Chapter 4

Question 1

What are the three aspects of an organisation?

Answer 1

• collective goals
• social arrangements - working towards common goal
• controlled performance -

Question 2

Name a few characteristics of poor governance

Answer 2

• Dominant board members
• Weak boards
• Lack of stakeholder interaction
• Lack of internal controls
• Corporate greed, allied with stock market pressure for good results

Question 3

What are the general aims of any system?

Answer 3

*providing an ethical and effective management framework *creating a willingness to follow the spirit *setting the best practise guidelines *managing a reduction in risk *building accountability for executive management

Question 4

Why does the agency problem arise?

Answer 4

Because of the fact that there is a separation of ownership and management. Directors are responsible for forming contractual relationships with 3rd parties on behalf of the company. Conflict of interest = may do what’s best for them not company

Question 5

Give an example of a third party

Answer 5

• stakeholder *customer *bank

Question 6

an example of an agent

Answer 6

director

Question 7

an example of a principal

Answer 7

the company itself

Question 8

What are CIMA’s suggested improvements to global governance codes?

Answer 8

• Creating a new reporting structure
• Telling the governance story
• Compliance reporting

Question 9

What is corporate governance

Answer 9

An additional set of rules and guidance for organisation