Step 2 Perform the guardian role of a company director proactively through: Assessing the risk level involved in any strategy devised; Putting brakes on poor strategies or decisions, demanding management's explanations and rectifications; and Reporting to the board and the relevant authority any unethical concerns, conflicts of interest, malpractices or illegal acts unveiled. Assessing the risk level brought about by Derek’s illegal acts: Derek’s secret pledge of the IPO funds to secure loans for his wife would increase the financial risks of the company and cause grave consequences to different stakeholders as mentioned above. As an INED and Chairman of the audit committee, I should inquire with Derek diligently and demand for an explanation once I observe the irregularities in the financial figures. I should seek professional advisors, the company secretary, financial controller or the internal auditor, for assistance in looking into the matter. Monitoring the management to mitigate the risks: Weak management controls create opportunities for persons under financial, social or other pressure to exploit circumstances and rationalise their fraudulent actions. I should ensure the management implements different control measures to limit opportunities for manipulation of company funds by any individual. Examples include requiring board approval for use of IPO funds or loans over a certain amount; monitoring the due checking of company funds by internal and external auditors; setting policy to govern non-audit services taken up by the serving audit firm; and enhancing the awareness of directors and in fact all levels of staff on related law and guidelines governing illegal acts, conflicts of interest or unethical behaviours.
Annex 5 Sample Code of Conduct for Business Corporations ETHICAL COMMITMENT 1. The (name of company) (hereafter referred to as the Company) regards honesty, integrity and fair play as our core values that must be upheld by all directors and staff1 of the Company at all times. This Code sets out the basic standard of conduct expected of all directors and staff, and the Company’s policy on acceptance of advantage and handling of conflict of interest when dealing with the Company’s business. PREVENTION OF BRIBERY 2. The Company prohibits all forms of bribery and corruption. All directors and staff are prohibited from soliciting, accepting or offering any bribe in conducting the Company’s business or affairs, whether in Hong Kong or elsewhere. In conducting all business or affairs of the Company, they must comply with the Prevention of Bribery Ordinance (POBO) of Hong Kong and must not: (a) solicit or accept any advantage from others as a reward for or inducement to doing any act or showing favour in relation to the Company’s business or affairs, or offer any advantage to an agent of another as a reward for or inducement to doing any act or showing favour in relation to his principal’s business or affairs; (b) offer any advantage to any public servant (incl. Government / public body employee) as a reward for or inducement to his performing any act in his official capacity or his showing any favour or providing any assistance in business dealing with the Government / a public body; or (c) offer any advantage to any staff of a Government department or public body while they are having business dealing with the latter. (The Relevant provisions of the POBO are at Appendix 1.) Acceptance of Advantage 3. It is the Company’s policy that directors and staff should not solicit or accept any advantage for themselves or others, from any person, company or organisation having business dealings with the Company or any subordinate, except that they may accept (but not solicit) the following when offered on a voluntary basis: