Deck 21: Key Issues in Australian Corporate Governance

Question 1

The "two- tier" model of board structure has particular prominence in:

A)the United States
B)Australia
C)Germany
D)the United Kingdom

Answer 1

C

Question 2

Which of the following statements is incorrect?

A)corporate governance does appear to play a significant role in improving transparency and accountability
B)it is very likely that good corporate governance is associated with reduced economic returns
C)it seems that the mere "appearance" of corporate governance is valued by investors
D)it is very likely that good corporate governance is associated with improved economic returns

Answer 2

B

Question 3

According to the ASX Corporate Governance Council,the board should be structured in such a way that it:

A)exercises independent judgment
B)has a proper understanding of,and competence to deal with,the current and emerging issues of the business
C)can effectively review and challenge the performance of management
D)all of the above

Answer 3

D

Question 4

Fundamental to the "two- tier" board structure is the existence of two separate boards which are:.

A)executive and non- executive
B)management and supervisory
C)executive and supervisory
D)management and non- executive

Question 5

Which of the following statements regarding stakeholder theory is incorrect?

A)it dispenses with the assumption that the sole important relationship is between agents (managers)and principals (shareholders)
B)it considers the corporation from a much broader perspective,whereby shareholders are only one of many potential stakeholder groups
C)to ignore society is to threaten the equilibrium that it provides
D)it assumes that the sole important relationship is between agents (managers)and principals (shareholders)

Question 6

A theoretical perspective on incentives and monitoring arising from the delegation of decision making authority from principal to agent is known as:

A)principal theory
B)delegation theory
C)agency theory
D)decision theory

Question 7

The key elements of the ASX Corporate Governance Council's definition of corporate governance relate to the rules,relationships,systems and processes that can help a company to:

A)monitor and assess risk
B)provide accountability
C)optimise performance
D)all of the above

Question 8

Which of the following was a recommendation of the ASX Corporate Governance Council?

A)the board should establish a nomination committee
B)the audit committee should be structured so that it is chaired by the chair of the board
C)companies should disclose the process for evaluating the performance of senior executives
D)both A and C

Question 9

A director of the company who is not a member of management involved in its business and operational dealings is known as a/an:

A)non- operational director
B)executive director
C)non- employee director
D)non- executive director

Question 10

The specific areas,corporate governance has been found to facilitate improved transparency and accountability include:

A)a reduction in management over- consumption
B)the provision of quality financial reporting
C)improved management monitoring
D)all of the above

Question 11

One clear example of the validity of stakeholder theory in Australia has been:

A)the increasing push towards corporate social responsibility
B)the collapse of companies such as HIH
C)the establishment of the ASX Corporate Governance Council
D)the merger of the Australian Stock Exchange and the Sydney Futures Exchange

Question 12

Which of the following statements is correct?

A)the Corporations Act contains an extensive amount of legal prescription concerning the role of the board as a whole
B)the legal framework for the operation of the company is contained in the provisions of the Income Tax Assessment Act 1936
C)the company,and its resources,are owned by the directors
D)the board of directors acts as the custodian and manager of the company's resources

Question 13

The purposeful intervention in the external financial reporting process,with a view to obtaining private gain for shareholders or managers has been referred to as:

A)financial statement fraud
B)financial reporting management
C)earnings management
D)none of the above

Question 14

The specific agency problems created by the assumption that managers are wealth maximisers include which of the following?

A)the differences between managers' and shareholders' attitudes to risk
B)the potential for company managers to maximise their wealth at the expense of company shareholders
C)the tendency for management to focus on short- term performance at the expense of long- term growth
D)all of the above

Question 15

Which of the following organisations was not represented on the ASX Corporate Governance Council?

A)Investment and Financial Services Association
B)Australian Securities and Investments Commission
C)Australian Shareholders' Association
D)Property Council of Australia

Question 16

Explain the concepts of agency theory.

Question 17

The stereotypical Australian company board of directors has which of the following types of board structures?

A)unitary
B)dual- tier
C)two- tier
D)singular

Question 18

According to the Corporations Act a public company must have a minimum of how many directors?

A)1
B)50
C)3
D)5

Question 19

Under the Corporations Act which of the following is not a criteria for an individual to be appointed as a company director?

A)no serious indictable offences
B)a minimum of 5 years of relevant experience in the company's industry
C)signed consent to the company
D)a minimum age of 18

Question 20

A theoretical perspective that an individual is motivated by a range of non- economic factors that help align the individual's interests with the organisation's goals is known as:

A)stewardship theory
B)agency theory
C)motivation theory
D)institutional theory

Question 21

Discuss the arguments for and against larger boards.

Question 22

Discuss some of the prior studies on the relationship between corporate governance and quality financial reporting.

Question 23

Explain the Corporations Act requirements relating to the composition and operation of the board of directors.

Question 24

Explain the arguments for and against independent directors.

Question 25

Explain the differences between the "unitary" and "two- tier" board structures.

Question 26

Identify the principle and recommendations of the ASX Corporate Governance Council.