Reference no: EM132803313

HURAC Ltd (HURAC) was established 15 years ago in Sydney and provided construction services to property developers. Because of the company's extensive use of cranes, the nature of HURAC's business has since evolved to include importing and assembling cranes for use on building sites. Some of these cranes are used by HURAC, while others are sold to property developers who employ their own workforces to operate the cranes. HURAC's board currently consists of five people: Brian Long, the current chair; three directors, who were the original founders; and Winnie Leung, who joined HURAC's board three years ago as a non-executive director. Brian has a 12 per cent equity stake in HURAC; the three original founders each hold a 10 per cent equity share; and the general public holds 58 per cent. Winnie does not have an equity interest in the firm. Because of the COVID-19 pandemic HURAC has experienced challenging financial times due to several factors. These include rising labour costs on construction sites, a sharp decline in the demand for new apartments, and a weakening Australian dollar that has increased the cost of importing crane components. All of these issues have led to HURAC holding excessive stock of crane parts.

• To overcome these financial difficulties, Brian decided that drastic action was necessary. He therefore sold some excess crane parts to his wife's property development company. Brian advised Winnie of this sale at a social lunch. Brian explained that, as the sale was done at market value, he did not think it was necessary to notify other board members, even though HURAC's constitution provides that related party transactions can only be undertaken with a majority of the board's approval. Another strategy devised by Brian to stimulate HURAC's business was to sell crane parts as well as assembly services at a discount to his preferred property developers. This was a particularly successful strategy in lifting HURAC's revenues, with one developer reciprocating the favour by agreeing to build Brian's new holiday home at a significant discount. Brian did not disclose this benefit to HURAC's board as he considered the benefit of his strategy to HURAC's business to outweigh any personal considerations

Problem A) With reference to the facts in the case, identify four stakeholders and explain the impact of Brian's actions on them.

Problem B) Discuss how a manager can encourage ethical behavior in an organization?