Solved Case Study on Corporate Governance Organica Futura


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Learning objective


As consultants to the board of Organica Futura, you have been asked to provide expertise concerning corporate governance. You are currently interviewing key board members.

You are meeting Abdul, one of the founders, for lunch to talk to him about corporate governance and learn more about his views. You understand that Abdul is opposed to developing corporate governance best practices within Organica Futura, even though he is open to eventually taking the company public to obtain capital for expansion.

Your challenge is to explain the benefits and persuade Abdul to change his views. Be prepared to answer Abdul’s questions. His concerns include:

  • Separation of ownership from control
  • Transparency and disclosure
  • Company funds to purchase things for the founders’ families
  • The inadequacy of his country’s compliance resources.

How will you respond? Within your group, prepare three talking points that you believe will be most persuasive. Use the Manual of Guidelines and other relevant frameworks to organize your ideas and examples.

The following is a statement from Abdul, a founding director of Organica Futura:

“We are a medium-sized founder/family-owned company and have been operating successfully for more than 20 years.”

“We have an annual sales volume in excess of US$ 50 million; we employ more than 60 people directly in three countries, serve thousands of customers and have assets in excess of US$90 million. This has been achieved without us ever having to adopt corporate governance practices.”

“As a company that promotes organic agriculture, our company is built on the fundamental principles of social responsibility. As the owners of Organica Futura, it would be our right to determine what we believe is appropriate for our company and its employees.”

“The concept of corporate governance you are promoting is not for this region because many companies like ours are privately owned. I have been told that corporate governance primarily focuses on the separation of ownership from control. That makes

no sense – to be the owner and not have complete control over what you own! By keeping our business private, we can ensure that the right decisions will be made. Our success demonstrates this.”

“We just do not see the benefits of corporate governance since it means relinquishing control and allowing others—who haven’t devoted their lives to the company’s success—to run it. Do you expect the other founders and our families to agree to bring strangers onto our company’s board? We did allow one, which our venture capital company demanded. To do more would be madness!”

“Also, what do you mean by a phrase like, ‘The Directors’ first duty is to the company’ and/or ‘they cannot make decisions on basis of their personal benefit’? Surely the purpose of setting up the business was to ensure that there would be money to take care of our families’ welfare.”

“We as founders have made all the wise decisions. Why should I not buy a car for members of my family from the business? After all, they should benefit from the company’s success, as I do.”

“Another question: Why should we disclose more information about our company? This would only prompt the government to ask more questions and help our competitors. If our employees know more about our earnings, they would become jealous and less eager to work for the company at their current wages. And why should we treat all shareholders’ equitably? Since we own the largest share of the company, we should have the most authority.”

“Finally, what is this Manual of Guidelines? How is it enforced? By whom?”

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Questions to Focus Discussion 

  • What are the strongest reasons for why companies whether founder / family-owned or public – should adopt corporate governance best practices?
  • What critical challenges emerge in promoting good corporate governance in your region?
  • What are the obstacles? How difficult are those to address and overcome?
  • How would you implement reforms to achieve adherence to good corporate governance