2.3 UK regulations: the Corporate Governance Code

Question 1

Which British Standard provides a framework that organisations can use to assess and improve their corporate governance activities?

Answer 1

BS 13500

Question 2

When was the Cadbury report first published and for what purpose?

Answer 2

1992 in response to growing concerns around the standard of financial report and board accountability, and in response to scandals such as the Maxwell Communication Corporation Scandal.

Question 3

What were the three recommendations of the original Cadbury report?

Answer 3

1 The CEO and chair roles should be separate
2 Board should have at least three NEDs
3 Each Board should have an audit committee consisting of NEDs

Question 4

The UK Code was updated following a fundamental review in 2017, and now includes softer risk issues such as o__________ c______ and r____ c_________.

Answer 4

Organisational culture

Risk culture

Question 5

What is meant by risk culture?

Answer 5

The values, beliefs and assumptions that are shared by employees of an organisation and which influence how these employees perceive risk and make risk management decisions.

Question 6

The advantages of a comply of explain approach are that organisations are provided with clear p_________ in relation to their governance practices, but are allowed a degree of f___________ given the wide variety of possible organisations, industries and environments.

Answer 6

principles

flexibility

Question 7

UK Corporate Governance Code Principle M:

The board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of i________ and e________ audit functions and satisfy itself on the i_______ of financial and narrative statements.

Answer 7

internal
external
integrity

Question 8

UK Corporate Governance Code Principle N:

The board should present a fair, b______ and understandable assessment of the company’s position and p_______.

Answer 8

balanced

prospects

Question 9

UK Corporate Governance Code Principle O:

The board should establish procedures to manage risk, oversee the internal control f_________ and determine the nature and extent of the p_______ risks the company is willing to take in order to achieve its l___-t____ objectives.

Answer 9

framework
principal
long-term

Question 10

What is meant by a principal risk?

Answer 10

Large scale risks to the achievement of strategic objectives which may threaten the business model, future performance and solvency of an organisation.

Question 11

Which organisation has developed a voluntary code of governance for small to medium sized organisations quoted on alternative investment markets, securities exchanges and derivative exchanges?

Answer 11

Quoted Companies Alliance.