2. Corporate Governance

Question 1

Also in the King III Report companies need to report on how they will enhance the (1)… and eradicate the (2)…

Answer 1

(1) current positives

(2) current negatives

Question 2

As of June 2010, companies listed on the … are expected to comply with King III.

Answer 2

Johannesburg Securities Exchange (JSE)

Question 3

Besides reporting on their financial performance (single bottom line) in King I Report, in the King II Report corporations must also disclose their … (triple bottom line).

Answer 3

Social and environmental performances.

Question 4

Companies with good corporate governance will attract more … to finance their growth and will therefore be more competitive in the corporate environment.

Answer 4

Foreign investments

Question 5

Corporate governance controls the … of managers, employees and outside business stakeholders.

Answer 5

Internal and external actions

Question 6

Corporate governance refers to the … among the management of an organisation, its board, its shareholders and other relevant stakeholders.

Answer 6

Relationships

Question 7

COSO defines … as “a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives.

Answer 7

Internal control

Question 8

Effective corporate governance helps enterprises to … by improving the confidence of domestic and international investors and by assuring them that the assets are used in the way agreed upon.

Answer 8

Attract lower-cost capital

Question 9

Effective corporate governance may lead to …

Answer 9

Improved corporate performance.

Question 10

Effective corporate governance promotes the efficient use of … within a firm and the economy at large.

Answer 10

Resources

Question 11

Good corporate governance contributes to … and is a key factor in the investor decision-making process.

Answer 11

Shareholders’ wealth

Question 12

It also refers to the specific … of boards of directors and management to maintain established relationships.

Answer 12

Responsibilities

Question 13

It is important to understand the … of the business because the statements will show the financial position of the business as well as the future position.

Answer 13

Financial statements

Question 14

Some … can be experienced when risk management processes need to be implemented in a business

Answer 14

Difficulties

Question 15

The board’s role is to avoid policies that promote (1)… , have appropriate (2)… , establish (3)… to promote long-term value

Answer 15

(1) excessive risk-taking
(2) risk management functions
(3) compensation plans

Question 16

The board’s role is to steer the corporation towards (1)… that support (2)… in shareholder value.

Answer 16

(1) corporate governance policies

(2) long-term sustainable growth

Question 17

The consequences of corporate governance in the King III Report relate strongly to how effectively companies enforced the … in 1994.

Answer 17

King I Report

Question 18

The King Code (King III Report) was necessary because of the introduction of the new …

Answer 18

Companies Act of 2008.

Question 19

The King I Corporate Governance Report focused mainly on the reporting the … side of organisations.

Answer 19

Financial

Question 20

The King I Report advocated an … that took all stakeholders (not only the shareholders) into consideration, for the greater good of society.

Answer 20

Integrated approach

Question 21

The King II Report moved away from the single bottom-line principle (i.e. profit for shareholders) to a triple bottom-line principle, which takes into account the … of a company.

Answer 21

Economic and social activities

Question 22

… is the framework of rules and practices by which a board of directors ensures accountability, fairness and transparency in a company’s relationship with all its stakeholders.

Answer 22

Corporate governance