BT- 10 to 16

Where there are a large number of external shareholders who play no role in the day-to-

day running of a company, there is a situation that is described as:

• detached corporate ownership

• uninvolved external ownership

• dividend based shareholding

• separation of ownership and management

The ‘agency problem’ refers to which of the following situations?

• Shareholders acting in their own short-term interests rather than the long-term

  interests of the company

• A vocal minority of shareholders expecting the directors to act as their agents and pay

  substantial dividends

• Companies reliant upon substantial government contracts such that they are

  effectively agents of the government

• The directors acting in their own interests rather than the shareholders’ interests

To encourage Executive Directors to operate in the best interests of the shareholders, they

could:

• be given a high basic salary

• receive share options based on both individual and company’s performance

• be entitled to large payment upon resignation or termination

• be asked to attend AGMs

Corporate social responsibility refers to the idea that a company should:

• play an active part in the social life of the local neighbourhood

• be sensitive to the needs of all stakeholders

• be alert to the social needs of all employees

• act responsibly in relation to shareholders’ overall needs – not just their financial needs

Which of the following would best explain the concept of sustainable development?

• Starting business in developed countries where the economic climate is conducive to

  trade

• Development which meets the needs of the present without compromising the ability

  of future generations to meet their own needs

• Sustaining the production at the level of maximum capacity

• Developing the business by signing long-term contracts with suppliers

Modern view on Corporate Social Responsibility is:

• it is a way to further a company’s business and attract additional shareholders

• it is necessary to reduce product liability claims

• a company must give part of its profits to charity

• social responsibility is incompatible with the objective of maximising shareholder’s

  wealth

Which of the following would render a non-executive director of a company less suitable

for this post?

• The person worked for the company six years ago

• The person has served as a non-executive for the last six years

• The person has no previous contact with the executive directors

• The person owns a number of the company’s shares

An audit committee should:

• consist of independent non-executive directors only

• include at least one senior member of the internal audit team

• include one member from the external audit firm

• carry out a detailed review of critical elements of the statement of financial position

The most obvious means of achieving public oversight of corporate governance is via:

• the company establishing a comprehensive web site

• publication of the Annual Report and Accounts

• press announcements of all significant developments

• shareholder access to the Annual General Meeting

Within the UK, what is the usual purpose of codes of practice on corporate governance?

• To establish legally binding requirements to which all companies must adhere

• To set down detailed rules to regulate the ways in which companies must operate

• To provide guidance on the standards of best practice that companies should adopt

• To provide a comprehensive framework for management and administration