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BTF > Chapter 9 - Governance and Ethics > Flashcards

Chapter 9 - Governance and Ethics Flashcards

1
Q

Why is the framework of governance developed?

A

To safeguard the interests of stakeholders

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2
Q

What does governance ensure managers don’t lose sight of?

A

Whom they are seeking to benefit
Should not harm others

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3
Q

What is the agency problem?

A

Managers act as agents of shareholders who are principles
Ownership and control separated
Conflicts arise between interests of those in control and ownership

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4
Q

What is corporate governance?

A

System by which companies are directed and controlled

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5
Q

What are the 4 perspectives of what the objectives of corporate governance should be?

A

Public policy perspective -
Stakeholder perspective
Corporate perspective - senior management should balance interests of shareholders to achieve long-term sustained value
Stewardship perspective - directors act in company’s best interests

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6
Q

What are the symptoms of serious conflicts of interest?

A

Directors hiding true financial performance
Disputes over director remuneration
Relegating interests of shareholders
Financial collapse without warning

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7
Q

What are symptoms of poor corporate governance?

A

Domination of the board by a single individual/group
No involvement by board
Inadequate control function
Lack of supervision of employees
Lack of independent scrutiny by external or internal auditors
Lack of contact with shareholders
Emphasis on short-term profitability
Misleading financial statements and info

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8
Q

What are qualities of good corporate governance?

A

Risk management and reduction
Ethical and sustainable pursuit of the business’s strategy, safeguards against misuse of resources and encourages efficiency
Integrity and probity
Accountability
Reducing the potential for conflict
Reconciling interests of shareholders and directors

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9
Q

How is corporate governance linked to natural capital, sustainability and corporate responsibility?

A

Good corporate governance takes into account wider areas of corporate responsibility
Natural capital - stock of renewable/non-renewable natural resources
Ecosystem services - benefits people from ecosystems
Abiotic services - benefits to people don’t depend on ecological processes
Biodiversity - health and stability of natural capital
Sustainability - the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs

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10
Q

What are the 2 types of financial system?

A

Bank based
Market based

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11
Q

What are Hofstede’s cultural dimensions?

A

Masculinity vs Femininity
Individualism vs Collectivism
Power distance
Long term orientation
Uncertainty avoidance
Indulgencevs restraint

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12
Q

What is governance structure?

A

Set of legal/regulatory methods that ensure effective corporate governance

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13
Q

What are the 2 basic governance structures?

A

Statutes
Codes of practice

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14
Q

How do combinations of statutes and codes of practice vary globally?

A

Different countries use different combinations depending on whether they have principles based or shareholders led approach to governance structures

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15
Q

What are the OECD’s Principles of Corporate Governance?

A

Promote transparent and fair financial markets
Consient with rule of lawEquitable treatment of shareholders
Relationships with investment sources
Rights of stakeholders in corporate governance
Accurate and timely disclosure and transparency regarding performance, ownership and governance
Responsibilities of the board to seld-monitor management

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16
Q

What are institutional shareholders?

A

Organisations which invest money on behalf of other people

In UK:
Insurance companies
Pension funds
investment trusts

17
Q

What are possible structures for a board of directors?

A

Unitary board - standard UK structure, responsible for management and reporting to shareholders
Two Tier Board - common in Germany, management board and supervisory board

18
Q

What are the Water Principles?

A

Voluntary code that aims to help large private companies meet the Companies Regulations

  1. Purpose and leadership
  2. Voard composition
  3. Director’s responsibility
  4. Opportunity and risk
  5. Remuneration
  6. Stakeholder relationships and engagement
19
Q

What is an ethical culture?

A

Business culture where basic values/beliefs encourage people within behave in line

20
Q

What do corporate ethics promote?

A

Openness and transparency
Good relationships
High standards in personal behaviour

21
Q

What are the Nolan principles?

A

Integrity
Objectivity
Accountability
Openness
Honesty

22
Q

What are the ethics of the Institute of Business Ethics?

A

Respect
Transparency
Openness
Fairness
Trust

23
Q

What is the Statutory requirements mandate?

A

Equality for all
No discrimination
Freedom of info

24
Q

What are business ethics?

A

How companies behave and function in society goes beyond law requirement, includes paying staff min wage and good working conditions

25
Q

How can an ethical culture be promoted?

A

Ethical leadership from the board of directors
Codes of ethics or business conduct
Policies and procedures to support ethical behaviour

26
Q

What are the attributes and behaviours of ethical leaders identified by The Institute of Business Ethics?

A

Openness
Courage
Ability to listen
Honesty
Fair mindedness

27
Q

How is ethics involved in business functions?

A

Marketing - tageteting of marketing efforts
Operations - production processes
Procurement - sourcing of material
HR - terms of employee contracts
IT - privacy and security of data
Finance - paying supplier and tax strategy

28
Q

In seeking to address the problem of the separation of ownership and control, corporate governance
attempts to align the interests of which two of the following stakeholders?

A

Investors and managers

29
Q

What are the 3 core aspects of the South Africa’s King Report?

A

Good corporate citizenship
Leadership
Sustainability

30
Q

What are the aims of sustainability?

A

End poverty
Fight inequality
Stop climate change

BTF (11 decks)

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