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AUE 2601 > 1.3 King 3 Report And Code On Governace In SA > Flashcards

1.3 King 3 Report And Code On Governace In SA Flashcards

1
Q

Although King report compliance is voluntary, where is it mandatory?

A

When a company is listed not he JSE

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2
Q

What does the JSE listing requirements state that issuers of financial reports disclose?

A
  1. Narrative statement of how it has applied the principles in the king code
  2. Extent to which the company has complied with king code and reasons for noncompliance.
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3
Q

As stated in the kings code, what is responsible leadership about?

A
  • Building sustainable businesses
  • Reflecting on society
  • Ethical business practices
  • Not compromising environment
  • Embracing a shared future
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4
Q

How is the company to satisfy the ethical leadership principle?

A

Sustainable business

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5
Q

What should the strategy of a business take into account?

A

Social, economy and environmental impact

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6
Q

What has the King 3 Code adopted since 2 and 1?

A

The stakeholder approach

Meaning board is answerable to all stakeholders and not just company and it’s shareholders

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7
Q

What are the four ethical values that are needed or decision making and action taking?

A
  1. Responsibility
  2. Accountability
  3. Fairness
  4. Transparency
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8
Q

What are the moral duties a director needs to adhere to beside the ethical values?

A
  1. Conscience: Act with intellectual honesty, best interest of company, avoid conflict of interest
  2. Care
  3. Competence: Necessary knowledge and keep up to date
  4. Commitment: Diligence and time and effort
  5. Courage: To take risks to control and to act with integrity.
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9
Q

What are the principles of ethical leadership?

A
  1. Provide efficient leadership
  2. Ensure company is seen as responsible corporate citizen
  3. Ethics are managed effectively
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10
Q

How will the company ensure it is seen as a responsible corporate citizen?

A
  1. Success based also because of impact on economy, social and environment
  2. Deal with stakeholders correctly
    3.
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11
Q

What does section 72 of the Act allow regarding committees?

A

That the board can appoint any umber of committees

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12
Q

What does the king 3 report say about committees?

A

That there must be at least a remuneration committee and if required, nomination and risk committee.

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13
Q

What is the chairman of the board?

A
  1. Independent non-executive director
  2. CEO should NOT be chairman of board
  3. Role should be formalized
  4. Performance should be assessed yearly
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14
Q

What is membership of the board?

A
  1. Comprise of balance of power with major being non-executives
  2. Non-executives should be independent
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15
Q

What are members of the board?

A
  1. Minimum of two executive directors: one should be CEO and other should be head of finance
  2. At least one third should rotate every year.
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16
Q

How many meeting should the board of directors have?

A

At least 4 per year

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17
Q

What should the chairman of board committees be?

A

independent non-executive director

18
Q

What is membership comprised of for risk committees?

A

Executive and non-executive director’s

19
Q

How many members are required for risk committees?

A

Minimum of three

20
Q

How many time should the risk committee meet?

A

Minimum twice a year

21
Q

What is an independent non-executive director?

A
  • Have no relationships with company

- Have no shares

22
Q

What do the functions of the CEO include?

A
  1. Recommend/appoint executive team.
  2. Develop company strategy
  3. Develop and recommend to board yearly business plans
  4. Monitor and report to board performance of company
  5. establish organizational structure for company
  6. Set tone in ethical leadership
  7. Ensure company complies with all relevant laws and corporate governance principles
  8. Company applies all recommended best practices
23
Q

Why should the CEO not be the chairman of the board?

A

To prevent too much power vesting in one person.

24
Q

Which committees are the CEO and chairman of board allowed to be members of?

A
  1. Remuneration committee
  2. Nomination committee
  3. Risk committee
25
Q

Which committees are the CEO and chairman NOT allowed to be members of?

A

Audit committee

26
Q

What is the most important component of corporate governance?

A

The board of directors

27
Q

What is wrong with a board of directors giving the chairmanship to senior member?

A

This is unstructured and they should elect the chairman

28
Q

What is another name for nominations committee?

A

Directors appointment committee

29
Q

What is the point of committees?

A

They are there to assist the board in decision making, but they do not actually make the decision. The board of directors MUST make the final decision.

30
Q

What should the chairman of the audit committee be?

A

An independent non-executive director

31
Q

Can the chairman of the board of directors be the chairman or a member of the audit committee?

A

No

32
Q

What should the members of the audit committee be?

A

They should all be independent non-executive directors

33
Q

How many times a year should the audit committee meet?

A

At least twice

34
Q

Who should the audit committee meet with and when?

A

And internal and external auditor at least once a year without management being present

35
Q

What are the main functions of the audit committee?

A
  1. Oversee integrated reporting
  2. Ensure combined assurance model is applied
  3. Satisfy itself with expertise, resources and experience of company’s finance function
  4. Oversee internal audit
  5. Integral part of risk management
  6. Recommend and appoint external auditor and oversee process
  7. Report to board and shareholders how it discharged duties
36
Q

Who evaluates the board of directors?

A

The chairman or an independent party.

37
Q

What is the essential focus of governance of risk according to the king 3 report?

A

“the board should exercise leadership to prevent risk management from becoming a series of activities that are detached from the realities,of the companys business”

38
Q

Who is responsible for governance of risk?

A

The board

39
Q

Who is responsible for design, implementing and monitoring risk management plan?

A

The board should delegate to management

40
Q

Who is responsible for monitoring risk management process?

A

The board, risk committee, audit committee

41
Q

Who is responsible for performing an objective assessment of the effectiveness of risk management?

A

Internal audit

42
Q

What is the responsibility of management and the CEO in risk management process?

A
  1. Risk strategy is executed by management

2.

AUE 2601 (4 decks)

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