Corporate Governance Factors for Negotiating a Joint Venture

"Corporate Governance Factors for Negotiating a Joint Venture with Nortel"
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Couse
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Report to Mr. Lau Man Seung
This report is intended to summarize the corporate governance factors to be considered when negotiating a joint venture with Nortel. This report will also offer information on current corporate governance problems within the JIH Group and suggestions for solutions (Koedijk et al., 2019).
1. Corporate Governance Considerations for the Joint Venture
Mr. Lau needs to consider the following corporate governance considerations when negotiating a joint venture with Nortel:
Board Structure: The proposed joint venture between Nortel and JEL is to be incorporated in Hong Kong and should have equal equity capital provided by each party. The board of directors should have three members from each company, including the CEO. The board should have a clear mandate and responsibility to oversee the joint venture, including formulating strategies and policies and reviewing performance (Koedijk et al., 2019).
Conflicts of Interest: Potential conflicts of interest must be identified and managed to ensure the joint venture operates in the best interests of both parties. It is essential to consider the potential for conflicts of interest in areas such as the allocation of resources, decision-making, and the distribution of profits (Ansoff et al., 2018).
Transparency: Transparency is essential for the success of any joint venture. It is vital that both parties are open and honest with each other and that there is a clear understanding of each other’s expectations. The board should ensure sufficient access to information to effectively manage the joint venture (Koedijk et al., 2019).
Risk Management: Risk management is a critical element of any corporate venture. It is crucial to consider the joint venture’s potential risks and have a clear strategy for managing them (Ansoff et al., 2018). The evaluation should include a comprehensive risk management system with clear policies and procedures to identify and address potential risks.
2. Corporate Governance Issues in the JIH Group
The JIH Group also faces a range of corporate governance issues which should be addressed. These include:
Shareholder Rights: The Group is owned by a family and related parties, who own 68% of the voting stock (IMCA, 2015). The board should consider ways to ensure that minority shareholders’ interests are protected and that they have adequate representation on the board. This will make them feel that they have a voice in the greater decision making of the business too.
Audit Committee: The Group has an audit committee, which should be reviewed to ensure that it is properly constituted and has sufficient authority and resources to carry out its responsibilities.