Corporate Governance

Question 1

What types of organisation have the strongest governance requirements?

Answer 1

Listed companies
Charities
Government Departments, agencies and authorities

Question 2

What Code governs companies on the London Stock Exchange?

Answer 2

UK Corporate Governance Code

Question 3

What are the three key purposes of corporate governance?

Answer 3

1. Facilitate accountability and responsibility for effective and efficient performance and ethical behaviour
2. Protect execs and employees in doing their work
3. Ensure stakeholder confidence in the org’s ability to identify and achieve objectives

Question 4

What are the two key approaches to corporate governance requirements?

Answer 4

Comply or explain (LSE)

Full compliance

Question 5

What 5 steps should be taken in order to improve corporate governance within and organisation?

Answer 5

1. Develop code of ethics for directors and produce ‘delegation of authority’ document
2. Produce an annual statement of conflicts of interest
3. Director training on corp. gov.
4. Establish committees with ToR e.g.
   - RM Committee
   - Audit Committee
   - Disclosures Committee
   - Nominations Committee
   - Remuneration Committee
5. Reports to every board meeting on corp. gov. standards, concerns and activities

Question 6

How is corporate governance defined in the OECD Principles of Corporate Governance?

Answer 6

“The system by which organisations are directed and controlled.”

Question 7

What are the four over-arching concerns of the OECD Principles of Corporate Governance?

Answer 7

Openness, integrity, accountability, decision making

Question 8

Which standard is most closely associated with corporate governance in the UK

Answer 8

BS13500

Question 9

Name a defining feature of BS13500

Answer 9

Defines different accountabilities to different stakeholders

Uses a checklist to ensure all elements of a good governance system are in place.

Question 10

Name the OECD’s 6 principles of corporate governance

Answer 10

1. Effective corporate governance framework
2. Rights of shareholders
3. Equitable treatment of shareholders
4. Role of stakeholders in corporate governance
5. Disclosure and transparency
6. Responsibilities of the board

Question 11

Explain the OECD corporate governance principle of “Effective corporate governance framework”.

Answer 11

Promote transparent and efficient markets,

Be consistent with the rule of law,

Define the division of responsibilities

Question 12

Explain the OECD corporate governance principle of “Rights of shareholders”.

Answer 12

Protect and facilitate the exercise of the rights of shareholders

Question 13

Explain the OECD corporate governance principle of “Equitable treatment of shareholders”.

Answer 13

Equitable treatment of all shareholders including minority and foreign shareholders

Question 14

Explain the OECD corporate governance principle of “Role of stakeholders in corporate governance”.

Answer 14

Recognise the rights of stakeholders and encourage active co-operation in creating wealth, jobs and sustainability

Question 15

Explain the OECD corporate governance principle of “Disclosure and transparency”.

Answer 15

Timely and accurate disclosure is made on all material matters, including financial situation, performance, ownership and governance

Question 16

Explain the OECD corporate governance principle of “Responsibilities of the board”.

Answer 16

Strategic guidance of the company,

Effective monitoring of management by the board,

Accountability of the board to the company and shareholders.

Question 17

The LSE Corporate Governance Framework separates governance OF the board from governance BY the board.

Explain what is meant by governance OF the board.

Answer 17

The board is governed by

• Membership
• Accountability
• Delegation
• Remuneration

Question 18

The LSE Corporate Governance Framework separates governance OF the board from governance BY the board.

Explain what is meant by governance BY the board.

Answer 18

The board governs through

• Strategy
• Corporate Social Responsibility
• Risk
• Audit
• Disclosure

Question 19

Risk is a separate component of the LSE framework but what other components are underpinned by risk?

Answer 19

Strategy
Corporate Social Responsibility
Audit
Disclosure

Question 20

UK corporate governance is made up of which two sets of guidance?

Answer 20

LSE Framework

OECD Principles of Corporate Governance

Question 21

What role does the third line of defence (non-execs, audit committee) play in corporate governance?

Answer 21

• Upholding ethical standards of integrity and probity
• Promote higher standards of corporate governance
• Seek compliance with applicable governance codes
• Gain trust and respect of board members
• Question, debate, challenge & make decisions objectively
• Listen to views of others including outside the board
• Support execs in leadership & monitor conduct

Question 22

What might the internal governance guidelines for a bank include?

Answer 22

Required director qualifications & responsibilities
Delegation of authority to committees
Arrangements for annual performance evaluation & senior management succession

Question 23

What will the corporate governance structure for a bank include?

Answer 23

A set of governing principles for the board e.g.

Conflicts of interest
Confidentiality
Legal/regulatory requirements

Question 24

What is the training for board members likely to include in a bank?

Answer 24

• legal and regulatory framework
• risk management
• capital management and group accounting
• HR & compensation
• audit committee, internal/external audit
• communications including branding

Question 25

How is the corporate governance approach in a government agency likely to differ from that of a bank?

Answer 25

More focussed on value for money and accountability.

Question 26

What will a government agency's governance framework describe?

Answer 26

Responsibilities of individual members of staff, reporting structure for risk, identification of risks to value, business continuity, fraud prevention, IT security

Question 27

What set of principles underpin corporate governance activities in government departments?

Answer 27

The Nolan Principles of Public Life

Question 28

Name the 7 Nolan Principles of Public Life

Answer 28

1. Selflessness, serving the public over self/friends/family 2. Integrity, under no obligation to outside individuals or orgs 3. Objectivity, decisions made on merit 4. Accountability, answer to the public, open to scrutiny 5. Openness, about decisions and actions 6. Honesty, declaring private interests, resulting conflicts 7. Leadership, support the principles by example

Question 29

What are the two types of board structure?

Answer 29

Unitary board (mixture of execs and non-execs) Two-tiered board (separate exec and non-exec boards, usually used by charities or public sector orgs)

Question 30

In what areas should the effectiveness of the board be evaluated?

Answer 30

``` Membership and structure Purpose and intent Involvement and accountability Monitoring and review Performance and impact ```

Question 31

What should be considered when evaluating the membership and structure of the board?

Answer 31

Necessary range of skills, experience and turnover to ensure new ideas? Sub-committees appropriate, with appropriate delegated authority? Good decision-making processes with adequate info available? Good comms between board members outside of meetings?

Question 32

What should be considered when evaluating the purpose and intent of the board?

Answer 32

Members understand and share the vision/mission, objectives? Sufficient knowledge and understanding of significant risks? Members involved with development of strategy? Measurable budget and performance targets?

Question 33

What should be considered when evaluating the involvement and accountability of the board?

Answer 33

Shared ethical values, open and honest, with policies consistent with this? Duties, responsibilities and obligations understood? Mutual trust and respect? Adequate delegation and authorisation procedures in place?

Question 34

What should be considered when evaluating the monitoring and review by the board?

Answer 34

Sufficient monitoring and appropriate measurement of performance? Planning assumptions challenged when and where appropriate? Able to rapidly respond to change? Demand for continuous improvement? Controls assessed and compliance assurance sought?

Question 35

What should be considered when evaluating the performance and impact of the board?

Answer 35

Good board and committee attendance? Board decisions recorded and tracked? Targets/KPIs evaluated and assessed? Impact of decisions and actions evaluated in a timely manner? Emphasis on accuracy, honesty and open external reporting?

Question 36

How do the governance arrangements in Germany differ to those in the UK

Answer 36

German law of dual board systems

Question 37

What governance arrangements apply in Latin America?

Answer 37

Mexican code of best practice. Sao Paulo has two stock exchanges with differing levels of governance.