11. Governance And Social Responsibility

Question 1

When specialist run the company it can be defined as____

Answer 1

Separation of ownership and control

Question 2

What is agency problem ?

Answer 2

When directors run business with their own interest instead of shareholders

Question 3

What is NED and it’s role ?

Answer 3

Nonexecutive director- need to be independent(no interest share in business) no ties to dirs, should be elected, not employed in last 5years

Role: strategy, performance, risk, remuneration for execs

Question 4

How execs and neds should be appointed?

Answer 4

Should be elected every 3 years by shareholders

Question 5

What are main areas of recommendations for effective corp. govern. ?

Answer 5

Board of dirs
Remuneration
Role of audit
Public disclosure

Question 6

Difference between exec and ned

Answer 6

NED is not employed by business ( no day to day tasks)

Executive dirs are involved in day to day operations

Question 7

What is remuneration committee , what + and -

Answer 7

Made of NEDs to decide salary for executives

+solves agency problem
-scratch my back

Question 8

Audit committee

Answer 8

Made of NEDs. Responsible for monitoring & review of internal financial controls and fin. Statements

Act as mid between board and auditors

Main adv. is allowing auditors to report to independent directors.

Question 9

Nomination committee - what it do?
what need to be considered ?

Answer 9

Monitoring process of app. Of dirs

To consider:
size of board, skills, mix of exec & NEDs on board, continuity, diversity

Question 10

Public oversight

Answer 10

annual reports disclosed
Companies house

Question 11

Benefits of corp governance

Answer 11

o Business success
o investors confidence
o minimal waste
o listing requirements ( ex. Lse)

Question 12

Corporate social responsibility refers to____

Answer 12

Idea that company should be sensitive to needs of all stakeholders (not just shareholders)

Financial, social (community) environmental

Question 13

Adv and disadv of CSR

Answer 13

+good reputation attracts customers
+avoiding pollution=no fines,tax

-loss of revenue
-increased cost

Question 14

Stakeholder analysis/ how?

Answer 14

Identify stakeholders and their needs through questionnaires, focus groups and interviews

Question 15

What are types of committee ?

Answer 15

Executive, standing (for particular purpose), adhoc, sub-committee

Question 16

Purpose of committee

Answer 16

Brainstorm ideas, delay, make decisions, consult, problem solve, advise

Question 17

Adv & disadv of committees

Answer 17

+delay
+ppl with skills
+no rush/poor decisions
+collective responsibility

-slow
-collective responsibility
-members can push for their own dep.
-part time for some

Question 18

Chair person functions

Answer 18

o keep meetings on schedule
o maintain order
o sums up
o ensure all can speak

Question 19

Secretary function

Answer 19

Support , prepare agenda, communicate decisions