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Betriebswirtschaftsle­hre

hong kong

2016

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Business report: The Scandal Inside SHKP. Management Study


Community College of City University

BUS10306 Management

Group Written Report

The Scandal Inside SHKP

Mak Kan Wai

word counts: 2,252

Submission date:14th November, 2016

Introduction:

Management can lead a company to success. however, human is emotional, their decision can be affected easily. especially for managers, they have higher position and bigger responsibility than others, if they once attracted by side factors and conduct unwisely decisions, the consequences may not only be in personal, whole business may get suffer. so, it is crucial for managers to have a mind, a horizon, to make the company prosperity.

In this report, we aim to investigate the impact brought by the misbehavior of Thomas Kwok and other managerial staffs, inside the family control enterprise – Sun Hung Kai Property. The motive behind for Kwok to make the decision, whether the power of Kwok exceed the positon he has, whether family-style management is good for SHKP .

The whole report is divided into seven parts. The first part of the report talks about background of the group. The second part will outline the whole scandal from the head to the result of it. the third part will have some in depth analysis and finding on the scandal. the forth and the fifth part will be the conclusion and recommendations regarding to the issue. the last part will be references and appendices

The report covers issues on decision making, motivation, organization structure and ethics.

Background:

( Retrieved from )

Sun Hung Kai Properties Ltd is a listed company based in Hong Kong. The company is founded by Kwok Tak Seng and it is in family control.

It becomes the most valuable real estate companies in Hong Kong and in Asia, and the world second most valuable real estate company. Kwok brothers having the largest share among the company. It aims to provide premium-quality residential and commercial projects for sale and investment. It employs millions of people who expertise in land acquisition, architecture, construction, engineering and property management.

Main strategy

(Retrieved from )

Sun Hung Kai Properties puts its long-standing belief in 'Building Homes with Heart' into priority, by developing residential area with the highest quality and offering high class service to the client. By contributing the best goods and services to the community to turn Hong Kong a better place to live and tighten the bond of belonging in Hong Kong

Business (Retrieved from )

The Group's major type of business is the development of property for sale and investment. It also diversifies in other type of business:


In hotel sector, it provides property management, construction of hotel, Insurance and mortgage services. In telecommunication sector, it provides information technology, infrastructure

Hotel and telecommunication are low risk investments that provide steady profit and handsome sum over the long term.

Land Reserve and Property Overview:

The Group own a relatively large land reserve with a land bank of 49.9 million square feet as at the end of June 2016, including:

20.9 million square feet under development

29.0 million square feet of completed investment properties

Over 30 million square feet of rural area (site area) in the New Territories, most of them are located along the railway track. The land can be converted into different use; the development of the land will be multifunctional that can match to future government policies easily

Group Finance:

the Group earned high credit ratings from two credit rating agencies.

'A+' from Standard & Poor's and 'A1' from Moody's

The Group is committed to considerate financial policies, maintaining high liquidity and low gearing. Most of the group investment and financing is in Hong Kong dollars, which carry very little foreign exchange risk.

Customer Service:

The Group puts clients into the first ranking and it always collect the opinions of customers through numbers of medias and channels to advance and improve to the finest service.

Property management companies: the high level of after-sale service conducted by Hong Yip Service Company Limited and Kai Shing Management Services Limited had been recognized

SHKP Club - The Group established the SHKP Club to enhance customer service and two-way communication. It currently has over 350,000 members.

Award:

(Retrieved from )

The group has won numerous awards like:

Best Landscape Award: 25 honors

Quality Building Award: Merit Award - Hong Kong Residential (Single Building) Category

Platinum Awards: Asia's Best Property company


ENID TSUI, Nikkei associate editor, December 19, 2014, Retrieved from

In year 2007 , SHKP use 4.05 billion dollar to purchase a land at tai wai from 3 companies, indirectly though the sister company .the land has granted by ORG to build 816 units ,altogether 52.1 million square feet residential area。Throughout the transaction, ICAC suspected that SHKP pay 1.5 billion more than the value of the land, and chan transferred that amount to hui as a tool for, so SHKP is under investigate at that time.

Rafael Hui Si-yan, Hong Kong's former chief secretary, was found guilty on December 19,2014. hui was sued for collecting millions of dollars under the table and hui was in a trial. The news seriously shock the citizens and damaged the reputation of such a clean position of chief secretary.

The same trial found Thomas Kwok Ping Kwong, he was sued by market capitalization, guilty of conspiracy to commit misconduct in public office. His brother and co-chairman, Raymond Kwok Ping-luen, was acquitted on all charges.


SKHP announced the resignation of Thomas Kwok and another convicted company officer, Executive Director Thomas Chan Kui-yuen, after the court rulings were being announced. the spokesperson of the group said the normal daily business of SKHP have not been affected by the bribery issue and will not be affected by these changes, SKHP also post the speech online as a notice without elaborating on the circumstances.

History of the bribery:

Hong Kong's most controversial bribery trial in recent history began in 2012 when Hui, the Kwoks, long-time SHKP executive director Thomas Chan and former Hong Kong stock exchange official Francis Kwan Hung-sang were charged with crimes relating to cash and other benefits that Hui received while in public office from 2000 to 2009.


The trial lasted about two years, and the nine-person jury deliberated for five days on the eight charges faced by the five men. They found Hui guilty of three charges of misconduct in public office, one charge of conspiracy to commit misconduct in public office, and one charge of conspiracy to offer an advantage to a public servant.

Apart from receiving nearly 20 million Hong Kong dollars in cash, Hui also failed to offend to the declaration of an unsecured HK$3 million loan given by a SHKP subsidiary while he was chief secretary, the city's highest ranking civil servant. He also failed to declare a HK$2.4 million unsecured loan and his free use of a luxury flat owned by SHKP while he was head of the Hong Kong Mandatory Provident Fund Schemes Authority.


Analysis and findings:

Ethics

Thomas Kwok and other members face ethical dilemma that blinded by personal benefit and harm organizational benefit. people around were getting hurt, from the fellow shareholders to his family members. Thomas made a decision that violates moral right rule and justice rule. only a small group of people can gain the profit.

The reputation of Thomas already gone. If Thomas was not charged, his subordinate might follow him and create a corrupt atmosphere inside the company.

In society ethic, Thomas disobeyed the laws to have misbehavior.

In Professional ethic, Thomas holds a master of business administration degree from London Business School, University of London and a bachelor’s degree in civil engineering from Imperial College, University of London. with those high educational level, Thomas should notice that he is making mistake. Once the unprogrammed decision being made, he will make those institute be ashamed.


As a role model, manager should keep a good image to their subordinates.

Decision making

Thomas has made a non-programmed decision. the action simply based on the unreasoned judgment, no time and effort evaluate whether it is good or not and just focus on the amount of revenue, then made on-the-spot decision. Thomas rather to bear the risk to be imprisoned. As a managerial member, there is a must to shape the company image. when making such decision, Thomas does not specify the criteria like legality and ethicalness. he needs to take up the responsibility to do illegal things.

A solely decision more likely to fall victim to bias.

Motivation

According to McClelland’s Needs for Achievement, Affiliation, and Power, as Thomas already the co chairman, having the biggest achievement for himself, he may feel lonely since the position is relatively high, the subordinate need to treat him properly to avoid any mistakes that lead to unemployment. if he found boredom from the job, he may want to have excitement and affiliation of others, to stand out from other. with such huge power held in hands, he may get blinded by the power and make unwisely decision.


Organization structure

Family-style management that can sustain for a long time, the key is professional control, determination and ability to centralize power. From the start till now, SHKP faces challenges from balancing the control and the performance of business.

McKinsey & Company has a survey showing that, less than 30% of family-style management can pass to the third generation and the group is one of the 30%.

The disadvantages of it will be: limited family members hinder the business development and the position of male is higher in Chinese traditional mindset, once the distribution was not well defined, those family disputes will harm the business future.



Ethic

  • Appoint an ethic officer to monitor an organization’s practice and procedures to be sure they are ethical

  • Strive to hire people have a sense of personal ethics and care about it

  • Require managers to consider ethical aspects of business decisions

  • Promote moral courage by not taking retribution against employees who exercise moral courage, say no to superior, or complain about unethical actions

Organization

  • To hire external investigating team to assess each managerial level staffs with their background, capital and previous business transaction to observe whether the staff behave well to their job, the information collected will be confidential due to privacy issues. after investigating, the team will conduct a report to public to be more transparent as a listed company and to retain shareholder’s confidence. the report will be conducted annually.


Control Environment

  • develop a promise towards integrity and ethical values by setting up a group that will be separate from normal business and monitor of the development and performance of internal control

  • holds individuals accountable for their internal control responsibilities in the pursuit of objectives

Risk Assessment

specifies objectives with sufficient clarity to enable the identification and assessment of risks relating to objectives

identifies risks to the achievement of its objectives across the entity and analyzes risks as a basis for determining how the risks should be managed

considers the potential for fraud in assessing risks to the achievement of objectives

  • Monitoring

The system is designed to provide reasonable, but not absolute, assurance against misstatement or loss, and to manage risks of failure in the Group’s operational systems.

The aim of the control system is to protect assets from inappropriate use, to ensure

It is legal with the regulation.

It will clearly defined lines of responsibility and authority. Policies and procedures are laid down for its key business processes and business units covering project development, tendering, sales and leasing, financial reporting, human resources and computer systems.

To continuously select, develop different evaluation to make sure whether the parts of internal control are present and performing well .


The Managers are responsible for the design, implementation and maintenance of the internal controls.

Appendix


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