explain the reasons also. Thanks in advance

CASE STUDY Misplaced Optimism and Failed Governance Huavivo is in the business of manufacturing a wide range of home appliances. In 2016, it recorded RM3.2 billion and RM200 million in sales and earnings after tax, respectively. At the end of 2016, the Chief Executive Officer (CEO) announced to the board of directors (the board) that Huavivo wanted to diversify its business into manufacturing mobile communication devices with a capital investment of RM1.5 billion. Huavivo did not have prior experience and expertise in this new business segment. The CEO, however, was optimistic that this new line of business would contribute higher sales, due to the booming market of mobile communication devices. The independent directors, on the other hand, were sceptical about the potential of the new business and expressed their deep concern with the fact that the management team neither have the manufacturing expertise in the new product range nor have the familiarity with such market. They were not sure of the risks and potential return associated with the investment. In addition, established global companies, such as Apple, Samsung and Huawei, had strong market share and brand presence in South East Asia. The CEO assured board members that his marketing and investment teams had conducted market research and due diligence on the proposed investment and found it to be viable. Thereby, the board members did not ask further. Zaireena Wan Nasir TE Business Ethics As the management team was confident of the new business venture, the Chairman of the board proposed that the executive directors would get a 20% salary cut and their allowances terminated if they failed to exceed the profit target for 2017. However, if they succeeded, they would be paid a bonus equivalent to 18 months' salary. The executive directors were already receiving housing allowance, car allowance and other allowances amounting to 40% of their salaries. The CEO and all the executive directors supported the proposal. The board subsequently endorsed the investment of RM1.5 billion for the new business segment and the proposed remuneration for 2017. An executive director proposed that the remuneration committee need not review the new remuneration policy because all of the members were present in the meeting. The board agreed unanimously. Ten months into 2017, it all became clear that the sales of the mobile communication devices were sluggish and below target. Huavivo failed to penetrate the already saturated market. Apparently, the management did not have superior manufacturing capability and marketing expertise to face the intense competition. It was clear that Huavivo had failed in its new business. By the time the board released the audited financial results in February 2018, the company had recorded a loss of RM650 million against the profit of RM200 million in 2017, mainly contributed by the failure of the new business segment. Questions: 1 How did the board of directors contribute to the failure of Huavivo? Limit your answer to three main areas