Randall Inc - Corporate Governance

Corporate Governance

Randall, Inc. is a private company that manufactures heavy machinery. The Company has an active board of directors and an audit committee. The board of directors includes ten directors, 2 of whom are independent (but are former executives of the company). The audit committee consists of the two independent directors and Howard Kress, the Company's Chief Financial Officer. The audit committee meets once a year to provide oversight of financial reporting, including reviewing new accounting policies and unusual transactions. The audit committee also meets with Randall's external auditors from time to time, to discuss audit planning issues and to review the outcome of the audit. The full board meets twice a year and evaluates top management's performance.

Howard Kress personally reviews and approves any related party transactions. Internal audits are performed by the internal audit team, headed by Jenny Kin Wong, who reports directly to Laura Howe, the Chief Operating Officer.

The company has a written code of conduct, and the employees agree to adhere to the code when they are hired. Each employee is also given an employment contract including a formal job description. All new employees are given aptitude tests appropriate for the area they will be working in. As a result, the company does not consider it necessary anymore to obtain references or conduct other background checks on the new employees.

The Company also has a hotline for confidential reporting of unethical behavior that is staffed by the corporate controller. The audit committee reviews summaries of all incidents and investigations performed before reporting them to the BOD.

Required:

a. List and briefly explain the strengths of the corporate governance mechanisms at Randall.

b. Identify the weaknesses in Randall's system of corporate governance and provide suggestions for improvement in the system. Organize your answer as follows:

Weakness Recommended Improvement