsibility (CSR) programs focus on ensuring that all
stakeholders in a business should receive fair treatments. Ethical CSR initiatives are also
intended to enforce fairer treatment to all employees including rewarding better fringe
benefits and ensuring appropriate safety standards are in existence in workplace.

Required:

a. Explain any two (2) advantages of practicing fair treatment in a workplace.

(5 marks)

b. Discuss any three (3) benefits a company can gain from ethical CSR initiatives.

(6 marks)
c. Explain the importance of being transparent in disclosing CSR report.
(3 marks)

d. Explain how the professional code of conduct influences an organizational culture.

(6 marks)
(Total: 20 marks)

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 CONFIDENTIAL 4 AC/DEC 2019/CRG650/520

QUESTION 4

Good corporate governance relies on distinct differences in the roles between the board
of directors and managers. It was never intended for the board of directors to be directly
involved in the daily operations of a corporation, and they certainly should not be engaged
in micromanaging the management.

Required:

a. Explain briefly any three (3) recommendations stated by the Malaysian Code of
Corporate Governance (MCCG) to facilitate the Board of Directors in discharging
their fiduciary duties and stewardship to the company.
(6 marks)

b. The fall of many giant corporations was mostly due to the failure of the audit
committee in effectively discharging its roles and responsibilities (Rashidah Abdul
Rahman, 2006). Explain any three (3) roles of the audit Committee in ensuring
effective corporate governance is in place.
(6 marks)

c. Discuss your understanding on (i) Agency Theory, (ii) Monitoring Cost, (iii) Bonding
Cost and (iv) Residual Loss.
(8 marks)
(Total: 20 marks)

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 CONFIDENTIAL 5 AC/DEC 2019/CRG650/520

PARTB

QUESTION 1

Ruslan runs Prihatin Rakyat, a Non-Governmental Organization (NGO) in the rural area of
State A. One of the main aims ofthe establishment of Prihatin Rakyat isto help the under
privileged children in getting basic education. The family ofthe children are very poor and
the income they earn isjustenough to cover for basic living expenses. Many ofthe children
have the potential to excel in their future. Some of them are equipped with extra skills as
the result of helping their parents in doing daily routine like weaving traditional tikar
mengkuang and also rattan basket.

As the manager of Prihatin Rakyat, Ruslan has the responsibility to help. This is also a
good opportunity for him to assist and facilitate the family and the children to have better
life in thefuture. Every year, Ruslan applies the government grant tofinance programs and
activities conducted by Prihatin Rakyat. The application is always a success. Ruslan is
happy and it is a ritual for him to call for meetings with his staffto plan for activities Prihatin
Rakyat should conduct.

The yearly grants provided by local government of State Amust be wisely utilized during
the year it is given. Failure to fully utilize the grant will result in unused grant which would
be returned to the local government. It will also lead to a possibility in getting a reduction
in the amount of grants provided for the following year.

In year 2018, Ruslan only managed to use two-third of the fund to finance the activities.
Ruslan then instructed the accountant, Sarah, to keep all the unused grant and manipulate
the accountto show that the grant has fully been utilized to finance the activities organized
in 2018.

Required:

a. Explain briefly the ethical dilemma Sarah is facing as an accountant.

(4 marks)

b. With regards to the possible judgement made by Sarah, discuss the fundamental
principles as prescribed in the International Federation ofAccountants (IFAC) Code
of Ethics: (i) Integrity, (ii) Objectivity and (iii) Professional behavior.
(10 marks)

c. In the above case, advise Sarah on the ethicality of Ruslan's actions in relation to
Egoism ethics.
(6 marks)
(Total: 20 marks)

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 CONFIDENTIAL 6 AC/DEC 2019/CRG650/520

QUESTION 2

Texon is a company that designs sensing devices for automobile airbags. Recently,
Mathew, a licensed automobile engineer, was hired to work in the quality control
department.

About eight weeks later, Mathew was asked to sign off on the design oftesting procedures,
protocols, and standards in which Mathew was directly involved. However, he remained
uncertain to proceed with the signing off due to both his lack of experience in the technical
area and his inability to fully interpret the preliminary testing results.

He consulted other technical professionals regarding the issue. He does not satisfy with
the proposed design. He found out that certain quality and safety requirements are not
adequate. It would be wrong for him to approve the design which may cause negative
impactto the users. Users may risk their life in case the sensing device for the automobile
airbags fails to properly function.

Mathew informed the project manager, Mr. Lee that he is not comfortable to signing off the
test design. Mr. Lee on the other hand, has put greater pressure on Mathew. He said time
should not be wasted. He added profit which would be generated is good enough to cover
any circumstances that may happen.

Required:

a. Identify any two (2) consequences if Mathew agrees to sign offthe approval for the
design.
(4 marks)

b. Outline two (2) appropriate type of justice to be given to Texon if the sensing device
of the automobile airbags fails to function.
(4 marks)

c. Based on the above case, explain briefly two (2) possible actions users of the
automobile may take towards Texon if the sensing device of the automobile airbags
fails to function.
(6 marks)

d. Discuss Mathew's ability to exercise his conscience in the above case.

(6 marks)
(Total: 20 marks)

END OF QUESTION PAPER

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