Week 5

Question 1

What is Corporate Governance

Answer 1

Corporate Governance is the system by which organisations are directed and controlled.

Question 2

Agency Theory

Answer 2

A principle to explain and resolve issues in the relationship between business principles and their agents.

Question 3

Agency Cost

Answer 3

A type of internal company expense which comes from the actions of an agent acting on behalf of a principal.

Question 4

Why is Corporate Governance?

Answer 4

Take control of the behaviour of the agents and to keep the best interest of the stakeholders and to avoid any financial or ethical crises.

Question 5

Corporate Governance Approaches

Rules-based (Rare: USA)

Answer 5

Given set of corporate governance requirements to be adhered to

Limited discretion on application and interpretation

May not be flexible enough to deal with new and changing circumstances and business environments

Narrower definition of ‘rules’

More of a tick-box exercise

Clear guidance on what is appropriate and what isn´t

Question 6

Corporate Governance Approaches

Principle-based(Usual)

Answer 6

Key principles need to be complied with or explained

Different organisations may interpret and apply principles differently

Flexibility to handle the changing circumstances and business environments

Broader definition or ´rules´

Less of a tick-box activity, more of a set guiding practices

Behaviour is more open to interpretation

Question 7

Governance Key Principles

Transparency

Answer 7

Make available or more widely know

Question 8

Governance Key Principles

Accountability

Answer 8

Required or expected to justify actions or decision

Question 9

Governance Key Principles

Probity

Answer 9

The quality of being honest and morally

Question 10

Governance Key Principles

Equity

Answer 10

The quality of being fair and impartial

Question 11

Governance Key Principles

there are 4:

Answer 11

Transparency
Accountability
Probity
Equity