BTF Chapter 12 : Corporate governance

Jacob has just been appointed as a non-executive director of Pulsemania plc, a FTSE 350 company. A consultant told him that under the UK Corporate Governance Code he has the following responsibilities as a non-executive director.

Responsibility 1 Satisfying himself about the integrity of the company's financial information

Responsibility 2 Reporting on the performance of the company

Responsibility 3 Determining appropriate levels of remuneration for executive directors

Responsibility 4 Satisfying himself that financial controls and systems of risk management are robust and defensible

Which will be Jacob's responsibilities?

• 1, 2 and 3

• 2, 3 and 4

• 1, 2 and 4

• 1, 3 and 4

The chairman of Raygold plc, a FTSE 350 company, is considering which of the company's non- executive directors can be classified as independent. Even if a non-executive director has worked as an employee for the company in the past, they may still be classified as independent if the period of employment finished at least

• two years ago

• three years ago

• four years ago

• five years ago

Jumpers plc has just joined the FTSE 350. A consultant has made the following two statements about the company and the UK Corporate Governance Code.

Statement 1 As Jumpers plc is in the FTSE 350, the Listing Rules mean that the Code applies so the company must never depart from any of its requirements

Statement 2 If Jumpers plc had joined the FTSE 100, compliance with the Code would be a statutory requirement

Are these statements true or false?

• Statement 1 True Statement 2 False

• Statement 1 False Statement 2 True

• Statement 1 True Statement 2 True

• Statement 1 False Statement 2 False

According to the UK Corporate Governance Code, a company should seek to improve corporate governance by ensuring that

• the chairman and chief executive are the same individual in order to avoid confusion over who has responsibility for running the company

• the chairman and chief executive are different individuals in order to prevent one person having too much power within the company

• the chairman and chief executive are different individuals in case one dies or becomes incapacitated by ill health

• the company chairman does not take up outside directorships

The performance of Petula in her role as an executive director of Jemson plc is due to be evaluated in line with the requirements of the UK Corporate Governance Code. This means that her performance will be judged in terms of

• her effectiveness of contribution and time commitment to the role

• her time commitment to the role only

• her effectiveness of contribution only

• neither of these

The UK Corporate Governance Code contains principles for the level and make-up of directors' remuneration. A consultant has listed the following as being among these principles.

Principle 1 Design remuneration to promote the long-term success of the company

Principle 2 Establish a formal and transparent procedure for developing policy on executive

remuneration and for fixing the remuneration packages of individual directors

Principle 3 Obtain the auditor's approval of the remuneration set

Which of these are contained in the UK Corporate Governance Code?

• 1 and 2 only

• 2 and 3 only

• 1 and 3 only

• 1, 2 and 3

The board of directors of Kempton plc is considering the membership of its remuneration committee. In this regard, which statement is true?

• The chairman must be one of the members of the remuneration committee

• The chairman may be both a member and chair of the remuneration committee

• The chairman may be a member but cannot chair the remuneration committee

• The chairman cannot be a member of the remuneration committee

Which statement about the requirements of the UK Corporate Governance Code is true?

• Non-executive directors of FTSE 350 companies, once appointed, only need to be submitted for re-election every three years

• The board's responsibility to present a fair, balanced and understandable assessment of company performance extends to interim reports as well as to annual financial statements

• Directors' service contracts should not exceed three years

• The annual report should state the company's business model but its strategy for delivering the objectives of the company may remain confidential

Flange plc is planning its forthcoming AGM. Which, if any, of the following committees should be represented by their chairman at the meeting?

• Audit

• Audit and Remuneration

• Audit, Remuneration and Nomination

• None of these

Paul has become aware of theft from his employer, Mortice plc, by one of its directors. He wants to bring this to the attention of the company but does not know how to do so in line with the UK Corporate Governance Code. Which of the following is responsible for reviewing arrangements by which staff may, in confidence, bring such matters to the attention of the company?

• The company chairman

• The board of directors

• The non-executive directors

• The audit committee