Governance, Corporate Responsibility and Ethics

Question 1

What is defined
A set of relationships between a company’s management, board, shareholders and other stakeholders that provides the structure through which objectives of the company are set, attained and monitored

Answer 1

Corporate governance

Question 2

What perspective of CG is described
To maximise wealth of shareholders, provide it conforms to rules of society (laws and customs)

Answer 2

Corporate

Question 3

What perspective of CG is described
Ensure company meets objectives of SH + other individual groups with a stake + interest of public at large

Answer 3

Public policy

Question 4

What perspective of CG is described
a balance between economic and social goals and between individual and communal goals, framework should encourage efficient use of resources through efficient investment, require accountability from senior management to shareholders and align interests of shareholders and companies with those other stakeholders

Answer 4

Stakeholder perspective

Question 5

What perspective of CG is described
Directors required to act in the best interest of the company when acting as stewards of company’s resources. most directly related to solving principal agent problem

Answer 5

Stewardship perspective

Question 6

Four perspectives of CG

Answer 6

corporate
public policy
stakeholder
stewardship

Question 7

Five key elements which drive good corporate governance

Answer 7

BOD
Senior management
SH
External Auditors
Internal Auditors

Question 8

what are the two types of financial system

Answer 8

bank based and market based

Question 9

Continental European systems especially France and Germany and Japan are what kind of financial system

Answer 9

bank based system

Question 10

What kind of financial system is described
Households prefer to bear little risk allocate more financial assets to cash and cash equivalents, have little access to investment in physical assets, where they do invest, done via intermediaries,
more government regulation,
banks concentrated and integrated
bank lending most important source of business finance
Banks and buinsess highlight integrated
markets are volatile and speculative

Answer 10

Bank based

Question 11

What kind of financial system described
Household bear more risk
greater access to investment in physical assets
indirect investment via intermediaries institutional SH have lots of influence
markets more important than bank for LT finance
comparatively unregulated
banks are more fragmented
banks have fewer close relationships with businesses lend to

Answer 11

Market based

Question 12

what represents the dominant force in external finance in a market based system

Answer 12

institutional Sh

Question 13

What represents the dominant force in external finance in a bank based system

Answer 13

Banks

Question 14

What is described
code of practice embodying SH led approach to CG, includes requirements of international SH and the company themselves

Answer 14

UK CG code

Question 15

Five main principles for companies in CG code

Answer 15

leadership
Board effectiveness
Accountability / audit
Remuneration
Investor relationships

Question 16

Who are the following roles of
provide leadership to board ensure effective and set agenda
cooperate in induction and development of new members
facilitate board appraisal
take lead in providing induction programme for new directors and in board development

Answer 16

Chairman

Question 17

Who are the following roles of
provide accurate and timely info
communicate effectively with stakeholders
facilitate effective implementation of board decisions
cooperate with all members of the board

Answer 17

CEO

Question 18

Which committee
at least three independent NED (two if small), review FS and recommend external auditors, reviewing on an ongoing basis their independence and setting policy on provision of NAS

Answer 18

Audit Committee

Question 19

Which committee
at least three independent NED (two in smaller companies), responsible for overall policy on remuneration and recommending remuneration package for individual executive directors. Levels of remuneration should be sufficient to attract, retain and motivate directors. A significant proportion of salary should be performance related pay. Level of pay for NED should reflect time commitment and responsibilities of the role

Answer 19

remuneration committee

Question 20

Which committee
At least three members, majority independent NED,
responsible for recommending appointments of NED and ED to the board

Answer 20

Nomination committee

Question 21

What are the two types of structure for the BOD as a whoel

Answer 21

unitary board
dual/supervisory board split between management and supervisory

Question 22

What board is described
responsible for both management of the business and reporting to SH via FS and SH metings

Answer 22

Unitary board

Question 23

What board is described
Split between management board - responsible to manage company using similar powers to unitary board and supervisory board who are independent separate board elected by shareholders and employees, often comprising of a series of committees with delegated powers

Answer 23

Dual/supervisory board

Question 24

Role of executive directors are evaluated in line with the UK CG code on the basis of

Answer 24

effectiveness of contribution and time commitment to the role

Question 25

T/F
The chairman may be a member of, but may not chair the remuneration committee

Answer 25

True

Question 26

A process, created by a BOD, Management or other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations reporting and compliance

Answer 26

Internal control

Question 27

COSO - Five components of effective IC

Answer 27

Control environment
Regular risk assessment (annual review at least)
Control activities
Information and communication
Monitoring

Question 28

Auditors of listed companies must also report on

Answer 28

directors remuneration report
Companies compliance with UK CG code

Question 29

For small listed companies outside FTSE 350, what is the minimum number of NEDs on the board

Answer 29

two

Question 30

Are full time executive directors of FTSE 100 companies allowed to take on chairmanship of another FTSE 100 company

Answer 30

No

Question 31

Who is responsible for maintenance of sound risk management and IC system

Answer 31

the entire BOD

Question 32

what is defined
a system of behaviour deemed acceptable in the society or context under consideration, tells us how to behave

Answer 32

ethics

Question 33

What is defined
a business culture where the basic values and beliefs in a company encourage people within the company to behave in line with acceptable business ethics

Answer 33

Ethical culture

Question 34

What are the relevant Nolan principles for starting point for business values

Answer 34

Integrity
Objectivity
accountability
openness
honest

Question 35

Institute of business ethics lists further business values which are

Answer 35

fairness,
responsibility
trust
transparency
truth

Question 36

Statutory requirements of business

Answer 36

equal opportunities
No discrimination on any grounds
Freedom of information

Question 37

What is defined
the application of ethical values to business behaviour and functions. goes beyond legal requirements for business and is about discretionary decisions and behaviour guided by values

Answer 37

business ethcs

Question 38

Levels of society expectations effects

Answer 38

overall level
specific company level
level of individuals in the company

Question 39

What is defined
the commitment the business makes to its stakeholders to increase positive impacts and decrease its negative ones

Answer 39

Corporate Responsibility

Question 40

How can an ethical culture be promoted

Answer 40

Ethical leadership
codes of ethics/business conduct
policies and procedures to support ethical behaviour

Question 41

Attributes and behaviours of ethical leadersq

Answer 41

openness
courage
fair mindedness
ability to listen
honest