You are a senior manager in the finance function at VacHealth Pharmaceuticals (“VacHealth”). You report directly to the Board and advise on special projects and strategic matters.

Background

VacHealth traces its origins back to an apothecary’s shop (a forerunner to a modern-day pharmacy)that was established in the early 18th century by Brandon Vac.

The shop was very successful because of a treatment devised by Mr. Vac for relieving the symptoms of bronchitis, a serious respiratory illness. Mr. Vac opened five further shops before setting up a laboratory that was used to manufacture popular products in bulk and to establish a space for the development of new products.

VacHealth was incorporated as a company in the middle of the 19th century. The company grew steadily, becoming listed on the Johannesburg Stock Exchange in 1995.

VacHealth’s mission statement and corporate

valuesMission
VacHealth’s mission is to provide society with innovative and effective solutions to disease and illhealth.

Corporate values
1. VacHealth works to extend and enhance human lives.
2. VacHealth is committed to the highest standards of ethics.
3. VacHealth’s research is driven by the needs of consumers.
4. VacHealth will be commercially responsible, recognizing that sustainable profits fund cutting-edgeresearch activities in addition to rewarding shareholders for their investment.
5. VacHealth will offer employees a safe and secure working environment, in which all feel valued and respected.

VacHealth’s Board of Directors

The Chief Executive, Melissa, originally trained as a pharmacist and spent much of her career with a major listed chain of retail pharmacies. She was Chief Operating Officer of that company for five years before joining VacHealth as Chief Executive in 2014.

Jackson has been VacHealth’s Director of Finance since 2016. He is a professionally qualified accountant. Before joining VacHealth, Jackson was Finance Director of a listed healthcare manufacturer.
Tembisa has a PhD in pharmacy from Research University. She spent 20 years conducting academic research into the action of pharmaceutical products on the central nervous system. On appointment she was one of Research University’s youngest ever professors and she co- authored papers with senior consultants at major teaching hospitals. Thembisa left academic life to become VacHealth Director ofResearch in 2009.

Jono has a PhD in pharmacy from World-Wide University. Before joining VacHealth, he worked in the research laboratory of a major pharmaceutical company where he specialised in veterinary medicines. He joined VacHealth in 2008 as a senior production manager and was promoted to Director of Production in 2014.

Familla has had a long and distinguished career in marketing. Before joining VacHealth, Familla held senior marketing positions in several major listed companies. Familla joined VacHealth as Director of Sales and Marketing in 2012.

Greta, the Chairperson, is the great-granddaughter of Mr Vac’s nephew and founder of the Wellness Foundation of VacHealth. She has served as Chair for three years.

Question 1 39 Marks

By January 2020, VacHealth had made extensive progress on an anti-biotic (VB24) that could combat respiratory diseases with 95% accuracy. The share-price increased exponentially at the news of the drug’s imminent completion. SAHPRA, the South African Health Products Regulatory Authority, had approved the use of the drug by 2021, provided that human trials were successful.

By November 2020, VB24 was ready to be produced at low cost to the consumer, however COVID-19 had spread across the world and the board of VacHealth started deliberating about researching and producing a vaccine. Unfortunately, because of limited production facilities, if VacHealth started the vaccine process, the production of VB24 would need to be put on hold. Thembisa had done extensive research on an academic level into the formulation of vaccines and is confident that she would lead the research team to success, given the severity of the situation. Jackson, after Familla entered into deliberations with the National Health Department, indicated that if VacHealth could successfully research and produce a vaccine, there would be a great financial benefit for the company.

Jackson sent you the following email:

Respond to Jackson’s email. Include the following aspects:

1.1 What the approach adopted by King IV in terms of stakeholders is. (10 Marks)

1.2 Identify the stakeholders of VacHealth and the underlying factors on which the relationships are built. (20 Marks)
1.3 Prepare an analysis of the stakeholders’ priority by mapping their interest and influence, making use of Mendelow’s Matrix. Start by explaining what is used to prioritize each stakeholder by using a diagram. (9 Marks)

Question 2 40 Marks

Melissa asked you to go and see her with great urgency. She stated that you gave Jackson such comprehensive information last year about the stakeholders that she wanted you to gather so me information for her to take to the board of directors. She showed you the following news article:

Melissa said: “I need to know what the implications of this article are for our company and what we are obliged to do!”

Write a report detailing the implications of the article. Include the following information: corporate governance and legal implications in terms of directors and the implications for VacHealth as a company. Suggest a course of action the board should take. (40 Marks)

Question 3 11 Marks

Jono stormed into your office, slumped down on the couch, and started talking about the idiotic, outdated thoughts and practices of the board of directors. He went on to explain that he has been trying to get his IT system in the production department updated since Greta became chair, but each time he raises the issue, she says it is not in the best interest of the company and will consume too many resources! He stated that when he was involved in veterinary medicine, the
IT system was reviewed and updated every two years.

Jono asked: “Isn’t there some rule somewhere that we need to update our IT systems? I really need to go into the next meeting with something more than a suggestion!”

Respond to Jono and answer his query regarding “some rule”. (11 Marks)

Answers to Above Questions on VacHealth Pharmaceuticals

Answer 1: Corporate governance is highly essential in every type of organisation. King IV edition of the King Court of corporate governance for South Africa specifies the principles and practices for effective corporate governance. An analysis of the approach adopted by KinG IV in terms of stakeholders is inclusive stakeholder because the case analysis of VacHealth pharmaceuticals indicates that the company considers the interest of various stakeholders including the employees, customers, shareholders, regulators and broader community.