CERTIFICATE LEVEL

Subject Fundamentals of Ethics, Corporate Governance & Business Law (BA4)

Boopathy Kahathuduwa
Lecturer Attorney At Law, CIMA Exams Complete, BBA (International Business) UOC

Module Corporate Governance Revision Questions

Code BA4/BK/12
 Corporate Governance Revision Questions

1. Which THREE of the following outline the principles/Rules of corporate governance?

A. The Sarbanes-Oxley Act of 2002 (US, 2002)
B. The Cadbury Report (UK, 1992)
C. The Principles of Corporate Governance (OECD, 1998 and 2004)
D. The Enron Act of 2001

2. Which of the following is NOT one of the five key principles of corporate governance?
A. Integrity and ethical behaviour
B. Equitable treatment of shareholders
C. Responsibilities of the board
D. Disclosure and transparency

3. Which of the following sentences apply to the UK Code of Cooperate Governance?

Select ALL that apply.

A. It is illegal not to follow all aspects of the code
B. Publicly listed companies have to produce statements regarding whether or not
they've followed the code
C. It's a set of principles aimed at companies listed on the London Stock Exchange
D. It operates on a ‘comply or explain’ system

4. Match the following type of boards with the correct descriptions.

A B
A. Two-tier i) Consist a Management board and a supervisory board
B. Unitary ii) Has both executives and non-executives and usually make
decisions together as a single unit

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 5. The aim of corporate governance initiatives is to ensure that entities are run well in the interest
of their shareholders and the wider community.
Which of the following does it NOT include?
a. The necessity for good internal control
b. Relationship with the internal auditors
c. The necessity for an audit committee
d. Relationship with the external auditors

6. Which of the following is incorrect with regards to the different approaches to corporate
governance?
a. The UK Corporate Governance Code follows a principle-based approach
b. The Sarbanes Oxley Act is a rules-based approach
c. A rules-based approach instills the code into law
d. The King Report III follows a rules-based approach

7. Which two of the following are not a profit-making organisation?

a. Partnership
b. Local government
c. Sole Trader
d. Limited company
e. Charity

8. Which one of the following is a profit making organisation?

a. Charity
b. Clubs
c. Public limited company
d. Central government

9. Which of the following elements is not normally found in the public sector?
a. Controlled Performance
b. Collective goals
c. Social arrangements
d. Creation of a product or service

10. Which of the following organisations is normally found in the public sector?
a. Schools
b. Charities
c. Clubs
d. Businesses

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 11. The public sector is normally concerned with:
A. Making profit from the sale of goods
B. Providing services to specific groups funded from charitable donations
C. The provision of basic government services

12. Which of the following is an organisation which Is owned and democratically controlled by the
people who buy its goods and services?
A. Co-operative
B. NGO
C. Public sector organisation
D. Private sector organisation

13. Which statement best describes the UK stock exchange rules in respect of the UK Corporate
Governance Code?
A. Both listed and unlisted companies are required to comply with the UK Corporate
Governance Code
B. Non-compliance with the UK code will result in a fine
C. There is no obligation for companies to comply with the UK Code
D. Listed companies must explain any non-compliance with the UK Code

14. Which of the following statements are TRUE of a two-tier board?

(1) There is a clear separation between the management and the control of the company
(2) Employee representation results in wider stakeholder involvement.
(3) There is an implied involvement of NEDs in the running of the company

a. (1) and (2) only

b. (3) only
c. (1) and (3) only
d. (1), (2) and (3)

15. Which of the following statements are NOT requirements of SOX for US companies?
(1) Senior audit partners must be changed every 5 years
(2) Directors may not deal in the shares of their company at any time
(3) If a company’s financial statements are restated due to material non compliance with
accounting rules and standards, the CEO and the chief financial officer must resign

A. (2) only
B. (3)
C. (2) and (3) only
D. (1), (2) and (3)

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 16. Which of the following is not a responsibility of the nominations (appointments) committee?
A. Succession planning for directors
B. Managing diversity in the composition of the board
C. Preparing a description of the role and capabilities needed for the appointment of the
chairman
D. Recommendations on the removal and appointment of auditors

17. Which of the following is consistent with the description of ‘an organisation’ :
(1) ‘Controlled performance’
(2) ‘Making a Profit’
(3) ‘Collective goals’

A. (1) only
B. (2) and (3) only
C. (1) and (3) only
D. (1), (2) and (3)

18. Not for profit organisations (NFPs) do not see profitability as their main objective. Instead, they
seek to satisfy the particular needs of their members or the sectors of society that they have
been set up to benefit. Which of the following is not an example of a NFP?
A. Partnerships
B. H M Revenue and Customs
C. Hospitals
D. Doctors Without Borders

19. Which of the following are examples of Private Sector organisations?

(I) Non-governmental organisations
(II) Healthcare for the poor
(III) Charities

a. (III) only
b. (II)only
c. (II) and (III) only
d. (I) and (III) only

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 20. As a consequence of the failiure of which of the following organisations did the US introduce
Sarbanes-Oxley legislation to address the many crticisms of reporting and auditing practice?
A. Enron
B. Maxwell Communication Corporation
C. Barings
D. Northern Rock

21. As a result of the Sarbanes-Oxley Act companies are required to report on how they have
complied with the Act, and if they have not done so, explain their reasons

True or False?

22. German boards often compromise a supervisory and a management board,; which of the
following would not be regarded as the role of the management board?
A. Safeguarding the interests of its shareholders
B. Preparing agendas for meetings
C. Preparing financial reports for meetings
D. Day to day running of the enterprise

23. Boards in many countries operate a unitiary structure. Which of the following options contains
two countries that generally use this system?
A. France and Germany
B. UK and Germany
C. USA and UK
D. USA and Germany

24. In the UK Corporate Governance Code which of the following statements regarding the roles of
Chairman and Chief Executive is a recommendation?
A. The Chairman and Chief Executive roles should be combined if possible so as to avoid
unnecessary duplication of tasks
B. The Chairman and Chief executive roles should ideally not be performed by the same
person
C. The Chairman should have previously been the Chief Executive of the business
D. There must always be a Chief Executive appointed

25. Which of the following Is correct in relation to the UK Corporate Governance Code(The Code)?
A. The Code is a set of statutory provisions
B. The Code, if broken, can give rise to civil liability.
C. Should the Code be breached a fine will be imposed
D. The Code gives rise to disclosure requirements

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 26. Which of the following are recommended by the UK Corporate Governance Code?
(1) The board should appoint one of the independent non-executive directors to be the senior
independent director to provide a sounding board for the chairman and to serve as
intermediary for the other directors when necessary.
(2) The board should establish an audit committee of at least 5, or in the case of smaller
companies 3, independent non-executive directors.
(3) Except for smaller companies, at least one quarter of the board, excluding the chairman,
should comprise non-executive directors determined by the board to be independent.
A. (1) only
B. (1) and (2) only
C. (1) and (3) only
D. (1), (2) and (3)

27. What requires public listed companies to comply with the UK Corporate Governance Code
A. The Sarbanes-Oxley Act
B. The London Stock Exchange
C. The Companies Act
D. The Cadbury report

28. Which of the following statements is not a measure introduced by the Sarbanes Oxley Act?
A. An independent five man board called the Public Company Oversight Board to be
established, with responsibilities for enforcing professional standards in accounting and
auditing
B. All companies with a listing for their shares in the US must provide a signed certificate to
the SEC vouching for the accuracy of their financial statements(signed by CEO and
Chairman)
C. Restrictions are placed on the type of non-audit work that can be performed for a
company by its firm of auditors
D. The board should establish formal and transparent arrangements for corporate
reporting and risk management and internal control principles and for maintain an
appropriate relationship with the company’s auditors

29. Which of the following types of committee is not required by the UK Corporate Governance Code?
A. Supervisory Committee
B. Audit Committee
C. Remuneration Committee
D. Nomination/Appointments Committee

30. Which of the following is incorrect with regards to the different approaches to corporate
governance?
A. A principle-based approach uses a ‘comply or explain’ policy
B. A rules-based approach instills the code into law
C. A principle-based approach instills the code into law
D. A rules-based approach has penalties for transgression

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 31. A Co-operative (or mutuals) are organisations that are owned and democratically controlled by
the government.

True or False?

32. Which two of the following are profit-making organisations?

A. Sole proprietorship
B. Charities
C. NGOs
D. Partnerships
E. Co-operatives

33. Which of the following are main principles of the UK Corporate Governance Code?
Select all that apply
A. Operational Excellence
B. Leadership
C. Financial Management
D. Disclosure and Transparency
E. Remuneration

34. The UK Corporate Governance Code follows a principles-based approach and is endorsed by the
Sarbanes-Oxley Act

True or False?

35. Which of the following is correct with regards to the different approaches to corporate
governance?
A. The UK Corporate Governance Code follows a Principles based approach
B. The Sarbanes Oxley act follows a ‘Comply or explain’ policy
C. The King Report III follows a Principles based approach
D. The King Report III follows a rules based approach

36. In two tier board structures, the management board is responsible for day to day running of the
enterprise and is coordinated by the CEO

True or False?

37. Which of the following was the first report to focus on Director’s remuneration?
A. Hampbel
B. Cadbury
C. Greenbury
D. Smith

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 38. In general, Ethics should be given higher priority in obedience and compliance more than the
Law.
True or False?

39. Which of the following reports resulted in a framework for establishing systems of internal
control
A. Turnbull
B. Higgs
C. Hampel
D. Cadbury

40. In two tier board structures, which of the following are characteristics of the supervisory board?
a. Strategic oversight of the organisation
b. The CEO coordinates the activities in the supervisory board
c. Generally only includes executives
d. Responsible for the day-to-day running of the enterprise
e. The Chairman coordinates the activities in the supervisory board.

41. In two tier board structures, the management board provides strategic oversight of the
organisation and is coordinated by the chairman of the board.

True or False?

42. Complete the following sentence:

A code that uses a principles-based means that...

A. It provides general guidelines of best practice rather than highly detailed rules.
B. It rigidly defines exact provisions that must be followed.
C. It's highly detailed rules are guided by principles.

43. Which of the following is NOT one of the five components UK Combined Code?
A. Leadership
B. Relations with Shareholders
C. Efficiency
D. Accountability

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 44. Match the following positions with the correct roles.

B
A
A. Chairman i)Executive responsibility for the running of the company's
business

B. Non-executive directors ii) To constructively challenge and help develop proposals

on strategy

C. CEO iii) Responsible for the leadership of the board and ensuring
its ensuring its effectiveness on all aspects of its role

45. All directors should be submitted for re-election at regular intervals, subject to
continued satisfactory performance.
Is the statement true or false?
A. True
B. False

46. Which of the following statements applies to the board of a company.

Select ALL that apply.
A. The board must be responsible for identifying risks
B. The board should establish formal and transparent arrangements for considering
how they should apply the corporate reporting
C. Every organization must use an Audit Committee
D. The board should maintain sound risk management and internal control systems

47. Which of the following is NOT a committee required by UK corporate Governance

Code (Select All that apply)
A. Nominations committee
B. Remuneration committee
C. Judiciary committee
D. Governance committee
E. Audit committee

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48. When would a board create a Remuneration Committee?
A. To discuss how much money the company has
B. To discuss the repaying of loans
C. To decide issues surrounding pay
D. To discuss how much tax the company owes

49. Which of the following statements about international corporate governance is false?
A. Codes linked to stock exchange listing requirements may create an obligation to follow
them
B. In some countries Corporate Governance principles are enforced through law
C. All corporate governance codes must be followed by law in each country
D. Corporate governance principles and codes have been developed in a range of various
countries in various different ways

50. Go for IT Ltd is an IT solutions company. The directors think that they deserve higher pay,
but the shareholders want to keep costs down as they already pay the directors a lot.
Go for IT are very successful and are the third largest in the country, but this wasn't always the
case. In the last few years Go for IT has grown rapidly. The shareholders are very pleased as the
company and its shares are worth triple what they were a few years ago.

Which of the following terms best describes this situation?

A. Principal problem
B. Information asymmetry
C. Governance disagreement
D. Agency problem

51. Company X (which is operating in UK) is trying to implement the principles of corporate
governance into its culture. When the board gets around to discussing ‘Disclosure and
transparency’, they are unable to remember why they need to have such openness.

Why is disclosing their business operations so important?

Select ALL that apply.
A. To give potential investors a clear and balanced view of the company
B. In order to provide stakeholders with a level of accountability
C. Because it is a legal requirement
D. To verify the integrity of financial statements

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52. Sam is thinking of setting up a new business in the UK. What board structure if he likely to
employ?
A. Two-tier
B. None
C. Unitary

53. An energy company is looking for a new director. Which of the following candidates is most
suited for this purpose?
A. Tim worked for the company for 25 years and he just started a two-year term as
president of an international energy industry regulatory body.
B. Kate joined the company three years ago; before that she worked for their main
competitors for 20 years.
C. Judith has served as a board member several clothes manufacturers.

54. Complete the following sentence:

An AGM is a good way for companies to...

A. Communicate with their investors and encourage their participation.
B. Correspond with government.
C. Get feedback from customers.
D. Get feedback from employees.

55. Steve has been in business for two years. Things have been going well for him, and his
staple-making company has already grown quite big.
However, although Steve's business has been doing well, he hasn't yet held an AGM. Why is this
bad?
A. Because his shareholders aren't able to voice their concerns or vote on relevant matters.
B. Because Steve is missing out on opportunities to network with other businesses.
C. Because it is a legal requirement to hold AGM
D. It's not bad at all.

56. Oliver and Co. Are a publicly listed company. They have grown a lot and their shares sell on
the London Stock Exchange for a very high price. A lot of people want to be shareholders in the
company.

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They originally only sold products for cats such as food, grooming kits and toys, but now sell
loads of products for other animals as well. They started as a small company with a narrow
market and are now a huge organisation with a massive customer base. They are still growing
and expanding their product range.
What code of corporate governance are they required to follow?
A. None
B. Sarbanes-Oxley Act
C. The Principles of Corporate Governance
D. UK Code of Corporate Governance
E. Cadbury report

57. Gini (Pvt) LTD is a company incorporated in UK. Gini has been selling lamps worldwide and is ranked
as the No 1 lamp in the world. Gini employs over 10,000 employees worldwide and makes revenue over
$20 Billion per year. Gini CEO is known for his lavish lifestyle and is usually seen going around in his
Private Jet.

Recently, a newspaper article had criticized the behavior of Gini’s CEO stating that Gini’s
workers in Asian countries are under paid, whilst Gini CEO and the board has been enjoying
luxury vacations using company money.
Which of the following Corporate Governance Code should Gini be compelled to follow to get
out of the above situation?
1. Sarbanes oxley Act

2. UK Corporate Governance Code

3. King Code III

4. Gini cannot be compelled

58. Which of the following are principle-based codes of governance?

A. The Cadbury Report (UK, 1992)
B. The Principles of Corporate Governance (OECD, 1998 and 2004)
C. The Sarbanes-Oxley Act

59. The board of directors for a pharmaceutical company called Drug Pharm are meeting to
discuss their corporate governance implementation.
They have a lot of issues to cover, such as the processes for hiring board members, how they will
manage animal welfare groups and government regulations on drug trials.

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They also need to ensure that employees are vetted and follow the company rules regarding non-
disclosure and anti-theft; a lot of the science and materials used by the company are valuable
and also dangerous.
How do companies like Drug Pharm usually make decisions about how to implement corporate
governance?

A. Outsource it to another company

B. Get expert opinion

C. Audit committee

D. Board of Directors

60. John is thinking of setting up a new business in Germany. What board structure is he likely
to employ?
A. Two-tier
B. Unitary
C. None of the above

61 A board committee comprises of 3 major sub committees namely the Audit Committee, the
Nominations Committee and the Remuneration Committee.
Which of the following are relevant to the ‘Remuneration Committee’?
D. Consists of only non-executive directors
E. Consider the balance between executives and NEDs on the board or directors
F. Ensure appropriate management of diversity to board composition
G. Establish pension provision policy for all board members
H. Agree any compensation for loss of office or any executive director
I. Consists of both executive and non-executive directors

62. I-Tech Ltd is an IT solutions company. The directors are facing issues in studying how the
external resources of their business such as the environment in which they operate in would
affect the behaviour of the organisation

Which of the following terms best describes this situation?

A. Principal problem
B. Information asymmetry
C. Resource-dependency theory
D. Agency problem

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 63 PQR Ltd. is considering implementing good practices in areas such as tax and treasury, cost
and profitability improvement and working capital management.

Which of the following terms best describes this situation?

A. Innovation and adaptability
B. Financial management
C. Operational excellence
D. Customer and stakeholder focus
E. Stewardship

64. The CEO of the company XYZ Ltd. has informed the directors that they can be compelled
to explain their decisions and can be criticized or punished if they have abused their
position.
Which of the following terms best describes this situation?
a. Agency theory
b. Stewardship
c. Accountability
d. Resource-dependency theory

65. A particular board committee of ABC plc, which comprises of majority Non-executive
directors are meeting to discuss some of the issues they face.
They have a lot of issues to cover, such as the appointment or recommendation of new
directors to the board, evaluation of candidate’s skills, knowledge and expertise, giving
full consideration to succession planning for directors, etc.…
What type of board committee is this?

a. Governance Committee
b. Audit Committee
c. Remuneration Committee
d. Nominations Committee

66. Country ABC is a member country of the OECD. LMN Ltd. which is a company in country ABC
implements the OECD Framework. However, it faces certain issues in ensuring the strategic
guidance of the entity, the effective monitoring of the management by the board and the
board’s accountability to the entity and the shareholders.

Which of the following OECD Framework principles relate to this?

a. Fair treatment for shareholders
b. Shareholders’ rights of ownership

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 c. Stakeholders’ role and rights
d. Disclosure and Transparency
e. Responsibilities of the board

67. Stokes Ltd. is a company based in the UK and implements ‘The UK Corporate Governance
Code’. It faces certain issues since there is no clear division of responsibilities between the
Chairman and the Chief Executive.

Which of the main principles of ‘The UK Corporate Governance Code’ relates to this ?
a. Relations with Shareholders
b. Leadership
c. Accountability
d. Remuneration
e. Effectiveness

68. Trump Ltd. is a company based in the USA and implements the Sarbanes Oxley Act.
Which of the following are disadvantages that Trump Ltd. would face when compared to
William Ltd. which is a company based in UK and implement ‘The UK Corporate
Governance Code’?
a. Exploitation of loopholes
b. Lack of standardisation
c. Flexibility is lost
d. There is less clarity in terms of what the organisation must do
e. Regulation overload

69. NLT Ltd. is situated in country XYZ which is a member country of the OECD. NLT Ltd. is
considering implementing OECD principles.

Which two of the following are true with regards to the OECD principles?
a. There are 10 OECD principles in the OECD framework
b. They intend to be concise, understandable and accessible
c. They are not intended to be a substitute for the government laws
d. The OECD principles are intended to be a substitute for the government laws

70. A board committee comprises of 3 major sub committees namely the Audit Committee,
the Nominations Committee and the Remuneration Committee.
Which of the following are relevant to the ‘Audit Committee’?
a. Comprises of both executive and non-executive directors
b. Comprises of only executive directors

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 c. Review of the audit report and any management letter provided by the external
auditors
d. Comprises of only non-executive directors
e. Ensure that there is a system in place for whistleblowing

71. PMB Ltd. is a company based in France and implements a two-tier board structure.
Which of the following are the disadvantages that PMB Ltd. would experience as
opposed to MBC Ltd. which is a company in UK and implements a unitary structure?
a. Lack of Codetermination
b. Dilution of power
c. Increased bureaucracy resulting in slower decision making
d. Banks have a distance relationship with PMB Ltd. when compared to MBC Ltd.
e. Lack of transparency over appointments of supervisory board members

72. A particular board committee of ABC plc is meeting to discuss some of the issues they
face.
They have a lot of issues to cover in having an appropriate reward policy that attracts,
retains and motivates directors to achieve the long-term interest of shareholders
What type of board committee is this?
a. Nominations Committee
b. Audit Committee
c. Remuneration Committee
d. Governance Committee

73. A particular board committee of ABC plc comprises non-executive directors.

They review of financial statements and any interim reports produced, review of the
company’s system of internal financial controls, ensuring that there is a system in place
for whistleblowing, etc.….
What type of board committee is this?
a. Governance Committee
b. Audit Committee
c. Nominations Committee
d. Remunerations Committee

74. Morgan Ltd. is a company based in the UK and implements ‘The UK Corporate Governance
Code’. It faces certain issues since there is no clear dialogue with shareholders based on the
mutual understanding of objectives

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 Which of the main principles of ‘The UK Corporate Governance Code’ relates to this?
a. Leadership
b. Accountability
c. Remuneration
d. Accountability
e. Relations with Shareholders

75. BMW Ltd. is a company based in UK and implements a unitary board structure. Which of
the following are the advantages that BMW Ltd. would experience as opposed to Benz
Ltd. which is a company based in Germany and implements a two-tier structure?

a. NED expertise and empowerment

b. Wider stakeholder involvement
c. Faster decision making in unitary board structures
d. Reduction of fraud and malpractice due to wider involvement in actual
management of the company
e. Clear separation between those that manage the company and those that own it
or must control it for the benefit of the shareholders

76. Which of the following are measures introduced by the ‘Sarbanes Oxley Act’?
a. The accuracy of the financial statements must be vouched for by the CEO and
the CFO
b. There should be clear division of responsibilities between the chairman and chief
executive
c. No director should be involved in deciding his or her own remuneration
d. Senior audit partner must be changed every five years.
e. Directors are prohibited from dealing in shares at sensitive times
f. All companies with a listing for their shares in the US must provide a signed
certificate for the SEC vouching for the accuracy of their financial statments

77. PUL Ltd. is a company which is based in country ABC. It has two boards namely the
management board and the supervisory board.
Which of the following are consistent with the board structure of PUL Ltd.?

a. PUL Ltd. has a unitary board structure

b. PUL Ltd. has a dual board structure
c. PUL Ltd would face increased bureaucracy problems as a result of its board
structure
d. PUL Ltd would be able to obtain NED expertise as a result of its board structure
e. PUL Ltd. would be able to experience NED empowerment as a result of its board
structure

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 78. Simon Ltd. is a company based in UK and implements ‘The UK Corporate Governance
Code’. Which of the following are advantages that Simon Ltd. would face when
compared to Howard Ltd. which is a company based in the USA and implements the
Sarbanes Oxley Act?
a. Greater flexibility
b. There is more room for improvement, or to go beyond the minimum level set
c. More clarity in terms of what the company must do
d. Reduction in regulation overload
e. Standardisation for all companies
f. Encouraging to follow the spirit of the law rather than the letter of the law leads
to well governed organisations

79. A board committee comprises of 3 major sub committees namely the Audit Committee, the
Nominations Committee and the Remuneration Committee.

Which of the following are true with regards to the ‘Nominations Committee’?

a. Comprises of only executive directors

b. Consider the balance between executive and non-executive directors on the
board of directors
c. Establish pension policy for all board members
d. Comprises of only non-executive directors
e. Give full consideration to succession planning for directors

80. Gini PLC is operating in an OECD country, and they are following OECD Framework on Corporate
Governance. Gini has an overall framework that governs the entity and the Gini’s board is accountable to
shareholders. Gini’s shareholder’s include several shareholders from Madagascar, all though they have
relatively less influence Gini has been taking their views into consideration when taking decisions and has
been updating them in the same way as other shareholders.

What principles of OECD Framework is Gini following. Select the TWO most appropriate answers.

A. Shareholder’s right of ownership

B. Fair Treatment to shareholders
C. Stakeholder roles and rights
D. Disclosure and transparency
E. Responsibilities of the board

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81. Which of the following statements about the status of the OECD Principles are correct. (Select all
that apply)

A. Principles of OECD are enforced through law in each OECD country

B. Principles represent a common basis that OECD member countries consider essential for
the development of good corporate governance.
C. Principles of OECD reflect the heighest standard of Corporate Governance that can be
followed
D. Principles are Intended to be concise, understandable and accessible to the international
community
E. Principles should be used only as a guideline and not as a substitute for government or
private sector initiative to develop more detailed best practices in governance

82. Mr. Peter owns Peter (Pvt) LTD. He is the sole shareholder as well as the only Director. Mr Peter
manages day to day business operations and do all the work of the business on his own. He does not have
any employees and takes pride in doing things his own way. Which of the following problems is Mr Peter
least likely to encounter?

1. Stock Management Problems

2. Ethical sourcing problem
3. Agency Problem
4. Resource Dependency problem

83. Mr Peter has now realized that he cannot run the organisaiton on his own and therefore has decided
to outsource some of it’s functions, including Accounting, Marketing and supplies handing to outsouce
partners. Which concept of Corporate Governance is Mr Peter now demonstrating?

1. Agency Problem
2. Stewardship
3. Fiduciary Duty
4. Resource Dependency Theory

84. Mr L is a shareholder who own 5 shares of XYZ LTD. Total shares of XYZ is 20 Million. At the annual
general meeting Mr L tried to raised a question regarding an issue he had found in the annual financial
statements. However he was not allowed to speak by the board of directors as he is an insignificant
shareholder. Assuming XYZ operates in an OECD Country which principles of OECD framework has been
breached?

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1. Shareholders right of ownership
2. The equitable treatment to shareholders
3.Discolsure and transparency
4. The responsibility of the board.

85. XYZ is a company operating in a country where major method of raising capital required for the
company is through loan finance. Large amount of loans are given by Banks which are backed by the
government. Banks are therefore highly vigilant regarding companies to ensure that the companies pay
back their loans on time. Which type of board structure will you propose for XYZ?

A. A unitary board structure

B. A Unitary board with an Audit Committee
C. A Two – Tier board Structure
D. A Unitary board with an Independent non-executive director as the Chairman

86. Gini is a company incorporated in United States. A recent audit has found that company’s Financial
Reports have been overstated as the required accounting standards have not been followed. What will
now happen to the CEO and the CFO of this company?

A. Nothing will happen as they have not violated any law

B. CEO and CFO will be prosecuted and thereafter if found guilty will be imprisoned
C. CEO and CFO will be asked to resign
D. Bonuses awarded for CEO and CFO for the last 12 months will be forfeited

87. Which of the following are problems of following Corporate Governance?

1. It is a red tape and create bureaucracy

2. It increases conflict between shareholders and directors

3. It cannot stop fraud

4. Following Corporate Governance code does not enhance competitiveness of the business

5. Director’s powers to make decisions is reduced

6. It increases the likelihood of loosing reputation among customers

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88. Gini is a company incorporated in UK and listed in London Stock Exchange. Gini’s shareholders include
3 shareholders from Iran. Due to recent travel bans that has been imposed to Iran Gini was not able to
bring Iranian shareholders for the Annual General Meeting. These shareholders have publicly expressed
their dissatisfaction regarding this incident. Which of the following statement most accurately reflect the
position of Gini, with regard to Corporate Governance?

A. Iranian shareholders can sue Gini and if successful, Gini will have to pay a fine
B. Gini will have to explain in their Annual Reports as to why they were unable to invite Iranians to
AGM
C. Gini has breached the principles of best practice under UK Corporate Governance code and will
be subjected to a fine by London stock exchange
D. Gini will have to publish a formal apology in newspapers

89. At XYZ company both the board of directors and senior management understand the organization’s
business model, its operating environment, and how sustainable organizational success is created and
optimized. The board of directors also have a clear vision and a strategy for the organisation. Which of
the following principles of 8 Drivers of sustainable corporate success (IFAC) is XYZ demonstrating?

A. Operational excellence
B. People and talent management
C. Effective leadership and strategy
D. Integrated governance, risk and control

90. Following information relates to Gini. A public limited company.

• Gini understand that doing business means taking a certain level of risk
• Gini has a proper mechanism to identify the level of risk that they are facing and to manage and
reduce risk
• Risk management is not just a separate function but everyone in the organisation is committed
to managing risk

Which of the following principles of 8 Drivers of sustainable corporate success (IFAC) is Gini
demonstrating?

BA4 Nov. 2020 – Corporate Governance Revision Questions – Boopathy Kahathuduwa 21

 A. Operational excellence
B. People and talent management
C. Financial Management
D. Integrated governance, risk and control

91. Tim Plc is a company that has been manufacturing swim wear for over 10 years. However after the
Corona Pandemic Tim had seen a drastic drop of sales of swim wear. Tim has now invented a new type of
a facemask which allows people to eat without removing it. They have now requested a patent for it.

Which of the following principles of 8 Drivers of sustainable corporate success (IFAC) is Gini
demonstrating?

A. Operational excellence
B. People and talent management
C. Effective leadership and strategy
D. Innovation and adoptability

92. Which of the following correctly points out intentions of enacting OECD Principles of
Corporate Governance?

A. To assist member and non-member governments in their effort to evaluate and improve
the legal, institutional and regulatory framework for corporate governance in their
countries.
B. To provide a mechanism for shareholders of Public Limited Companies to sue the
direcotrs if they are found in fraud
C. To Provide guidance and suggestions for stock exchanges, investors, corporations and
other parties that have a role in the process of developing good corporate governance.
D. To ensure that all OECD countries follow one Law

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93. Which of the following are reasons why Law should be supplemented by rules of Corporate
Governance?

A. Those who invest in shares of Public Limited companies do so with the intention of achieving
good capital growth, a good return on their investment in the form of dividends or a
combination of both
B. Laws have been proven to be useless against certain wrong doers, who seems to be able to get
away from the implications of Law
C. Shares of Public limited companies are being held by thousands of different shareholders who
are not united by any common objectives other than good returns on their investment
D. It is difficult to know all the laws which are existing, thus having corporate governance code
reduces the need to know the law.

94. XYZ is a company operating in Zee land, an OECD country, it has up to date followed all OECD principles.
Recently the home country of XYZ has passed a law which gives preferential rights to shareholders from
the Zee land. This has raised concerns among various foreign investors. What should XYZ do?

A. Stop doing business in Zee land

B. Respect the law in Zee land and do as it says
C. Disobey to follow the law as it is in violation of OECD principles
D. Disobey the law and pay a fine but keep the foreign shareholders happy

95. Dee land is a country where all citizens are law abiding citizens. All companies follow the law to the
letter. Dee land is the No 1 in the index of least crimes in the world. Dee land has numerous amounts of
laws applying to companies and has some of the highest legal costs in the world. Citizens of Dee land take
pride in the fact that they are the most lawful country in the world. Select the statement

a. Dee land does not require codes of corporate Governance as the law is enough
b. Dee land does not requires corporate governance as the people are law abiding
c. Dee land require Corporate Governance and a rules based Corporate Governance code shall suit
Dee land better.
d. Dee land require Corporate Governance and a principles based Corporate Governance code
shall suit Dee land better.

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96. Gini a public limited company has a large trade union. In the recent past they have had multiple
disputes continuously with the trade union officials. It is the complaint of the Trade Union that decisions
are being taken by the management which cannot be practically enforced. One such decision is the
decision to work from home during the Corona Pandemic even though most of the staff of Gini are on a
low wage and does not have necessary internet facilities to work from home. The management on the
other hand is of the view that trade union has not communicated these requirements properly to them.
The shareholders as well as board of directors are very concerned about the situation and has sought your
advise for a sustainable solution, they are willing to consider any change as long as their problem is
resolved. What is the best advise you can give Gini?

A. Give the workers of Gini a pay raise so that they can purchase internet facility to work from
home
B. Introduce a more Non Executive directors and put a NED in charge to handle complaints from
the Trade Union
C. Create a Two – Tier board structure and allocate several board seats to Trade Union
representatives.
D. Ignore the requests of the trade union as you can always hire more staff.

97. Gema (PVT) LTD is a company incorporated in UK. They are currently not following any principle of UK
corporate governance code. Which of the following statement best describe the position faced by Gema.

1. Gema will have to pay a fine

2. Gema will have to explain in their annual reports why they have not followed UK corporate
governance code.

3. It is advisable for Gema to follow the principles of UK corporate governance code as a best practice

4. Gema may be taken out of the register of companies after giving several warnings.

98. Mr Tim is a shareholder of XYZ plc. He has recently heard from a friend that if the principles of UK
corporate governance code are followed it will enhance the profitability of XYZ. Is this statement True or
False?

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99. Mr peter is the CEO of Gima Plc a company listed in the London stock exchange. Gima is a fortune 500
company that has been listed as one of the top 10 companies of UK. Mr Peter is aware that CEO’s of similar
companies all fly from a private jet. However, he has constantly refused to buy a private jet using company
money stating that he wants to ensure wealth of shareholders are protected. Which of the following
qualities is Mr Peter demonstrating?

1. Disclosure and transparency

2. Stewardship

3. People and talent management

4. Integrity

100. The board of XYZ Plc constantly encourage a dialog between various stakeholders and attempts to
get the support of various stakeholders to achieve corporate objectives. Which of the following OECD
Principles is XYZ following;

A. Effective governance framework

B. Equitable treatment to shareholders
C. Stakeholder role and rights
D. Shareholder’s right of ownership

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