BST Quick

Question 1

Issues with the objectives of Not-For-Profit organisations

Answer 1

NFPs often have multiple objectives to consider which are difficult to measure success as these aren’t financial eg pass rates of a school, attendance rates, child happiness

Stakeholder conflicts may be higher due to increased variety in type and influential people eg gov, teachers, children etc
Financial constraints may also limit ability to achieve objectives

Question 2

Planning horizon. (5)

Answer 2

Need to balance short term results with longer term strategic development

Influences:
Nature of ownership is NFP usually more long term than profit generating entity
Capital structure -banks expect returns over a longer period of time to match assets securing a loan
Nature of industry- industries that require a high level of capital eg aircraft developer would expect returns to be generated over a long period of time
Business environment-dynamic industries may be better short term to react to the market
Nature of management-long term planning is a skill and so managers lack the time or skill to plan long term

Question 3

Good principles of corporate governance

Answer 3

Appropriate balance of power (no one individual should be awarded too much power eg the chair and ceo should not be the same person)

There should be a sufficient number of NEDs to provide objective opinion in key decisions

Established committees, NEDs should form a nominations committee, remuneration committee and audit committee

Effective risk management-dhould have this and internal control systems

Question 4

Governance for not for profit

Answer 4

Don’t need to comply with corporate governance code but should:

Be accountable
Answerable to a wide number of stakeholders
Open and transparent to improve public trust
Board structures
Monitor performance

Question 5

What is corporate governance

Answer 5

System by which business corporations are directed and controlled

Question 6

If asked to improve governance what could you suggest?(5)

Answer 6

-Increase NEDs to improve executive control making
-Appoint a secretary
-Move towards compliance in line with corporate governance code
-Include other functions eg if only have marketing director but no procurement should add this
-Say board procedures should be reviewed to ensure there is compliance with legal requirements acting in the interests of a company