Page 8 - SCS May 2018 - Day 1 Suggested Solutions

CIMA MAY 2018 – STRATEGIC CASE STUDY

CHAPTER FIVE – P3

EXERCISE 1 – ANALYSIS OF CORPORATE GOVERNANCE

Couchweb is the leading media streaming company in Mayland, and one of the world’s largest
media streaming companies. It is listed on the stock market and so therefore needs to comply or
explain to Corporate Governance guidelines, and as the company continues to grow good
governance will be essential.

Corporate governance guidelines exist so that the needs of shareholders are met. Monitoring
exists so that directors are kept ‘in check’ and minimising any problems arising from the agency
relationship between principals (shareholders) and agents (directors).

We are not told about the shareholdings of any of the directors, but presumably some of the
Board and most likely the three co-founders still own some of the shares; this will reduce the
agency issue at Couchweb. If the Board were not to act in the best interests of the shareholders
they would be jeopardising their own interests. If this is the case there should be a reduction in
the need (and costs) of monitoring the Board.

Applying corporate guidelines for good governance, the following are considerations worth
reviewing.

Board Balance

A Board should be balanced in terms of skills, experience and diversity. Such a structure will help
enable Couchweb Board to deal with strategic and operational issues.

The members of the Board have a good range of skills and experience in their field.

CEO Chet Nolan has experience as an IT director for a company that designed websites; Legal
director Jen Kramer specialised in contract law and copyrights for a large law firm; director of
sales and marketing Jo Ying has previous experience as a marketing director for a large media
company. Martine Andels is a qualified accountant and has experience at a multinational
company; director of business development Javier Mercot has experience of sales and marketing
at a major media company. Together their skills should serve Couchweb well from a strategic
perspective. They have all served at least 3 years on the Board at Couchweb and so should be
familiar with the company and the day to day operations.

There are areas of business operation that do not appear to be well served by the Board,
surprisingly for an organisation that has succeeded in leveraging the capabilities of the internet;
one is IT, another is HR and also creativity.

Chet Nolan has IT experience, so he will be partly responsible for the success so far, but he also
has significant other responsibilities and as the company grows this will reduce his ability to think
about strategic IT issues. Per the organisation chart IT falls under the remit of Javier Mercot
(Business Development), although he does not appear to have any specific skills or experience in
this area. He does have experience at a media company.

HR is not specifically mentioned anywhere in Board responsibilities or experience. There is no
mention of the size of the workforce for Couchweb, but not only must the workforce for a
company of this size be fairly significant, they must be talented. Innovation, quality, and the

44 KAPLAN PUBLISHING