Topic 2: Board Functions and Structures

Historically, why were directors held to lower legal standards of care and diligence?

• a) Directors were considered specialists like doctors or lawyers.

• b) Directors’ roles were seen as honorary or social positions.

• c) Directors were always involved in daily operations.

• d) Courts had no legal framework to hold directors accountable.

Which modern legal concept is now applied to hold directors accountable for their actions?

• a) Duty of loyalty

• b) Tort of negligence

• c) Contract law

• d) Doctrine of ultra vires

What are the three main organs of governance in a corporation?

• a) Board of directors, management, and auditors

• b) Board of directors, shareholders, and employees

• c) Shareholders, management, and customers

• d) Employees, shareholders, and regulators

What is the primary responsibility of shareholders in corporate governance?

• a) Overseeing daily operations of the company

• b) Appointing and removing directors

• c) Managing financial resources

• d) Developing the company’s strategy

Which of the following is NOT one of the four main responsibilities of the board of directors?

• a) Setting goals for the corporation

• b) Appointing the CEO

• c) Auditing financial transactions

• d) Reviewing progress toward goals

What does Bainbridge’s “director primacy model” emphasize?

• a) The board of directors holds ultimate control over the corporation.

• b) Shareholders have ultimate control over the corporation.

• c) Employees have significant influence over corporate decisions.

• d) Regulators have direct oversight of corporate management.

What is the key difference between a unitary board and a two-tier board?

• a) Unitary boards include only non-executive directors, while two-tier boards include only executive directors

• b) Unitary boards focus on daily operations, while two-tier boards focus solely on governance.

• c) Unitary boards are used in Germany, while two-tier boards are common in the US.

• d) Unitary boards combine executive and non-executive directors, while two-tier boards separate governance into supervisory and management boards.

Which of the following is a responsibility of standing board committees?

• a) Managing daily operations

• b) Developing the company’s long-term goals

• c) Overseeing specific governance areas

• d) Representing shareholders in court

What is the purpose of effective legislation in corporate governance?

• a) To define a company's strategy and goals

• b) To identify and prevent abuses, such as fraud or negligence

• c) To manage the daily operations of the corporation

• d) To provide direct guidance to shareholders

Which of the following is an example of a code of best practice in corporate governance?

• a) ASX Principles of Good Corporate Governance

• b) Sarbanes-Oxley Act

• c) Anti-Money Laundering Guidelines

• d) International Financial Reporting Standards (IFRS)