Chapter 3

Question 1

What are the six core competencies of a director?

Answer 1

Generic core competencies of a director
1. Strategic reasoning, perception & vision
2. Capability of quantitative and qualitative analysis
3. Planning and decision-making capabilities
4. Communication and interpersonal skills
5. Network and political abilities
6. Knowledge of the enterprise (history, politics, organization, financials, industry)

Question 2

What are the directores duties and rights?

Answer 2

Duty of trust: exercise a fiduciary responsibility to the shareholders
* Act honestly, in good faith, giving all shareholders equal, sufficient and accurate information on all issues affecting their interests; should avoid conflict of interest; declare any interest in proposed transaction

Duty of care: exercise independent judgement with reasonable care, diligence, and skill

Question 3

What are two reasons for boards to create subcommittees?

Answer 3

1. Enable independent directors to meet separately from the board as a whole, in order to fulfil their oversight role
2. Delegate board activities to reduce the burden on the board as a whole

Question 4

What is corporate governance?

Answer 4

• The way power is exercised over corporate entities
• Covers: the activities of the board and its relationships with the managers of the firm, with the stakeholders, with external auditors, regulators and other legitimate stakeholders

Question 5

How can the board ensure long-term focus? (4 steps)

Answer 5

1. Define long-term
2. Take the lead in finance and strategy decisions
3. Take the lead in developing talent
4. Streamline the processes dealing with compliance control and other routine issues, in order to free up time for the
   activities above