TEST 8 CORPORATE GOVERNANCE

179. Which of the following can be defined as follows?

the system by which companies are directed and controlled.
A Corporate Governance.
B Social Responsibility.
C Ethics.
D Professional Behaviour.
180. Which one of the following most accurately describes corporate governance?
A It is the body of rules and ethics primarily concerned with the effective control, business efficacy
and accountability of the management of public listed companies for the benefit of stakeholders.
B It is a body of law, morals and ethics designed to ensure that the shareholders of listed
companies are treated fairly by the board.
C It is a code of best practice which instructs directors of listed companies how to maximise profits
for the benefit of shareholders.
D It is the set of rules contained in the constitution of listed companies which governs the
relationship between the board and the shareholders.
181. Corporate Governance is primarily for the benefit of stakeholders.
What are stakeholders in this context?
A The public at large.
B Consumers who are affected by the companys activities.
C Shareholders.
D All those directly or indirectly affected by the companys activities.
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182. The UK Corporate Governance Code is primarily directed at which type of business
organisation?
A All limited liability business organisations.
B All business organisations.
C All listed public companies.
D All private companies.
183. Which one of the following statements is correct in relation to the UK Corporate Governance
Code?
A If the code is ignored by any company, no action may be taken as it has no legal status.
B If a listed company fails to produce a report explaining why it has not implemented the Codes
recommendations, it has acted in breach of the Code.
C If a public company fails to comply with the Code, it may be sued for breach of statutory duty by
those who have suffered loss as a result.
D If any company fails to comply with the Code, the directors may be sued for breach of duty by
the company on behalf of the shareholders.
184. Which of the following is correct in relation to the UK Corporate Governance Code?
(i) The Code gives rise to a disclosure requirement.
(ii) Breach of the Code gives rise to criminal penalties.
(iii) Breach of the Code gives rise to civil liability.
A (i) only.
B (iii) only.
C (i) and (ii) only.
D (ii) and (iii) only.
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185. According to the UK Corporate Governance Code, who is responsible for

setting the companys values and standards?
A The Chairman.
B The Managing Director.
C The shareholders.
D The Board.
186. Which is the responsibility of the Chairman, according to the UK Corporate Governance
Code?
A Operational control.
B Carrying out the policies of the Board.
C Controlling the workings of the Board.
D Authorising major investments.
187. Which one of the following is not one of the main requirements of the UK
Corporate Governance Code?
A The establishment of an audit committee.
B The separation of the roles of Director and Company Secretary.
C The reporting to shareholders of risks and internal controls.
D The separation of the roles of the Chairman and Managing Director.
188. Which one of the following is not one of the main requirements of the UK Corporate
Governance Code?
A The separation of the roles of Chairman and Chief Executive.
B The appointment of non-executive directors to the board.
C The establishment of a company website.
D Notice or contract periods for executive directors should be set at one year or less.
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189. Which one of the following is not one of the main requirements of the UK
Corporate Governance Code?
A The establishment of a remuneration committee.
B The remuneration committee should set the remuneration of nonexecutive directors.
C The remuneration committee should set the remuneration of executive directors.
D Remuneration of non-executive directors should not include share options.
190. Which of the following are recommended by the UK Corporate Governance Code?
(i) There should be a formal statement of the matters which require a board decision as opposed
to a management decision.
(ii) Each company should establish a Nomination Committee made up entirely or mainly of
independent non-executive directors.
(iii) Each company should establish an Audit Committee made up entirely of independent nonexecutive directors.
A (i) only.
B (iii) only.
C (i) and (ii) only.
D (i), (ii) and (iii).
191. Which of the following types of Committee is not required by the UK Corporate Governance
Code?
A Appointments Committee.
B Remuneration Committee.
C Disciplinary Committee.
D Audit Committee.
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192. Which of the following types of Committee is required by the UK Corporate

Governance Code?
A Nomination Committee.
B Investment Committee.
C Risk Assessment Committee.
D Quality Assurance Committee.
193. In Germany the two-tier board structure is used by many limited liability companies.
A two-tier board is made up of a Management Board and which other organ?
A A Quality Assurance Board.
B A Remuneration Committee.
C A Supervisory Board.
D An Employee Board.
194. Which of the following is correct?
A In Germany employees are normally appointed to the Supervisory Board.
B In Germany employees are normally appointed to the Management Board.
C In the UK employees are normally appointed to the Board.
D In the USA employees are normally appointed to the Board.
195. Which of the following statements best describes the situation in the UK?
A Corporate governance is enforced by the Government through the Standing Committees of both
the Lords and the Commons.
B Some corporate governance is enforceable in law.
C No corporate governance is enforceable in law.
D All corporate governance is enforceable in law.
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196. The failure of which corporation indirectly brought about the introduction of Sarbanes-Oxley?
A Barings.
B Maxwell Communications.
C Parmalat.
D Enron.
197. The Sarbanes-Oxley Act 2002 applies to
A All UK companies.
B All USA companies.
C All companies incorporated and listed in the USA.
D All companies listed in the USA, whether incorporated in the USA or not.
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