Harvey Storm is chief executive of West Wing Savings and Loans. Harvey authorises a loan to Middleman Properties secured on the land it is about to purchase. Middleman Properties has little money of its own. Middleman Properties subdivides the land and builds houses on them. It offers buyers a house and finance package under which West Wing provides the house loans up to 97% of the house price even to couples with poor credit ratings. This allows Middleman Properties to ask for higher prices for the houses.
Middleman Properties appoints Frontman Homes as the selling agent who kindly provides buyers with the free services of a solicitor to handle all the legal aspects including the conveyancing. Most of the profits from the developments are paid to Frontman Homes as commissions. Harvey Storm's wife has a 20% interest in Frontman Homes.
Required:
Are these corporate governance failures? Discuss.