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QUESTION 
Governance
 
Techpoint plc is a medium-sized public company that produces a range of components used in the 
manufacture of computers. 
The board of directors consists of chairman Max Mallory, chief executive Richard Mallory and finance 
director Linda Mallory, all of whom are siblings. There are five other unrelated executive directors. All 
directors receive bonuses based on sales. The company's sales are made by individual salesmen and 
women, each of whom have the authority to enter the company into contracts unlimited in value without 
the need to refer to a superior or consult with other departments. It is this flexibility that has enabled the 
company to be very profitable in past years. However, a number of bad contracts in the current year 
have meant that the finance director has reclassed them as 'costs' to maintain healthy sales and to 
protect the directors' bonuses. 
What are the corporate governance issues at Techpoint plc? 
ANSWER 
The main corporate governance issues are: 
(a) 
Domination by a small group 
All the key directors are related which gives them power over the other executives. 
(b) 
Short-term view 
Directors' bonuses are based on short-term sales and have resulted in the manipulation of 
accounts to achieve them. 
(c) 
Lack of supervision 
The sales force can tie the company into large loss-making contracts without any checks. There is 
no authorisation or communication with other departments which means the company may take 
on contracts that it cannot fulfil. The company has been hit hard with bad contracts in the 
current year. 
 
2.3 Risks of poor corporate governance
Clearly the ultimate risk is of the organisation 
making such large losses
that
 bankruptcy
becomes 
inevitable. The organisation may also be closed down as a result of