Corporate Governance & Social Responsibility

Question 1

Corporate governance definition

Answer 1

System by which organisations are directed & controlled by the senior officers

Question 2

Main provisions of Sarbanes-Oxley Act

Answer 2

• Majority of BOD must be independent
• CEO & CFO must certify financial statements are accurate
• Audit committee made up entirely of independent directors
• Auditors must review & report on effectiveness of internal control procedures
• Public Company Accounting Oversight Board (PCAOB) was set up

Question 3

Audit committee membership

Answer 3

2-3 NED, at least one of whom have recent, relevant financial experience

Question 4

Information required to be reported on Corporate Governance (UK CG Code)

Answer 4

• Narrative statement of how principles of CG code have been applied
• Statement of compliance with Code/reasons for non-compliance
• Information about BOD
• Committee reports
• Statement of effectiveness of internal control

Question 5

Define CSR

Answer 5

Idea that organisation (not only company) have an obligation to consider the interests of customer, employees, SH, communities & ecological consideration in all aspects of their operations

Question 6

Proactive [CSR approaches]

Answer 6

Take full responsibility for its actions

Question 7

Reactive [CSR approaches]

Answer 7

Wait until public reaction before amending ways

Question 8

Defence [CSR approaches]

Answer 8

attempt to avoid additional obligations caused by particular problem

Question 9

Accomodating [CSR approaches]

Answer 9

Accomodate concerns of public & gov to prevent stricter legislations being introduced

Question 10

Types of CSR responsibility

Answer 10

1) Economic - provide return to SH, rumenaration to staff, VFM to customer
2) Legal - follow legislations
3) Ethical - act in a fair & just way
4) Philanthropic - exceed ethical, improve society

Question 11

4 Ethical Stances [Johnson & Scholes]

Answer 11

1) ST SH interest
2) LT SH interest - corporate image enhancement, presentation of pressure for legal regulation
3) Multiple STH obligation
4) Shaper of society - etc public sector organisation

Question 11

OECD Principles [2015 ver]

Answer 11

Corporate governance framework should

1. Promote transparent & fair market and effective allocation of resources
2. Protect & facilitate the exercise of SH’s right including minority & foreign
3. Provide sound incentives across investment chain
4. Recognise the rights of stakeholders and encourage active co-operation between corporations and stakeholders
5. Ensure that timely and accurate disclosure is made on all material matters regarding the corporation
6. Ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.