問題：A technological failure occurred at Lobo Company last year. A new computer system which was designed to control Lobo’s complicated operational facility broke down shortly after it was installed. This meant that the company was unable to carry out production processes normally for several days.
　　The cause of the failure was later found to have been a system specification error made by Frank Bub, the operations director and a professional engineer. He had seriously miscalculated the capacity needed for the new system and had ordered a computer system which was unfit for purpose. Not only had this resulted in the loss of several days of production and a loss of loyalty and goodwill from customers and others, it also cost a large amount to repair and upgrade the system to be able to cope with the actual demands placed upon it.
　　Frank Bub acknowledged that he had over-ridden normal procurement procedures in purchasing the system. But he was thought by his colleagues to be such a competent engineer, it was not felt necessary for anybody else in the company to discuss the purchase with the suppliers. His fellow directors believed that Mr Bub would exercise the judgement needed to purchase and implement the new system. Because the system was needed urgently, there was no time to run it in ‘pilot mode’ or to test it on site before it was fully installed. When he was asked about the failure, Frank Bub said that he decided to buy the system in question because an old friend had recommended it and that he saw no need to take further advice beyond that.
　　The non-executive directors met after the incident and collectively decided that Frank Bub, who had nine months remaining on his renewable three year contract, had lost the confidence of the board and should leave the company at the earliest opportunity. It was decided to move him to a non-critical role until such time as it was possible to remove him as cheaply as possible.
　　Required:
　　(a) Directors may leave the service of a board in several ways.
　　(i) Describe the main ways in which the directors of companies can leave the service of a board (3 marks)
　　(ii) Justify an appropriate way for Frank Bub to leave the board of Lobo Company, based on the circumstances of the case. (5 marks)
　　(b) Briefly explain ‘technological risk’ and discuss the problems which led to the technological failure at Lobo, commenting on how these might affect shareholder confidence in the entire board. (8 marks)
　　(c) You may assume that, as a professional engineer, Frank Bub is bound by the same fundamental principles of professional ethics as a professional accountant and must act in the wider public interest.
　　Required:
　　Discuss the fundamental principles of professional ethics which Frank Bub failed to observe and explain how an awareness of his duty to the public interest may have prevented his errors. (9 marks)
　　(25 marks)
　　解析：(a)(i) Leaving a board of directors
　　There are several ways in which a director can leave the service of a board. The first way they can leave is by retiring by rotation meaning that upon the expiry of a predetermined fixed term (three years in Frank Bub’s case), they do not offer themselves for re-election by shareholders or, having offered themselves for re-election, are not re-elected.
　　A director can also resign at any time with or without a financial pay-off depending on contract. They can be dismissed for gross misconduct such as theft, violence, fraud or similar. In some cases, this may take the form of a legal disqualification or disbarment. As with other employees of an organisation, directors can be dismissed for incompetence, weak performance or failing to meet targets or similar. In some cases, the director may fall ill or be otherwise unable to continue (including becoming incapacitated or dying). Finally, directors will leave the company if the company is
　　declared insolvent or otherwise becomes unable to pay and thus retain the services of a director.
　　(ii) Frank Bub’s case
　　In most cases, probably including Frank Bub’s case, the easiest course of action is to allow the current contract to elapse. This is easiest for the company because the fault for the error is partly shared by the rest of the board due to its (the board’s) lack of oversight of Frank Bub’s activities, and the principle of joint responsibility. In any company with strong governance, such decisions would never be made by a single individual. In Frank Bub’s case, the contract elapses in nine months’ time. The problem with, say, dismissing him, would be in showing how he failed as a director: it can often be problematic as performance is difficult to assess or *uate with a small number of performance measures. Whilst he was responsible for the error in the specification, there is a joint liability as others should have signed off on this project too. It may be possible to pay him until his contract expires without having him in a position of responsibility (‘gardening leave’) or he may agree to perform another role in that time period.
　　Unless the board supports his re-election, he would be unable to offer himself for re-election by shareholders and so his period of tenure as a director would expire naturally. Assuming there is no expensive termination payment in force on his contact, it should be inexpensive for him to leave the service of the Lobo board.
　　[Tutorial note: Allow other ways to remove Frank Bub if adequately justified.]
　　(b)Technological risk
　　Technological risk concerns the potential losses and damage incurred by the failure of any technology. People often associate
　　technology with computers but it need not be so – it could also be engineering, designs, etc. The impacts of technological
　　risk depend upon those activities which depend upon the particular technology in question. In the case of lost data or a
　　computer storage failure, recent work may be lost, or more seriously, a patient may suffer if a piece of medical technology
　　fails during use. In some financial systems, technology failures can also have very high impacts if all financial data is lost,
　　for example.
　　Technological risk and shareholder confidence at Lobo
　　The errors which led to the technology failure were serious and avoidable. Frank Bub had ordered a system which was unfit for purpose in that it was not correctly specified. This means that it was not capable of processing the number of tasks required of it and this caused the system to fail when placed under normal loading. Having a person in a senior position capable of this magnitude of error may reflect on the remainder of the board and also its appointments processes and this may ultimately affect shareholders’ confidence in the board as a whole.
　　Second, Frank Bub was seemingly allowed to make a large investment decision alone and with no purchasing procedure or controls in place to monitor and assess the quality of such a large asset purchase decision. For something as important as an operational control system, this is an organisational and systemic oversight which reflects badly on the purchasing procedures for the company as a whole. A project team might instead have been formed with technical specialists and product users meeting together to ensure that the system ordered was suitable for the intended purpose.
　　Third, the system was not pilot tested before it was fully implemented. For such an important system as the one which controls the company’s main operations, discussion of this project should have been a regular and standing item on the board meeting agendas in the period leading up to its implementation. Thus, shareholders are unlikely to see the blame as being attributable to just one person. Such a major decision should have been taken by the board and full implementation procedures agreed by the board. Therefore, even with the removal of Frank Bub, shareholders may not regain full confidence in the board.
　　(c) Fundamental principles Frank Bub failed to observe
　　By over-riding the normal procedures for purchasing at Lobo Company, he acted unprofessionally and failed to observe the fundamental principle of professional *. Procedures in organisations are agreed and imposed for good reason, including, in the case of large capital purchases, ensuring that systems meet value for money criteria and possess adequate operational capabilities. It was by the circumvention of these procedures that the events described in the case occurred.
　　By purchasing a system unable to cope with the demands placed upon it, and failing to correctly specify the system requirements, he failed to observe the fundamental principle of professional competence and due care. In the same way that accountants are employed because they are trusted with certain areas of expertise, engineers are employed because they are trusted with such matters as technical system specifications.
　　By purchasing the system on the advice of a friend and failing to take further advice beyond that, he was lacking objectivity and sound judgement. Professionals should act without bias, conflicts of interest and undue influence in all decisions. When a decision involves a large capital investment such as that at Lobo Company, this criterion becomes especially important as it can affect the operational capability of the business and also, eventually, its strategic positioning.
　　Public interest
　　All professionals are required to act in the public interest. Because the status of a professional in society is accorded a special privilege, the requirement to act in the public interest at all times is an expectation of society. This applies to professional engineers as well as to professional accountants. An awareness of this would have meant that Frank Bub would have considered a wider range of factors before making the incorrect specification decision.
　　If Frank Bub was aware of this duty, he would be aware that he owed a duty of professional care to ‘clients, lenders, governments, employers, employees, investors, the business community and others who rely on the work’ (from the IFAC definition of professionals).
　　Acting in the public interest also reminds Frank Bub that his status as a professional is supported by society in exchange for an understanding that he will explicitly not act for any sectional interest or in any way which lacks competence, objectivity or professional care. Because, in the case of his role at Lobo, he is acting on behalf of its shareholders, employees and others, their legitimate claims should be uppermost in his mind in his professional duties.