Question 1

The corporate governance committee is staffed by members of the board of directors and specialists.

Accepted Answer

The corporate governance committee is typically made up of members of the board of directors and may also include specialists or experts.

Question 2

The King Report on Corporate Governance incorporated a code of corporate practices and conduct that looked beyond the corporation itself,taking into account its impact on the larger community.

Accepted Answer

The statement accurately describes the King Report on Corporate Governance, which emphasized the importance of social responsibility and ethical behavior for corporations.

Question 3

Board members are not accountable to the company and its shareholders.

Accepted Answer

Board members have a legal and ethical responsibility to act in the best interest of the company and its shareholders. They are accountable to the company's stakeholders, including shareholders, and must prioritize the company's success over their own personal interests.

Question 4

The King I report failed to recognize the involvement of all the corporation's stakeholders in the efficient and appropriate operation of the organization.

Accepted Answer

The King I report recognized the importance of all the corporation's stakeholders in the operation of the organization and recommended that their interests be taken into consideration in decision-making processes.

Question 5

Corporate governance is concerned with how well an organization meets its obligations to its stakeholders.

Accepted Answer

Corporate governance is indeed focused on ensuring that an organization effectively and responsibly fulfills its commitments to its stakeholders, which can include shareholders, employees, customers, suppliers, and the community at large. This can involve establishing systems and processes for decision-making, accountability, risk management, and ethical behavior, among other factors.

Question 6

The King II report formally recognized the need to move the stakeholder model forward and to consider a triple bottom line instead of a single bottom line of profitability.

Accepted Answer

The statement is correct. The King II report, a corporate governance code in South Africa, emphasized the importance of considering the interests of all stakeholders and adopting a triple bottom line approach, which takes into account social, environmental, and financial performance.

Question 7

Typically,the compensation package of the CEO and other senior executives consists of a base salary,performance bonus,stock options,and other perks.

Accepted Answer

This is true. It is common for the compensation package of senior executives to include a base salary, performance bonus, stock options, and other perks such as health insurance, retirement plans, and use of a company car or private jet.

Question 8

The board of directors comprises a group of individuals who oversee the governance of an organization.

Accepted Answer

The board of directors is responsible for overseeing the overall direction and management of an organization, including making strategic decisions and providing guidance to executive leadership.

Question 9

Independent or outside directors are not eligible to be a part of the compensation committee.

Accepted Answer

Independent or outside directors are typically eligible to serve on compensation committees, as they bring an objective and unbiased perspective to the decision-making process regarding executive pay. However, some companies may choose to exclude independent directors from the compensation committee due to concerns about potential conflicts of interest.

Question 10

Corporate governance does not impact the efficiency of financial markets.

Accepted Answer

Corporate governance plays a crucial role in the efficiency of financial markets by ensuring transparency, accountability, and fair practices. Good corporate governance practices help in reducing information asymmetry, improving investor confidence, and promoting effective risk management, thereby making financial markets more efficient.

Question 11

The Cadbury report on corporate governance dealt exclusively with external governance.

Accepted Answer

The Cadbury report on corporate governance dealt with both internal and external governance, and proposed recommendations to enhance accountability, transparency, and ethical behavior within organizations.

Question 12

Corporate governance is the system by which business organizations are directed and controlled.

Accepted Answer

Corporate governance refers to the set of processes, principles, and values that govern how an organization is managed, administered, and controlled to ensure that it operates in the best interests of all its stakeholders. It involves the distribution of rights and responsibilities among different stakeholders, including shareholders, directors, managers, employees, customers, suppliers, and regulators. Good corporate governance is essential for promoting transparency, accountability, integrity, and sustainability in organizations.

Question 13

The King II report emphasized the need for companies to adopt an exclusive approach to corporate governance instead of an inclusive one.

Accepted Answer

The King II report emphasized the need for companies to adopt an inclusive approach to corporate governance, taking into consideration the interests of all stakeholders, including shareholders, employees, customers, and the community.

Question 14

The corporate governance committee of a company oversees compliance with the company's internal code of ethics as well as any federal and state regulations on corporate conduct.

Accepted Answer

The corporate governance committee is responsible for overseeing compliance with the company's internal code of ethics and any applicable federal and state regulations on corporate conduct.

Question 15

The triple bottom line proposed by the Kings II report recognizes the economic,environmental,and social aspects of a company's activities.

Accepted Answer

The statement is true. The Kings II report proposed the concept of the triple bottom line which emphasizes the importance of considering not only financial results but also environmental and social aspects of a company's activities.

Question 16

Members of the board of directors are not eligible to be a part of the audit committee.

Accepted Answer

Members of the board of directors can be a part of the audit committee, but they cannot constitute a majority of the committee. The intent is to ensure that the committee is independent and objective in its oversight of financial reporting and auditing processes.

Question 17

The strategic business unit of an organization is responsible for monitoring the financial policies and procedures of the organization.

Accepted Answer

The strategic business unit is responsible for developing and implementing strategies to achieve the goals of the organization, but monitoring financial policies and procedures is typically the responsibility of the finance department.

Question 18

Creditors,suppliers,and professional consultants represent the inside members of the board of directors.

Accepted Answer

Creditors, suppliers, and professional consultants are not typically considered inside members of the board of directors. Inside members typically include executives and officers of the company.

Question 19

The stakeholders of a company include its customers,its vendor partners,state and local entities,and the community in which it conducts its business operations.

Accepted Answer

This statement is true. The stakeholders of a company can include its customers, vendor partners, state and local entities, and the community in which it operates.

Question 20

The main responsibility of the compensation committee is to set the compensation for all the employees of the organization,including its outside contractors.

Accepted Answer

The compensation committee primarily focuses on setting the compensation for top executives and directors, not all employees or outside contractors.

Quiz 5: Corporate Governance