Question $1(25$ marks$)$

Read the case study below and answer the questions that follow.

ETHICAL MISCONDUCT

Ford

The siblings of Reshall Jimmy, who died when his Ford Kuga burst into flames in

December $2015,$ are planning a class action lawsuit against the motor company.

During January $2017,$ over a year after the death of Reshall, the motor manufacturer

announced a safety recall of Ford Guga models with $1,6-$litre engines that were

produced between $2012$ and $2014.$ Not only did the company take more than a year

to apologise to the family for Reshall$$s death, but they have yet to admit that a fault in

their vehicle caused it to combust. Ford has delayed taking action on Kuga vehicles

reported to be a danger on South African roads. In the United States, Ford Escape

models, the equivalent of the Kuga in South Africa, were recalled as early as $2012.$

African Bank investments

In August $2014,$ African Bank Investment Limited $($Abil$)$ shares were suspended on

the JSE and the underlying business was put under curatorship by the South African

Reserve Bank $($SARB$).$ The Myburgh Report that analysed the reasons for Abil$$s

collapse made some very uncomfortable findings. Financially speaking, what had led

to the bank$$s collapse, was making insufficient provision for bad debts and engaged

in unsustainable lending. Behind all that was the CEO, Leon Kirkinis, who believed

too much in his own abilities, and a board that failed to exercise the necessary care

and skill in overseeing what he was doing. The Myburgh Report found that Kirkinis

had an overwhelming influence over the board and the operations of the bank.

Essentially, no one questioned him. The starkest example is that he unilaterally

decided to buy Ellerines for R$9,1$ billion without conducting proper due diligence or

obtaining full board approval.

Steinhoff

In $2017,$ the Steinhoff share price collapsed by more than $90\%,$ wiping out nearly R$10$

billion in shareholder value in about three days, following the resignation of the

company$$s CEO, Markus Jooste, after news that German prosecutors were

investigating the company for alleged massive accounting fraud. Steinhoff is listed on

both the Johannesburg Stock Exchange and the Frankfurt Stock Exchange.

Source: Ehlers, T & Lazenby, K$.2021.$ Strategic Management. Southern African

concepts and Cases. $3$rd ed$.$ Pretoria: Van Schaik Publishers.

$1\mathrm{.}1$ The King Report II of $2002$ provides clear guidelines on minimum standards of

corporate governance. Outline these guidelines and evaluate whether the

organisations in the case study adhered to these guidelines by providing one

example from any of the case studies for each of these guidelines. $(21)$

$1\mathrm{.}2$ Differentiate between the focus points of the King II Report of $2002$ and King I

Report of $1994$ on Corporate Governance. $(4$