Ethical Hemp Ltd 2
Governance issues in Ethical Hemp Ltd
Corporate governance issues
Corporate governance issues majorly relate to the agency conflict that exist between the
principal (Shareholders) and the agent (management) (CHEN, LU and SOUGIANNIS, 2011).
Ideally, the real owners of resources, shareholders, normally appoint the management, who act as
agents, inorder to full heartedly manage their resources (shareholders). However, management a
times represents their interests rather than representing the interests of the shareholders. This
kind of misrepresentation leads to agency conflict. Agency conflict affects the corporate image
identity and the general overall performance of the company. According to Richard Conti
(2009), one of the objectives of company existence is maximization of shareholder’s value.
Therefore shareholders ‘value can’t be maximized if the quality of companies operations is at
stake because of poor governance and crave ethical concerns.
The case of Ethical Hemp Ltd presents some grave ethical concerns relating to corporate
governance. For example, it has been indicated in the case that there has a lot of mismanagement
of company resources by Tasma Callistemon, the community engagement officer. It is said that a
number of community engagement projects have stagnated because of mismanagement. This
affects company operations and thwarts its growth as the company’s quality of operations is
interfered with. This goes against one of the rules or principles on which listing in the ASE is
based. This contravened principle states that an entity which wishes to be listed in ASE should
satisfy minimum standards of size, quality and operations before it is listed. Ethical Hemp
limited supposedly doesn’t meet the requirements of this principle because of poor governance
that have affected the company to an extend that the company is at the verge of collapsing as Ben
Banksia , one of the directors is heard saying that the company might no longer be viable.
Conflict of interest
Conflict of interest is one of the governance issues affecting most companies. It arises in
instances where management engages in other issues that are not part of the operations of the
company. Ideally, management is selected by the shareholders to maximize shareholder value.
However, maximization of shareholder value is often not achieved because of conflict of interest.
Additionally, conflict of interest includes instances where the affairs of the company are