Week 4

Question 1

US courts may decide to “lift the corporate veil” because

Answer 1

• A parent corporation hides illicit activity in a subsidiary
• The corporation was formed with insufficient capital

Question 2

Internal stakeholders

Answer 2

Question 3

External stakeholders

Answer 3

Question 4

Window dressing definition

Answer 4

Window dressing is a strategy used by mutual fund and other portfolio managers near the year or quarter end to improve the appearance of a fund’s performance before presenting it to clients or shareholders. To window dress, the fund manager sells stocks with large losses and purchases high-flying stocks near the end of the quarter. These securities are then reported as part of the fund’s holdings.

Question 5

Agency theory

Answer 5

Question 6

Definition of corporate governance

Answer 6

– System of rules, practices and processes by which a company is directed and controlled

– Aims at balancing the interests of the stakeholders

Question 7

Objectives of corporate governanace

Answer 7

• ensure integrity in the company’s operations
• hold the management accountable for its actions
• encourage investor and public confidence
• promote sustainable long term management and economic stability

Question 8

B.Principles of corporate governance

Answer 8

Question 9

Statutory model (Management structure of corporations)

Answer 9

Question 10

Publicly held corporation (Management structure of corporations)

Answer 10

Question 11

Closely held corporation (Management structure of corporations)

Answer 11

Shareholders = Directors = Officers

Question 12

Corporate governance in a listed company

Answer 12

Question 13

Corporate governance in a non-listed company

Answer 13

Question 14

The notion of CSR encompasses all the obligations of the company as regards social, environmental and economic matters

Answer 14

Question 15

CSR Implementation

Answer 15

• France: Mandatory reporting on the financial risks related to climate change
• International: ISO 26000 international norm about social responsibility

Question 16

Caveat Emptor

Answer 16

The phrase is an ancient principle that is intended to resolve disputes arising from information asymmetry, the pervasive situation in which the seller knows more than the buyer about the quality of a good or service. If Hasan wants to buy a car from Allison, he is responsible for gathering the necessary information to make an informed purchase. He should ask her how many miles it has on it, whether any major components need to be replaced, whether it’s been serviced regularly and so on. If he simply buys the car for the asking price and makes little or no effort to assess its true value, and the car subsequently breaks down, Allison is not liable for damages under the principle of caveat emptor.

Question 17

UK: Cooling off period

Answer 17

Customers are allowed to unilaterally withdraw from a contract within a certain timeframe, to return the ordered product back to the trader and they are entitled to get the paid amount reimbursed