1.

Cách làm bài

Bước 1: Xác định các điểm yếu trong quản trị doanh nghiệp
Điểm yếu trong quản trị doanh nghiệp chủ yếu thuộc hai bộ phận chính:
 Hội đồng quản trị (Board of Directors - BOD)
 Ủy ban kiểm toán (Audit Committees)
Trình bày điểm yếu trong quản trị doanh nghiệp theo câu văn hoàn chỉnh dựa vào thông tin trong đề bài.
Bước 2: Xác định cách Quản trị doanh nghiệp nên làm
Cách Quản trị doanh nghiệp nên làm theo cơ cấu Quản trị doanh nghiệp theo thông lệ quốc tế.
Bước 3: Đề xuất các khuyến nghị để khắc phục các điểm yếu trong quản trị doanh nghiệp
2. Dạng tự luận
Đề thi ACCA kỳ tháng 3-6/2016
You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co
(Tangerine), a company which is planning to list on a stock exchange within six months. The listing rules of the
stock exchange require compliance with corporate governance principles, and the directors are unsure whether
they are following best practice in relation to this. They have asked the audit engagement partner for their view
on this matter.
Tangerine’s board is comprised of six executive directors, a non-executive chairman and three other non-
executive directors (NEDs). The chairman and one of the NEDs are former executive directors of Tangerine
and on reaching retirement age were asked to take on non-executive roles. The company has established an
audit committee, and all NEDs are members including the chairman who chairs the committee. All four
members of the audit committee were previously involved in sales or production related roles.
 All of the directors have been members of the board for at least four years. As the chairman does not have an
executive role, he has sole responsibility for liaising with the shareholders and answering any of their
questions. The company has not established an internal audit function to monitor internal controls. 
 
Required: Using the information above, 
Describe FIVE corporate governance weaknesses faced by Tangerine Tech Co and provide a
recommendation to address each weakness to ensure compliance with corporate governance principles.
 
Hướng dẫn giải:
Thông tin về hệ thống quản trị doanh nghiệp Tangerine như sau:
Tangerine’s board is comprised of six executive directors, a non-executive chairman and three other non-
executive directors (NEDs) (1). The chairman and one of the NEDs are former executive directors of Tangerine
and on reaching retirement age were asked to take on non-executive roles (2). The company has established an
audit committee, and all NEDs are members including the chairman who chairs the committee (3). All four
members of the audit committee were previously involved in sales or production related roles (4).
 
All of the directors have been members of the board for at least four years (5). As the chairman does not have
an executive role, he has sole responsibility for liaising with the shareholders and answering any of their
questions (6). The company has not established an internal audit function to monitor internal controls (7).

Điểm yếu trong quản Lý giải  Đề xuất khuyến nghị

trị doanh nghiệp
(Recommendation)
(Weaknesses)

Hội đồng quản trị (BOD)

1. Ban quản trị gồm 6 . The number of members of the
giám đốc điều hành Board of Directors with the number of
(executives) và chỉ có 4 members who are executive directors
giám đốc không điều and members who are non-executive
hành(non-executives).  directors is not equal, leading to the
inability to ensure fair voting
decisions.
At least half of the board should consist
of non-executive directors (NEDs).
Tangerine's board should consider
hiring and appointing additional
independent NEDs to satisfy this
requirement, or reduce at least two
executives.

2. A non-executive As former executives, they have been Only non-executive, independent

director and chairman previously employed by the company, persons with relevant skills and
are both former and therefore cannot guarantee the experience should be appointed to
executives and have necessary degree of independence and Tangerine's board of directors. When
been transferred to the objectivity. In addition, the degree of evaluating, it is important to ensure the
role of non-executive independence of other non-executive independence of all existing non-
director. directors was not assessed. executive directors.
The best option would be to replace
anyone who is not independent or
supplemented by non-executive
directors.

5. All directors have The directors must be re-elected by
been members of the the shareholders at intervals of no
board of directors for at more than three years. Shareholders
least four years. should regularly review the
composition of the board of directors
as appropriate, and have an
appropriate re-election process in
place to ensure this can be achieved.
At the current year's annual meeting, it
is recommended that certain directors be
re-elected if they have been a member
of the board of directors for 3 years or
more. The remaining directors may then
be re-elected in the following years.

6. 6. Only the Chairman The responsibility for communicating The Board of Directors should clearly
of the Board of with shareholders and answering any state in the annual report about its
Directors is responsible of their questions is the responsibility members, and especially non-executive
for communicating with of the board as a whole, not the directors, to help shareholders
shareholders and chairman alone. All members of the understand more about the company.
answering any questions board of directors should participate in
dialogue with shareholders, for
example, all members should attend
meetings with shareholders (general
meeting of shareholders)

Ủy ban kiểm toán (Audit Committees)

3. Chủ tịch hội đồng Ủy ban kiểm toán bao gồm các thành Chủ tịch nên ngừng việc đảm nhận vai
quản trị, là một giám viên độc lập (NED). Chủ tịch HĐQT trò chủ tịch Ủy ban Kiểm toán. Một
đốc không điều hành, lại trong công ty nhỏ có thể đảm nhận trong những giám đốc không điều hành
là chủ tịch của ủy ban luôn vai trò của Ủy ban kiểm toán nếu nên được bổ nhiệm vào vị trí này.
kiểm toán. The chủ tịch đó là độc lập, không tham gia
The Chairman should discontinue his
chairman of the board, vào việc điều hành công ty. Nhưng
role as chairman of the Audit
being a non-executive trường hợp này không áp dụng cho
Committee. One of the non-executive
director, is also the Tangerine
directors should be appointed to this
chairman of the audit
The audit committee is composed of position.
committee.
independent members (NED). The
Chairman of the Board of Directors in
a small company can always take on
the role of the Audit Committee if the
chairman is independent and does not
participate in the management of the
company. But this case does not apply
to Tangerine
.

4. 4 thành viên của ủy Ít nhất một thành viên trong ủy ban
ban kiểm toán đều chỉ kiểm toán phải có kinh nghiệm gần và
có kinh nghiệm liên liên quan về lĩnh vực tài chính (recent
quan đến hoạt động bán and relevant financial experience).
hàng và sản xuất.  Không có thành viên nào trong ủy ban
kiểm toán là cựu giám đốc tài chính
hay các vị trí liên quan nên các thành
viên ủy ban kiểm toán không đáp ứng
đủ yêu cầu về kinh nghiệm tài chính. 
Công ty phải đảm bảo khi họ tuyển
dụng người vào ủy ban Kiểm toán, ít
nhất một trong số họ có kinh nghiệm
gần và liên quan đến tài chính. Ở trường
hợp của Tangerine nên bổ nhiệm thêm 1
người có kinh nghiệm gần và có liên
quan đến tài chính vào ủy ban kiểm
toán.

7. Hiện tại, Tangerine Trường hợp không có bộ phận kiểm Cần xem xét thêm để thiết lập một
chưa thành lập phòng toán nội bộ hỗ trợ, ủy ban kiểm toán phòng kiểm toán nội bộ, để giúp ủy ban
kiểm toán nội bộ. Ủy cần xem xét sự cần thiết để thành lập kiểm toán hoàn thành trách nhiệm giám
ban kiểm toán cần cân phòng kiểm toán nội bộ. sát của họ về kiểm soát nội bộ trong
nhắc tính hiệu quả của doanh nghiệp. Tuy nhiên, các chi phí để
Where there is no supporting internal
kiểm soát nội bộ và thiết lập một phòng kiểm soát nội bộ
audit department, the audit committee
kiểm toán nội bộ để hỗ should consider the need to establish cần được xem xét so với lợi ích sẽ đạt
trợ.  an internal audit department. được.
Currently, Tangerine Further consideration is needed to set up
has not established an an internal audit department, to help the
internal audit audit committee fulfill their oversight
department. The audit responsibilities on internal control
committee should within the enterprise. However, the
consider the costs of setting up an internal control
effectiveness of internal room need to be weighed against the
control and internal benefits that will be achieved.
audit to assist.

CGI
Disclosure
The basic reason for drafting such policy is to make sure those executives of the GCI and other reporting
insiders, who have the proper access to the all the undisclosed information regarding GCU must comply with
the internal trading rules and regulations. As per the policy draft, people who have been allowed access to the
CGI’s material information are only allowed to trade and deal with the CGI securities. The period that needs to
follow for this is act starts from the third business day actually followed by the quarterly financial figures and
by fiscal year results. The ending takes place on the fourteen calendar day at the end of fiscal quarter. The
blackout tenures may also be suggested as per the requirements on time to time basis. These suggestions are
given as a result of special circumstances related to organization, when insiders should be prevented from
trading in the CGI’s securities. For example, the expiry date of the stock option occurs during the blackout
periods or within the ten working business days so the actual date of expiry of the stock option will be the
10th day, which is followed by the extinction of the blackout period.
Board composition
The board of directors is appointed by shareholders. The board of directors has to perform various tasks for day
to day management of the organization of the company in compliance with the Operations Management
Frameworks of the company, which has been agreed by the board of directors. Sometimes the size and overall
composition of standing committees and board of directors is dependent on the circumstances of the
organization and it looks at the board of directors as an independent decision making and efficiently working
body. There is a corporate governance committee, which works under the leadership and full support of the
board of directors. This committee is responsible for handling the daily corporate governance matters and
makes recommendations for the board of directors. This committee also conducts a well-organized self
assessment procedure for the board of directors, the standing committees and for some individual directors.
The board of directors is appointed in every annual general meeting. Shareholders actually elect the members of
the board. They give them the complete authority to manage and look after the company’s management and its
affairs for the coming year. The board of directors possesses the vital and exclusive power as well as influence
to award the PSUs underneath the PSU Plans and to understand the terms and conditions of the PSUs that have
been actually awarded.
A 4,000 stock grant has been offered to the newly elected members of the board of directors, specifically to
those who are appointed for the first time. These stocks are offered on the date of their appointments. Under the
share option plan, members of the board receive a grant of 4,000 stocks annually. It is the core responsibility of
the board of directors to report about each and everything to the shareholders at the annual general meeting.
Mrs. Paule Doré holds the office of the lead director and Mr. Thomas P. d’Aquino holds the office of the chair
of the committee. Both of these personalities are independent directors. During the fiscal year 2013, the
committee met three times.
Shareholder relations
CGI has always been found interested in taking a very good care of their three stakeholder groups. For this
purpose, CGI has implemented a SPMF that sounds different from companies’ ISO certification. In the common
course of operations, there are certain corporate actions, which are material to CGI are kicked-off time to time
by the company’s high level management and, at the suitable time, they are presented to CGI’s Board of
Directors for thoughtfulness and approval. When suitable, such issues are also submitted for contemplation and
approval by shareholders of CGI. It is the core responsibility of the board of director to report about each and
everything to the share holders at the annual general meeting.
All major approvals are analyzed and approve in accordance with the agreement of the board of directors and
their standing committees, applicable corporate and securities legislation and under the light of the CGI’s
corporate governance practices.  Mrs. Serge Godin is the founder of the CGI and André Imbeau is working as
the Executive Chairman of the Board.  The corporate secretaries and vice chairman were the members of the
board of directors till Dec 13, 2013.
Committee effectiveness
There are different committees, who work under the supervision of the board of directors. This committee
includes Standing Committee, audit and risk management committee, human resources committee and
corporate governance committee. These committees conduct self-assessments test and analyze the business
performance. They work as a right hand of the board of director board of directors and present them the
valuable suggestions. There is a corporate governance committee, which works under .........................
The Corporate Governance Review: Vietnam
Overview of governance regime
Corporate governance in Vietnam is mainly regulated by the Law on Enterprises,2 which provides for, among
other matters, different corporate forms of business entities and the corresponding governance model of each.
The two main corporate forms are the limited liability company, which could be owned by between one and 50
members, and the joint-stock company, which must have at least three shareholders but is not subject to any
limitation on the number of shareholders. Less common forms of corporate entities include sole proprietorship
and partnership companies.
A limited liability company consists only of equity members and is the prevalent form for small companies. In a
joint-stock company, differently, there is a clear distinction between equity participants and management, and
most medium and large companies are incorporated under this corporate form. Joint-stock companies include
private joint-stock companies and public joint-stock companies (usually called private companies and public
companies, respectively).
Public companies, generally defined as joint-stock companies with at least 30 billion dong3 in paid-up charter
capital and 10 per cent of their voting shares held by at least 100 retail investors, are also subject to corporate
governance rules provided for under:
a. the Law on Securities;
 b. Decree 155 of the Government on corporate governance of public companies; and
c. Circular 96 of the Ministry of Finance on disclosure of information of public companies.4
The principal function of these rules is to provide a fair, orderly and transparent market for the trading of
securities.
Public companies may or may not be listed on a stock exchange. There is no clear distinction in the corporate
governance regime applicable to listed public companies and unlisted public companies and the listing rules of
stock exchanges do not impose any additional corporate governance requirements.
During the past two decades, the Law on Enterprises and the Law on Securities have been updated a few times,
with the latest versions being passed during 2019–2020 and effective from 1 January 2021. Decree 155 and
Circular 96, the implementing regulations of those laws, were issued around the same time. These laws and
regulations form the main part of the Vietnamese corporate governance regulatory framework.
In addition to mandatory rules provided in the laws and regulations, the State Securities Commission (SSC),
with support from the International Finance Corporation, issued in summer 2019 the Vietnam Corporate
Governance Code of Best Practices for public companies (the CG Code), which recommends standards that go
beyond the minimum requirements imposed by laws and regulations. These are not mandatory. The 2015
G20/OECD Principles of Corporate Governance and the 2017 ASEAN Corporate Governance Scorecard have
been used as key reference materials in developing the CG Code. The CG Code is considered an important
milestone for Vietnam, and will continue to assist the SSC and other policymakers in evaluating Vietnam's
corporate governance framework and steering its continuing evolution.
Corporate governance is more prevalently enforced in joint-stock companies. For private companies, the local
licensing authorities (i.e., the local Departments of Planning and Investment) are responsible for enforcing
corporate governance rules. For public companies, the SSC is the key regulator and enforcement agency.
Monetary penalties are the key sanction applied for both private companies and public companies. Lawsuits
against shareholders and managers remain uncommon.
This chapter canvasses the corporate governance matters of joint-stock companies in general, with a focus on
public companies. Financial institutions such as banks, insurers, securities companies and fund managers are
also subject to separate sets of corporate governance regulations issued by their line regulators, which are not
addressed herein.
Corporate leadership
i Board structure and practices
General
A company has the option of following either a two-tier board structure (i.e., a board of directors (BOD) and a
supervisory board (SB)) or a one-tier board structure (i.e., a BOD only). For a company that follows a one-tier
board structure, at least 20 per cent of the members of the BOD must be independent and the company must
form an internal audit committee, the members of which are drawn from the BOD (a sub-board committee).
BOD and SB members are appointed by the general meeting of shareholders (GMS). The general director (GD)
is responsible for the day-to-day management of company business.
BOD composition
In a joint-stock company, the number of BOD members must be at least three and not more than 11, and all
must be natural persons. A shareholder or a group of shareholders holding 10 per cent or more of the voting
shares of a company has the right to nominate candidates for BOD members, unless a lower threshold is
provided in the company's charter. The election of BOD members by the GMS may occur through cumulative
voting, which is popular in joint-stock companies, albeit optional. This allows minority shareholders greater
representation in the BOD. Cumulative voting is popular in joint-stock companies.
To facilitate objective decision-making, it is further required that at least one-third of BOD members in public
companies are non-executive members (i.e., not the company's GD, deputy GD, chief accountant or other
managers as stipulated in the company's charter). For unlisted public companies and listed public companies
that follow a one-tier board structure, at least one-fifth of the BOD members must be independent. Listed public
companies are required to have at least one independent board member if the BOD comprises between three and
five members, two independent board members if the BOD comprises between six and eight members, and
three independent board members if the BOD comprises between nine and 11 members. Failure to comply with
this requirement may subject a company to a fine of up to 150 million dong.5 The CG Code recommends that at
least one-third of BOD members should be independent.
Independent members are subject to several restrictions, including that they must not:
a. be employed within the same corporate group nor receive any remuneration (other than allowances);
b. hold more than 1 per cent of the voting shares of the company;
c. have been a manager (including a BOD or SB member) in the past five years;
d. be a relative of a major shareholder; nor
e. be a manager of any subsidiary.
The term of each BOD member may not exceed five years, though re-election may be for an unlimited number
of terms. Independent member positions in the BOD are limited to two consecutive terms. Further, a BOD
member of a public company is not permitted to sit on the board of more than five other companies. Failure to
comply with this requirement may subject the relevant member to a fine of up to 100 million dong.
SB composition
SB members are appointed in a similar manner to the BOD and the number of SB members must be at least
three and not more than five.
It is a general requirement for the head of the SB in a joint-stock company to hold certain professional
qualifications and serve full-time. Furthermore, members must not be related to the company. They must not be,
among other things, a manager of the company, or a family relative of any BOD member, the GD or other
managers. In respect of a public company, they should not be employed in the accounting or finance department
of the company nor have been a member or an employee of the company's auditor during the previous three
years.
ii Legal responsibilities and representation
BOD
The BOD manages the business of the company and may delegate its authority. It supervises the GD and other
managers. The powers of the BOD are limited by law, including when certain decisions may be taken only by
the GMS. This broadly occurs when the rights of shareholders are involved, such as any dealings with shares or
if the company enters into significant transactions. Decisions of the GMS must be implemented by the BOD.
The chair of the BOD may not unilaterally exercise the authority of the BOD without requisite BOD approval.
There is a court ruling annulling a decision by a chair to dismiss a company's manager without the BOD's prior
approval.6
For a company that follows a one-tier board structure, independent BOD members and the audit committee
must perform a supervisory function by overseeing the implementation of management control in the company.
The lack of an SB is compensated by oversight by independent BOD members and the audit committee.
The BOD operates under its internal regulations, which are established by the BOD itself. The CG Code goes
further by recommending that the BOD should set up a system that provides (as a minimum) criteria and
processes to determine the performance of the BOD, its individual members or its committees on the basis of,
among other things, feedback from shareholders.
BOD members are subject to certain duties owed towards the shareholders and the company and which are
fiduciary in nature, although the concept of fiduciary duty does not formally exist under Vietnamese laws and
regulations. BOD members are generally required to:
a. exercise their powers and perform their duties in accordance with the law, the charter or as authorised by
the GMS;
b. exercise their powers and perform their duties honestly, prudently, to the best of their abilities and in the
interests of the company; and
c. be loyal to the interests of the company and shareholders and not to use information and business
opportunities for their own benefit.
The CG Code further requires that BOD members should 'act in good faith, with due diligence and care, and in
the best interests of the company and shareholders'.
To avoid conflicts of interest, BOD members are subject to disclosure obligations with regard to related-party
transactions and any interest held in other companies (in addition to the disclosure requirements of securities
markets discussed below in Section III). Failure to comply with these disclosure obligations may subject the
relevant BOD member to a fine of up to 100 million dong. The CG Code recommends that the BOD adopt a
written policy on related party transactions and the BOD must generally ensure that such transactions are
conducted in accordance with market standards.
SB
The SB is a specific corporate body and not a sub-board committee. The SB performs oversight of the BOD and
the GD with respect to the management of the company. The SB of public companies is required to establish
internal operation regulations that must be approved by the GMS. The SB has the power to review, inspect and
evaluate the effectiveness and efficiency of the company's internal control systems, internal audit and risk
management. It can request information and conduct investigations. Notably, there is a ruling that the SB could
not use an external auditor without the approval of the legal representative, indicating quite clearly that the SB
cannot infringe the scope of other corporate bodies.7 Therefore, it cannot usurp the BOD's authority to manage
the business of the company. In practice the SB's role is fairly limited for private companies, though more active
for public companies.
GD
The GD, a role akin to managing director or chief executive officer, is responsible and has the authority for the
day-to-day management of company business (except those falling within the BOD's power). Each company
has only one GD. The GD may also be the legal representative of the company and, if so, the GD has the
authority to contract on behalf of the company or to represent the company in legal proceedings involving the
company. The GD implements the BOD's decisions and can appoint other managers of the company. The GD is
appointed by and is accountable to the BOD. Failure to obtain requisite BOD approval for matters that fall
within the BOD's powers may subject the GD to a fine of up to 100 million dong. If a related party contract is
not properly approved by the GMS or BOD, the GD may be held jointly liable to compensate the company in
respect of its loss.
The GD cannot serve a term exceeding five years, though may be reappointed for an unlimited number of terms.
Audit committee
The Law on Enterprises contemplates the audit committee as a sub-board committee. The audit committee is
required for companies that follow a one-tier board structure. The committee's main role is to inspect, review
and supervise the company's accounting and audit function. In practice, the role of the audit committee in
Vietnamese companies remains rather blurred.
The committee must consist of at least two members. Its head must be an independent BOD member and the
other members must be non-executive BOD members.
Company administration
Decree 155 creates a role for a person to be responsible for company administration who can also assume the
role of company secretary (the latter office is itself optional). This person will be responsible for, among other
things:
a. providing advice to the BOD in organising the GMS;
b. preparing for meetings of the BOD, the SB and the GMS;
c. providing advice on procedures for issuance of resolutions of the BOD;
d. providing financial information, meetings minutes of the BOD and other information for members of the
BOD and the SB; and
e. supervising and reporting to the BOD on the company's information disclosure.
Historically very few public companies have disclosed use of this role, although company secretaries have
become more popular.
iii Compensation
The BOD determines the remuneration of the GD and other managers, while remuneration of both BOD
members and SB members is determined by the GMS. The CG Code clarifies certain criteria for remuneration
of the BOD members by determining the roles, performance and incentives in respect of the BOD members and
recommends that a committee be set up to deal with this. Remuneration committees have become more
common in public companies and the remuneration of BOD members and executives is usually calculated by
such a committee and approved by the BOD or the GMS (as applicable). Excessive executive pay has not
attracted much controversy although, as with other jurisdictions, this can be a topical issue.
The basic annual fee of the BOD chair is often one-and-a-half to three times higher than other BOD members.
The non-fixed remuneration package is the most popular approach (more so for independent members) and
includes the basic annual fee, combined with committee fees and fees for additional BOD activities. Another
structure used is the single fixed remuneration package, whereby only a single fixed fee is paid for all
assignments. The least popular is the pro bono approach, whereby no annual fee is payable, but BOD members
are paid a nominal business fee for each activity.8 Compensation is usually in the form of cash, although share
and cash and share combinations do occur.9
iv Sub-board committees
The BOD may form sub-board committees to assist with certain special matters. It is not unusual for public
companies to set up committees having specific functions for their governance, for example, a human resources
committee. The CG Code proposes that the BOD be proactive in establishing certain committees, such as a
competent risk management committee and others to oversee, for example, corporate governance, nominations
and remuneration. In practice, it is not unusual for companies (especially those engaged in financial services,
partly because of sector requirements) to have a strategy committee, a personnel and remuneration committee, a
risk committee and an audit committee. Nomination committees are less common.10
Disclosure
i Non-public companies
Non-public companies are subject to basic disclosures set out in the Law on Enterprises, including that they
must publish the following on their websites:
a. their charter;
b. certain qualifications and work experience of BOD members, SB members and the GD;
c. annual financial statements; and
d. annual reports on evaluation of operational results of the BOD and SB.
Additionally, certain corporate information (including details of BOD members, SB members, the GD and legal
representative) must be disclosed to the local licensing authorities, some of which is made available through
public searches of the National Business Registration Portal.
In practice, non-public companies generally do not comply with the above disclosure requirements.
ii Public companies
The aforementioned disclosure requirements are applicable equally to public companies and non-public
companies. Public companies are also subject to a set of disclosure requirements provided for in Circular 96 and
are specifically subject to periodic and ad hoc disclosures, as well as certain disclosures upon request from the
SSC or the relevant stock exchange.
Disclosures must be made on a company's website and must be notified to the SSC at the same time and, for
listed companies, also to the relevant stock exchange.
Periodic disclosures
A public company must periodically publish on its website and the SSC's disclosure system:
a. annual audited financial statements;
b. annual reports in the prescribed form set out in Circular 96 (which includes disclosure of operations of
the company, reports and assessments of the BOD and corporate governance information); and
c. half-yearly management reports.
Separate and consolidated financial statements are required for a public company that is a parent company.
Large-scale public companies (those with charter capital of at least 120 billion dong) and listed companies must
also disclose reviewed half-yearly financial statements and quarterly financial statements.
Public companies are obliged to publicly disclose certain information, including their foreign ownership limit,
share redemption information and, for listed companies, information about offerings, issuance, listings of shares
and reporting on the use of proceeds from capital-raising activities. Additionally, draft resolutions to be adopted
at the annual general meeting must be disclosed in advance.
Ad hoc disclosures
Public companies must disclose information on an ad hoc basis within 24 hours of the occurrence of certain
prescribed events. These include changes or disruptions to business or licences, decisions on dividend-related
matters or redemption of shares, changes in the number of voting shares, changes to positions of internal
persons, insider transactions, transactions with a value exceeding 15 per cent of total assets of the company,
information affecting the share price of the company and other material events affecting the business or
corporate governance of the company.
Listed and large-scale public companies are obliged to disclose, within 24 hours, all decisions to increase or
decrease the charter capital, to conduct transactions of 10 per cent or more of the value of the total assets of the
company, or to contribute capital in another organisation equal to at least 50 per cent of that other organisation's
participation capital.
Whenever the voting shares of any major shareholder holding 5 per cent (or more) of voting shares in a public
company is increased by a 1 per cent increment then that shareholder must notify the SSC, the relevant stock
exchange and the relevant company. The company is then required to publish this information on its website.
Disclosure on request
Public companies are required to disclose, within 24 hours of a request from the SSC or the relevant stock
exchange, events that seriously affect the lawful interests of investors or information about the company that
significantly affects its share price that the SSC or the exchange wishes to verify. Disclosure following such a
request must include the relevant cause and an assessment of the authenticity of the event and remedy.
Public companies generally comply with the applicable disclosure requirements. The SSC regularly monitors
this and non-compliance may subject public companies to monetary fines. The SSC has been increasingly
imposing fines in respect of violations of disclosure obligations of listed public companies and the total number
of sanctioning decisions (in respect of disclosure obligations) issued by the SSC was 26.5 per cent higher in
2021 compared with 2020.11
Corporate social responsibility / ESG
i Corporate social responsibility
Circular 96 requires public companies to report on environmental, social and corporate governance issues in
their annual report (e.g., greenhouse gas emissions, energy consumption, water consumption, compliance with
the law on environmental protection, policies concerning employees, responsibility for local community,
investments and other community development activities). The CG Code recommends that the BOD ensure
disclosure of key non-financial information, including environmental and social reporting. Significant
recommended practices under the CG Code include that the BOD should ensure that:
a. relevant information is prepared in accordance with globally accepted standards, such as those issued by
the International Integrated Reporting Council, the Global Reporting Initiative or the Sustainable
Assurance Standards Board, and subject to independent verification; and
b. appropriate governance policies and processes are in place to monitor the quality of information.
Decree 3112 provides that the operational term of investment projects of foreign-invested companies should not
be extended when using obsolete, environment-threatening or resource-intensive means. Although the
implementation of this provision is not widespread, there is an intention to have 'clean' foreign investment.
It is expected that Vietnam will follow the global trend of increased corporate social responsibility, partially
driven by investor concerns and public opinion. Development finance institutions, including the International
Finance Corporation and Asian Development Bank, are investors that usually require a higher level of corporate
social responsibility. Trade relations may also play a role, for example, the free trade agreement between
Vietnam and the European Union provides that the parties 'agree to promote corporate social responsibility'.13
Shareholders
i Shareholder rights and powers
Shareholders generally exercise their rights through the GMS – the highest decision-making body of a
company. Shareholders may attend and vote at a GMS in person or by proxy. Voting thresholds are generally
more than 50 per cent for basic matters, and at least 65 per cent for certain specified matters. Resolutions passed
by way of collecting written opinions are decided by more than 50 per cent. In principle, each ordinary share is
granted only one vote. Companies may issue voting preference shares with greater voting rights, although only
to founding shareholders or shareholders that are government entities or government-authorised entities.
Companies may also issue shares with preferential dividend or redemption rights (generally to anyone). A
change in the Law on Enterprises now allows shareholders holding preferred dividends and redeemable
preferred shares to attend and vote on matters that adversely affect the rights and obligations attached to such
shares.
A shareholder or a group of shareholders holding at least 5 per cent of shares of a company may call a GMS
meeting if they consider the BOD to have acted in material violation of shareholders' rights, managers' duties or
has decided matters that are outside its authority. The matters that must be submitted to shareholders for
approval include the amount of dividend to be paid, the redemption of more than 10 per cent of issued shares,
and investment or sale of assets valued at 35 per cent or more of the total asset value.
Shareholders may approach a court to prevent the BOD from implementing or to annul any BOD decision or
resolution that is or has been passed contrary to law, the company's charter or GMS resolutions. Furthermore,
shareholders holding at least 1 per cent of the total ordinary issued shares of a company have the right to
directly, or on behalf of the company, pursue a direct derivative suit against a BOD member or the GD under
certain circumstances in which that individual has failed to fulfil his or her duties. In pursuing the suit, the
claimant (with court consent) has the right to examine, look up and extract necessary information before and
during the suit that supports this right.
A notable example of shareholders using the derivative suit is the one being pursued by the shareholders of Mon
Hue against abuse of power of the managers when appropriating the company's properties. Vietnamese law does
not currently provide for a clear legal basis for an indirect corporate derivative suit (save where a minority
shareholder may pursue a claim against a parent company on behalf of a subsidiary).
Additionally, the Law on Enterprises provides a regime for shareholders holding at least 5 per cent of shares to
approach a court, within 90 days of receipt of the GMS's resolution, to invalidate this GMS resolution on certain
grounds. This may occur by way of a unilateral petition (rather than a suit that must involve two parties in
dispute) and is therefore subject to a simpler procedure. This remains an interesting tool that could be further
developed.
ii Shareholder duties and responsibilities
Shareholder duties as provided in Vietnamese law are very basic. They include the obligation to contribute the
registered charter capital, not to withdraw contributed capital from the company, to comply with the company's
charter and internal regulations, to comply with GMS and BOD resolutions and to keep information provided
by the company in confidence in accordance with the company's charter and the law. Vietnamese law does not
expressly require a shareholder to act in the interests of the company (as is the case with BOD members).
Should a company become controlled by a shareholder (i.e., a parent company), then the parent company may
not unduly exert itself to force the subsidiary to conduct business outside the subsidiary's ordinary course, or
engage in non-profit-making activities and cause loss to the subsidiary. The parent company may be held liable
for loss sustained and a shareholder may bring a direct derivative claim against the parent to compensate the
subsidiary. Additionally, under the Law on Securities, major shareholders of a public company that directly or
indirectly hold at least 5 per cent or more of voting shares may not use their influence to cause any damage to
the rights and benefits of the company and other shareholders. This appears to emphasise the principle of
equality between shareholders rather than impose any general duty on shareholders.
iii Shareholder activism
Shareholders are becoming increasingly active in corporate governance as Vietnamese law gravitates towards
greater corporate governance. Within the shareholder toolbox, the GMS decides remuneration of the BOD and
the SB. As mentioned, holders of 5 per cent of ordinary shares may call a GMS to deal with BOD malfeasance.
If the BOD fails to do so, the SB can call the GMS and, failing which, the relevant shareholders may themselves
call the meeting. Historically, attempts to call a GMS by shareholders have ended in failure, prompting a change
in the Law on Enterprises with a reduction (from 10 per cent to 5 per cent) of the minimum shareholding
requirement for calling a GMS.
iv Takeover defences
Vietnamese law does not distinguish between friendly and hostile takeovers. In addition, hostile takeovers
remain rather muted, although proxy fights do take place in practice.
The most prominent safeguard to hostile takeovers is the requirements of public tender offers. The Law on
Securities requires an acquirer to launch a public tender offer for, among other things, any acquisition of 25 per
cent or more of the voting shares of a public company (resulting in a regulated offer). The acquirer must register
the public tender offer with the SSC and notify the BOD of the target company of the proposed public tender
offer. The target company is obliged to disclose the receipt of the public tender offer on its website within three
days. The BOD must, within 10 days of receipt, deliver its opinion on the public tender offer to the SSC and all
shareholders.
Defensive devices that are common in developed jurisdictions, such as the shareholders' right plan (i.e., poison
pill), staggered board appointments, the acquisition or disposal of an asset (which may require GMS
sanctioning) and preference voting shares (subject to described limitations) are present in Vietnam, though
highly exceptional.
v Contact with shareholders
Shareholders holding 5 per cent or more of the ordinary shares of a company are entitled to access and extract
the minutes of meetings, resolutions and decisions of the BOD, semi-annual and annual financial statements,
reports of the SB, contracts and transactions subject to approval by the BOD and other documents (except those
that involve the company's business secrets). These rights are not widely exercised.
The CG Code recommends that the BOD should ensure the equitable treatment of all shareholders, including
minority and foreign shareholders, and that the company has a system of registering shareholder complaints and
effectively regulating corporate disputes. The company should also disclose the ultimate beneficial ownership
of 5 per cent or more of its shares. This is the first instance of the use of the term 'ultimate beneficial
ownership'. Although not prescribed under any law or regulation, this requirement represents an important
development of the Vietnamese corporate governance framework towards greater transparency and effective
shareholder involvement.
VietnamIssue description
Most of foreign investors in Vietnam choose the corporate form of SMLLC thanks to obvious advantages of
this vehicle. The improvement of corporate governance of this corporate form would definitively add values to
their investment in particular and the investment environment of Vietnam generally.
Article 75 of the EL gives owner (analogous to the single shareholder) of an SMLLC supreme power to manage
its company. Key examples would be the right to make the most importance decisions of the company's
business affairs, appointment of key officers, restructuring of the entity, etc.
From a legal perspective, it is implied that the EL does not allow the owner to directly exercise these rights.
Instead, it must act through either the members' council (Article 79) or the company's president (Article 80),
depending on how many persons the owner wishes to authorize, to act on its behalf. In other words, though the
owner is given the ultimate power, it has no option but to authorize other persons to exercise such power. In
fact, what the owner can do is to 'ratify' company related decisions already approved by either the members'
council or the company's president without directly deciding or approving them.
  Recommendations
The EL should be more specific on only decisions of the members' council or the company's president are
legally sufficient for approving most important issues of an SMLLC. Guiding regulations such as Decree 78
should be changed accordingly.
X.2 Scope of authorisation of the Members' Council in an SMLLC

Relevant Ministries: Ministry of Planning and Investment

  Issue description
Article 79.1 of the EL provides that the members' council may act on behalf of an SMLLC to implement rights
and obligations of that SMLLC other those granted to the general director.
This provision may not be consistent with the Civil Code of Vietnam (both 2005 and 2014 versions –
collectively the 'Civil Code'). Specifically, the Civil Code only allows an individual or a legal entity to act on
behalf of their counterparts with respect to implementing civil transactions, which arguably include the
aforementioned rights and obligations. These person/entity can be either the legal or authorised representative
(via power of attorney or authorisation contract). It is obvious that the members' council cannot be treated as
any of the above concept and therefore cannot act on behalf of the company.
  Recommendations
Article 79.1 of the EL and any other similar provisions which grant the authorisation to bodies which are neither
individuals nor corporate entities must be changed to reflect provisions of the Civil Code.
X.3 Authorisation Authority of an SMLLC's (general) director
Relevant Ministries: Ministry of Planning and Investment
  Issue description
Pursuant to the Civil Code, only legal representative or authorised representative can act in the name of a legal
entity including a corporate entity. Regarding legal representative of an SMLLC owned by an organisational
owner, its charter will clearly state who is/are the legal representative(s) of a company. Without such statement,
either the chairman of an MC or the company's president will be the natural legal representative of that SMLLC.
Nevertheless, Articles 64.2e and 81.2.e of the EL allows the (general) director (GD) of an SMLLC to enter into
contract in the name of that company.

1.4.1. Coca-cola case

The Coca-Cola Company is committed to sound principles of corporate
governance.
The Board is elected by the shareowners to oversee their interest in the long-term
health and the overall success of the business and its financial strength. The Board
serves as the ultimate decision making body of the Company, except for those matters
reserved to or shared with the shareowners. The Board selects and oversees the
members of senior management, who are charged by the Board with conducting the
business of the Company.
1.4.2. Amazon.com case
Nominating and Corporate Governance Committee Charter
Organization and Membership
CORPORATE GOVERNANCE.CASE STUDIES
6
This charter governs the operations of the Nominating and Corporate
Governance Committee (the "Committee") of the Board of Directors of Amazon.com,
Inc. (the "Board"). The Committee is appointed by the Board and consists of at least
two Directors, each of whom will meet Nasdaq Stock Market, Inc. ("NASDAQ")
requirements with respect to independence as determined by the Board. The Committee
reviews this charter periodically and recommends appropriate changes to the Board.
Statement of Purpose
The purpose of the Committee is to:
Review and assess the composition of the Board,
Assist in identifying potential new candidates for Director,
Recommend candidates for election as Directors, and
Provide a leadership role with respect to corporate governance of the Company.
Among its specific duties and responsibilities, the Committee performs the following, to
the extent it deems necessary and appropriate, consistent with and subject to applicable
laws, as well as rules and regulations promulgated by the SEC, NASDAQ or other
regulatory authorities.
Review and Assess the Composition of the Board
1. The Committee recommends to the Board assignments of committee members
and chairs for each committee.
2. The Committee reviews the qualifications of Directors for continued service on
the Board.
3. The Committee assists the Board in the annual CEO and Director self-
evaluations.
Assist in Identifying Potential New Candidates for Director
CORPORATE GOVERNANCE.CASE STUDIES
7
4. The Committee develops and recommends to the Board criteria to identify and
evaluate prospective candidates for Director.
5. The Committee develops and periodically reviews the policy for Director
candidates recommended by the Company's shareholders.
6. The Committee identifies and reviews the qualifications of candidates for
Director.
Recommend Candidates for Election as Directors
7. The Committee recommends to the Board candidates for election or reelection
as Directors at each annual meeting of stockholders and recommends candidates
to be elected by the Board as necessary to fill vacancies and newly created
Directorships.
Provide a Leadership Role with Respect to Corporate Governance of the Company
8. The Committee periodically considers, and reports to the Board on, general
corporate governance matters.
9. The Committee develops and periodically reviews the Corporate Governance
Guidelines and recommends changes to the Board.
The Committee recommends compensation for newly-elected Directors and
reviews Director compensation as necessary.
Code of Business Conduct and Ethics
Amazon.com employees should always act lawfully, ethically, and in the best
interests of Amazon.com. This Code of Business Conduct and Ethics (the "Code of
Conduct") sets out basic guiding principles. Employees who are unsure whether their
conduct or the conduct of their coworkers complies with the Code of Conduct should
contact their manager or the Legal Department. Employees may also report any
CORPORATE GOVERNANCE.CASE STUDIES
8
suspected noncompliance to the Legal Department or to the Amazon.com Ethics Line
referred to in paragraph IX below.
I. Compliance with Laws, Rules and Regulations
Employees must follow applicable laws, rules and regulations at all times.
Employees with questions about the applicability or interpretation of any law, rule or
regulation, should contact the Legal Department.
II. Conflicts of Interest
Employees are expected to use their judgment to act, at all times and in all ways,
in the best interests of Amazon.com. A "conflict of interest" exists when an employee's
personal interest interferes with the best interests of Amazon.com. For example, a
conflict of interest may occur when an employee or a family member receives a
personal benefit as a result of the employee's position with Amazon.com. A conflict of
interest may also arise from an employee's business or personal relationship with a
customer, supplier, competitor, business partner, or other employee, if that relationship
impairs the employee's objective business judgment.
Because an employee's receipt of gifts or services could create a conflict of
interest, the Legal Department will develop and maintain guidelines for disclosure of
gifts or services received from customers, suppliers, competitors or business partners.
Employees should attempt to avoid conflicts of interest and employees who
believe a conflict of interest may exist should promptly notify the Legal Department.
The Legal Department will consider the facts and circumstances of the situation to
decide whether corrective or mitigating action is appropriate.
III. Insider Trading Policy
CORPORATE GOVERNANCE.CASE STUDIES
9
Federal and state laws prohibit trading in securities by persons who have
material information that is not generally known or available to the public.
Employees of the Company may not a) trade in stock or other securities while in
possession of material nonpublic information or b) pass on material nonpublic
information to others without express authorization by the Company or recommend to
others that they trade in stock or other securities based on material nonpublic
information.
The Company has adopted guidelines designed to implement this policy. All
employees are expected to review and follow the Amazon.com Insider Trading
Guidelines. Certain employees must comply with trading windows and/or preclearance
requirements when they trade Amazon.com securities.
IV. Discrimination and Harassment
Amazon.com provides equal opportunity in all aspects of employment and will
not tolerate any illegal discrimination or harassment of any kind. For more information,
see the Amazon.com policies on Equal Employment Opportunity and Workplace
Harassment in the Amazon.com Owner's Manual.
V. Health and Safety
Amazon.com provides a clean, safe and healthy work environment. Each
employee has responsibility for maintaining a safe and healthy workplace by following
safety and health rules and practices and reporting accidents, injuries and unsafe
conditions, procedures, or behaviors.
Violence and threatening behavior are not permitted. Employees must report to
work in a condition to perform their duties, free from the influence of illegal drugs or
alcohol.
CORPORATE GOVERNANCE.CASE STUDIES
10
VI. Price Fixing
Employees may not discuss prices or make any formal or informal agreement
with any competitor regarding prices, discounts, business terms, or the market segments
and channels in which the Company competes, where the purpose or result of such
discussion or agreement would be inconsistent with applicable antitrust laws. If you
have any questions about this section or the applicable antitrust laws, please contact the
Legal Department.
VII. Payments to Government Personnel
The U.S. Foreign Corrupt Practices Act prohibits giving anything of value,
directly or indirectly, to officials of foreign governments or foreign political candidates
in order to obtain or retain business. Employees may not make illegal payments to
government officials. Employees who are conducting business with the government
officials of hLfo[(L)6Entmrntpa650(m)-1 0 0 rgn977ntrs ntountoun6 n orici me0(t)-65-2.9b
CORPORATE GOVERNANCE.CASE STUDIES
11
b) believe that a violation of the Code of Conduct has or is about to occur or c) when in
doubt about how to properly act in a particular situation.
Employees may also raise questions or report suspected violations of the Code
of Conduct through the Amazon.com Ethics Line. Calls to the Ethics Line are answered
by an independent third party and may be anonymous upon request.
Amazon.com will not allow retaliation against an employee for reporting
misconduct by others in good faith. Employees must cooperate in internal investigations
of potential or alleged misconduct.
Employees who violate the Code of Conduct will be subject to disciplinary
action up to and including discharge.
X. Periodic Certification
The Legal Department will designate certain employees who, based on their
level of responsibility or the nature of their work, will be required to certify periodically
that they have read, understand and complied with the Code of Conduct.
XI. Board of Directors
With respect to their service on behalf of the Company, Amazon.com's Board of
Directors must comply with the relevant provisions of this Code of Conduct, including
conflicts of interest, insider trading and compliance with all applicable laws, rules and
regulations.
XII. Waivers
Waivers of this Code of Conduct may be made only in a manner permitted by
law.
13
To establish and preserve management accountability to Microsoft's owners by
appropriately distributing rights and responsibilities among Microsoft Board
members, managers, and shareholders.
To provide a structure through which management and the Board set and attain
objectives and monitor performance.
To strengthen and safeguard their culture of business integrity and responsible
business practices.
To encourage the efficient use of resources, and to require accountability for
their stewardship of those resources.
ROLE OF THE BOARD OF DIRECTORS
Shareholders elect the Board of Directors to oversee management and to assure
that shareholder long-term interests are served. Through oversight, review, and counsel,
the Board of Directors establishes and promotes Microsoft's business and organizational
objectives. The Board oversees the company's business affairs and integrity, works with
management to determine the company's mission and long-term strategy, performs the
annual CEO evaluation, oversees CEO succession planning, establishes internal controls
over financial reporting, and assesses company risks and strategies for risk mitigation.
BOARD OF DIRECTORS
Board of Directors
Steven A. Ballmer Chief Executive Officer, Microsoft Corporation
BOARD COMMITTEES
The Board has five committees: an Antitrust Compliance Committee, an Audit
Committee, a Compensation Committee, Governance and Nominating Committee, and
a Finance Committee. Each committee is led by, and is composed solely of,
independent directors. Each committee is responsible for the review and oversight of
company activities in the areas designated in its charter.
1.4.4. Nokia case
Pursuant to the provisions of the Finnish Companies Act and our articles of
association, the control and management of Nokia is divided among the shareholders in
a general meeting, the Board of Directors and the Group Executive Board. Our Articles
of Association provide for a Group Executive Board, which is responsible for the
operative management of Nokia. The Chairman and the members of the Group
Executive Board are elected by the Board of Directors. Only the Chairman of the Group
CORPORATE GOVERNANCE.CASE STUDIES
15
Executive Board can be a member of both the Board of Directors and the Group
Executive Board.
Board of Directors
The Board decides on matters that, in relation to the Group's activities, are
significant in nature. Such matters include confirmation of the strategic guidelines,
approval of the periodic plans and decisions on major investments and divestments. The
Board appoints the CEO, the President, the Chairman and the members of Nokia's
Group Executive Board. The Board also confirms the remuneration of the CEO and the
President.
The roles and responsibilities of the Board and its committees are defined in the
Corporate Governance Guidelines and the committee charters. The Board's committees
consist of the Audit Committee, the Personnel Committee and the Corporate
Governance and Nomination Committee. The Board regularly reviews these guidelines
and charters in order to ensure that they appropriately comply with what the Board
believes to be best practices of corporate governance. The Board and each of its
committees conduct annual performance self-evaluations.
Group Executive Board
Nokia's articles of association provide for a Group Executive Board, which is
responsible for managing the operations of Nokia. The Chairman and the members of
the Group Executive Board are elected by the Board of Directors. Only the Chairman of
the Group Executive Board can be a member of both the Board of Directors and the
Group Executive Board.
Annual General Meeting
CORPORATE GOVERNANCE.CASE STUDIES
16
The shareholders of Nokia use their decision-making power in Nokia's general
meetings. The Annual General Meeting is usually held in each March, April or May.
Auditor
The auditor is elected annually by the Annual General Meeting.
PricewaterhouseCoopers Oy was elected as the auditor for 2006 in the Annual General
Meeting held on March 30, 2006.
Corporate Governance Practices
Nokia follows rules and recommendations of the Helsinki, New York,
Stockholm and Frankfurt stock exchanges, where applicable.
Nokia's corporate governance practices comply with the Corporate Governance
Recommendation for Listed Companies approved by the Helsinki Exchanges in
December 2003, effective as of July 1, 2004. The Recommendation recommends a
company to describe the manner in which the internal audit function of the company is
organized. As Nokia has comprehensive risk management and internal control processes
in place, there is no separate internal audit function at Nokia.
Under the New York Stock Exchange's corporate governance listing standards, listed
foreign private issuers, like Nokia, must disclose any significant ways in which their
corporate governance practices differ from those followed by US domestic companies
under the NYSE listing standards. There are no significant differences in the corporate
governance practices followed by Nokia as compared to those followed by US domestic
companies under the NYSE listing standards, except that Nokia follows the
requirements of Finnish law with respect to the internal audit function and the approval
of equity compensation plans. Under Finnish law, stock option plans require
shareholder approval at the time of their launch. All other plans that include the delivery
of company stock in the form of newly issued shares or treasury shares require
shareholder approval at the time of the delivery of the shares or, if shareholder approval
is granted through an authorization to the Board of Directors, not earlier than one year
1.What are the two things that long term profits stem from?
Current and Future Profits

Growth in Sales of Existing Products or New Products

2/What are the two things that can impact a companies organization?
Capital Requirements

Risk Sharing
3,What are the advantages to a sole proprietorship?
Single Person in Charge

Easy Set Up

Don't have to pay unemployment tax on themselves

4.About how much of U.S businesses do Sole Proprietorship represent?
70%`
5.What are the disadvantages to a sole proprietorship?
Limited Lifespan

Limited Ability to Raise Capital

Unlimited Personal Liability

6/What are the advantages to a partnership?
More than One Owner

Ability to Pool Capital and Skill

7.What are the disadvantages to a partnership?
Each Partner bears unlimited liability
8.About how much of U.S businesses do Corporations represent?
Fewer than 20%
9.What form of business ownership generates the majority of the country's revenue?
Corporations
10.Corporations have the status of?
Legal Personhood
11.What are some characteristics of a corporations?
Unlimited Life

Can Sue and Be Sued

Is a Tax Payer

Corporate Officers act as agents for the corporation

12.What is a shareholders role in a corporation?
They contribute capital in return for the shares. Share the risk along with the returns.

Elect a board of directors

13.How is a corporation formed?
Is formed by filing a document with the state government that specifies how many shares of stock are
authorized for issuance.
14.What are the advantages of a corporation?
Easy access to capital markets

Infinite life unless it goes bankrupt or a merger takes place.

Owners have limited liability

Liquid corporate ownership

15.What are the disadvantages of a corporation?
Shareholders are exposed to double taxation

Cost structure of running a corporation is higher than simpler forms

Corporations suffer from potentially serious governance problems

16.Where does the need for corporate governance come from?
It comes from the idea that when separation exists between ownership of a company and its management, self-
interested executives have the opportunity to take actions that will benefit themselves but cost others.
17.What is the self interest of executives in corporations called?
The Agency Problem or The Principal-Agent Problem
18..Costs resulting from the Principal Agency Problem are called what?
Agency Costs
19What is the purpose of corporate governance?
A system of checks and balances to lessen the agency costs and give a monitoring system to these organizations
20.What is put in place to deter people from acting in self interest?
Increasing the probability of detection and shifting the risk-reward balance so that the expected payoff from
crime is decreased
The exhibition of self restraint on moral grounds is called what?
Moral Resilience
Corporate Governance is the collection of control mechanisms that an organization adopts to prevent or
dissuade potentially self interested managers from engaging in what?
Activities detrimental to the welfare of shareholders and stakeholders
True or False: Insufficient Time and Effort on Building Shareholder Value is an example of Agency Costs
True
True or False: Manipulating financial results to increase bonus or stock price is an example of Agency Costs
True
True or False: The failure to groom successors so management becomes "indispensable" is an example of
Agency Costs
True
True of False: Pursuing uneconomic acquisitions to "grow the empire" is an example of Agency Costs
True
What is the primary monitor of the executives in corporations?
Board of Directors
What are solutions to the principal-agent problem?
Be sure to align executive incentives with shareholders desires. (ex: stock, restricted stock, and stock options)

Set up additional mechanisms for the monitoring of managers behaviors.

How can shareholders influence mangers?
Indirectly through the board of directors
What is the definition of an "inactive" shareholder?
One who simply goes along with whatever management wants.
What is the definition of an "active" shareholder?
Someone who is large enough to try and influence management or change the board. They often met defeat
though.
What are some internal monitors?
Board of Directors
What are some external monitors?
Auditors, Analysts, Bankers, Credit Agencies, and Attorneys
What are some government monitors?
The SEC and IRS
What role does the Board of Directors serve?
They oversee management and are supposed to represent shareholders' interests.

Evaluate management and design compensation contracts to tie management's salaries to the firm's performance
What is the role of the SEC? (Security Exchange Commission)
Regulate public firms for the protection of public investors

Make policy and prosecute violators in civil courts.

What is the role of the IRS? (Internal Revenue Service)
They enforce the tax rules to ensure that corporations pay taxes.
What was the Sarbanes-Oxley Act of 2002?
Was created to protect investors from fraudulent accounting practices by corporations.
What are some additional monitors?
Market forces

Stakeholders

Creditors

Employees

Society
Why do important different occur between the types of monitoring and incentives used in other capitalist
countries and the U.S?
Different compensation contracts

Different accounting standards

Different institutional investing environment

Bank-oriented or capital markets-oriented

Different legal environment

1

Specific corporate governance practices for publicly traded U.S. corporations are mandated by the Uniform
Corporate Governance Act.
a.
True.

b.
False.
B
2

Which of the following is true regarding a corporation's board of directors?

a.
All of these are correct.

b.
The directors represent the middlemen between the shareholders and management.

c.
The directors are generally elected by the company shareholders.

d.
The directors oversee business operations by assessing the strategy and underlying purpose of management's
decisions and actions.
A
3

The boards of directors of companies that are listed on the NYSE or NASDAQ must be composed of a majority
of independent directors.

a.
True.

b.
False.
A
4

According to the OECD Principles of Corporate Governance, an entity's corporate governance framework
should:

a.
All of these are correct.

b.
Encourage active cooperation between corporations and stakeholders in creating wealth and jobs.
c.
Ensure the timely and accurate disclosure of all material matters regarding the corporation.

d.
Ensure equitable treatment of all shareholders, including minority and foreign shareholders.
A
5

Companies with securities listed on the NYSE must have an internal audit function.

a.
True.

b.
False.
A
6

The purpose of corporate governance is to:

a.
Provide reasonable assurance regarding the organization's compliance with applicable laws and regulations.

b.
Prevent and detect misstatements, whether caused by errors or fraud.

c.
Encourage the efficient use of resources and require accountability for the stewardship of those resources.

d.
Ensure the accuracy and reliability of the organization's financial reports.
C
7

Under NYSE rules, a listed company's board of directors must have which of the following committees?

a.
Nominating/corporate governance committee.

b.
All of these are correct.

c.
Compensation committee.
d.
Audit committee.
B
8

Which of the following parties is responsible for directing employees to carry out business activities and
managing their performance of those tasks?

a.
Shareholders.

b.
External auditors.

c.
The board of directors.

d.
Management.
D
9

According to the requirements of the Sarbanes-Oxley Act, which of the following parties is responsible for
establishing procedures to handle complaints regarding irregularities in a publicly traded company's accounting
methods, internal controls, or auditing matters?

a.
The audit committee.

b.
Executive management.

c.
The external audit firm.

d.
The internal audit function.
A
10

The _______________ provide(s) guidance for policy makers in evaluating and improving the legal, regulatory,
and institutional framework for corporate governance.

a.
IIA Standards for the Professional Practice of Internal Auditing.
b.
IOSCO Principles for Auditor Oversight.

c.
INTOSAI Code of Ethics.

d.
OECD Principles of Corporate Governance.
D
11

Both the NYSE and NASDAQ have rules requiring listed companies to adopt and disclose a code of conduct for
all employees and to report any waivers of the code for directors or officers.

a.
True.

b.
False.
A
12

Specific corporate governance requirements for publicly traded U.S. corporations are considered optional and
are left to the discretion of the corporation's board of directors.

a.
True.

b.
False.
B
13

Good corporate governance practices:

a.
Define the relationships and expectations of the parties involved.

b.
All of these are correct.

c.
Provide clear lines of accountability and reporting.
d.
Ensure that no single party is capable of making all of the business decisions without influence, input, or
approval of other parties.
B
14

Which of the following parties is responsible for overseeing business operations by assessing the strategy and
underlying purpose of management's decisions and actions?

a.
The board of directors.

b.
External auditors.

c.
Industry regulators.

d.
Shareholders.
A
15

The term _______ refers to the oversight responsibilities of different parties for an organization's direction,
operations, and performance.

a.
Corporate compliance.

b.
Fraud risk assessment.

c.
Corporate governance.

d.
Risk management.
C
16

Effective corporate governance is the foundation of fraud risk management.

a.
True.
b.
False.
A
17

The OECD Principles of Corporate Governance are required to be implemented by all corporations in the
jurisdictions that have officially adopted them.

a.
True.

b.
False.
B
18

Effective corporate governance practices are most important for which of the following organizations?

a.
A small souvenir shop in a tourist town that employs four retail clerks, in addition to the store's owners.

b.
A sole-practitioner dentist's office.

c.
A financial services company whose stock shares are traded on a public securities exchange.

d.
An advertising firm with 75 employees and four partners, all of whom actively participate in the business.
C
19

Good corporate governance is based on a framework that:

a.
Is appropriate for the organization's legal and regulatory environment.

b.
All of these are correct.

c.
Takes into account the organization's cultural and ethical environment.

d.
Remains adaptable.
B
20

An entity's corporate governance structure specifies the distribution of rights and responsibilities among the
different participants in the organization and lays down the rules and procedures for organizational decision-
making.

a.
True.

b.
False.
A
21

Who is responsible for holding the board of directors accountable for proper governance and oversight?

a.
The shareholders.

b.
The chairman of the board.

c.
Executive management.

d.
The external auditors.
A
22

The Organisation for Economic Co-operation and Development has developed a detailed corporate governance
policy that can be effectively applied to all organizations.

a.
True.

b.
False.
B
23

Which of the following is not one of the core principles of sound corporate governance?
a.
Responsibility.

b.
Fairness.

c.
Independence.

d.
Transparency.
C
24

Under the Sarbanes-Oxley Act, members of the audit committee can be paid for consulting work done for the
company, but only if the transaction is documented and conducted at arm's length.

a.
True.

b.
False.
B
25

The Sarbanes-Oxley Act requires that each member of a company's audit committee be independent with
respect to the company. Which of the following is not a violation of the independence requirements for audit
committee members?

a.
Serving as the CEO of a subsidiary of the company.

b.
The receipt of pension benefits from previous employment with the company.

c.
Ownership of 18 percent of the company's voting stock.

d.
The receipt of legal consulting fees from the company.
B
26

Ownership of an equity share in a publicly traded company provides an investor with a right to certain
information about the corporation and a right to influence the corporation through participation in general
shareholder meetings and by voting.

a.
True.

b.
False.
A
27

Which of the following is a responsibility of the audit committee under the Sarbanes-Oxley Act?

a.
Resolving disputes about financial reporting between the auditors and management.

b.
Hiring, overseeing, and paying the company's external auditors.

c.
Pre-approving all audit and non-audit provided by the external auditor.

d.
All of these are correct.
D
28

The Treadway Commission made which of the following recommendations to reduce the probability of fraud in
financial reports?

a.
All of these are correct.

b.
Adequate audit committee resources and authority.

c.
A mandatory independent audit committee.

d.
A written charter for the audit committee.
A
29

The Treadway Commission was established with the purpose of defining the responsibility of the auditor in
preventing and detecting fraud.
a.
True.

b.
False.