Manfold Case

The Manfold Toy Company case represented a few problems including unethical decisions made by upper-management and weaknesses in corporate governance. Throughout the case study, many unethical decisions made by the upper-management were revealed, mainly by the chairman, Joseph Wan, and two of the senior executives, Daniel Kot and Wu Jiaxiong. Several corporate governance problems were presented as well, including ignorance in adopting the new corporate governance framework and internal transparency within the upper-management.

During a business trip in 2006, Mitchell & Meyer told the chairman of Manfold Toy Company, Joseph, that they would be interested in takeover only if the company had a 20% growth in the 2006 year-end audited report. In anticipation of the takeover, the company needs to quickly improve the financial before 2006 year-end, and therefore led to many unethical decisions to boost the financial. Joseph took many unethical actions hoping to sell the company with a better price. By offering the external auditor, Ken Tse, many favors, including both business and personal levels, Joseph intended to have Ken ignore many suspicious issues created within the company. Despite the rumor of Peter’s close relationship with some suppliers, Jiaxiong obtained the recommendations Peter gave him for cheaper materials in order to cutback the production costs in the short-run and without proper inspection of the source. During the Toyfair at Thailand, Daniel intentionally invited Francis Yen, an investment bank analyst, to scuba trips with all expenses paid by Manfold Company. After the trip to Thailand, Francis Yen rated the company’s stock as “outperformed” to return Daniel’s favor.

While other companies are adopting the new corporate governance framework, Manfold Toy Company paid little attention to improve it. Vivian Chen, secretary of Manfold Company, who formerly worked in major companies, saw the flaw in Manfold Toy Company and recommended Daniel to adopt...