<G>Chapter 11: Memorized – Understanded
161<Q>The agency problem underlies the need for sound corporate
governance. In this context, the “agents” are the company’s:
<A>Customers.
Shareholders.
Directors.
Auditors.
<R>3
<T>1
162<Q>The agency problem underlies the need for sound corporate
governance. In this context, the “principal” in this agency relationship is:
<A>customers.
shareholders.
managers.
directors.
<R>2
<T>1
163<Q>In seeking to address the problem of the separation of ownership
and control, corporate governance attempts to align the interest of which of
the following pair of stakeholders?
<A>Shareholders and Regulators.
Shareholders and Managers.
Managers and Regulators.
Shareholders and Auditors.
<R>2
<T>1
164<Q>Which of the following is concerned with overall control to ensure
that the company can achieve its objectives in an acceptable and
sustainable way?
<A>Governance.
Management.
Marketing.
Financing.
<R>1
<T>1
165<Q>How entities are systematically directed and controlled refers to
which of the following?
<A>Corporate governance.
Sustainability.
Agents.
Internal controls.
<R>1
<T>1
166<Q>The agency problem concerns the misalignment in interests and
conflicts of interest between:
<A>banks and financial markets.
regulators and professional bodies.
government and industry.
directors and shareholders.
<R>4
<T>1
167<Q>From the public policy perspective, which of the following is NOT
the main aim of corporate governance to ensure that the company meets?
<A>The objectives of its shareholders.
The interests of other individuals and groups with a direct ‘stake’ in the
company.
The interests of the public at large.
The best personal interests of its directors.
<R>4
<T>1
168<Q>Which of the following is NOT true about the aim of corporate
governance? Corporate governance is to ensure that the company meets:
<A>The objectives of its shareholders.
The interest of other individuals and groups with a direct “stake” in the
company.
The interests of the public at large.
The interest of only managers.
<R>4
<T>1
169<Q>Which of the following is NOT the symptom of conflicts between
stakeholders’ interests?
<A>Financial collapse without warning.
Directors trying to disclose the true financial performance of the company.
Disputes over directors’ remuneration such as huge salaries, bonuses.
Empire building.
<R>2
<T>1
170<Q>Which of the following is NOT the perspective on corporate
governance?
<A>Customer perspective.
Stakeholder perspective.
Stewardship perspective.
Public policy perspective.
<R>1
<T>1
171<Q>Which of the following is NOT included in key elements of
corporate governance?
<A>External auditors.
Internal auditors.
Senior management.
Government.
<R>4
<T>1
172<Q>Which of the following is NOT the symptom of poor corporate
governance?
<A>Inadequate control function.
Lack of supervision of employees.
Misleading financial statements and information.
Emphasis on long-term profitability.
<R>4
<T>1
173<Q>Which of the following is NOT the symptom of poor corporate
governance?
<A>Adequate control function.
Lack of independent scrutiny by external or internal auditors.
Lack of contact with shareholders.
Domination of the board.
<R>1
<T>1
174<Q>Which of the following is NOT a good practice in corporate
governance?
<A>Good internal controls and risk management.
Openness and transparency.
Increasing the potential for conflict.
Accountability in judging directors’ performance.
<R>3
<T>1
175<Q>Good practice in corporate governance is LEAST LIKELY
concerned with:
<A>Risk management.
Unethical and unsustainable behaviors.
Transparency.
Reducing the potential for conflict.
<R>2
<T>1
176<Q>Regarding the effect of the financial system on governance, which
of the following is a type of financial system?
<A>Market-based system.
Indirect investment system.
Direct investment system.
Household-based system.
<R>1
<T>1
177<Q>In the country of Zana, the population has a risk-seeking attitude
towards financial matters. Zana’s financial system is likely to be?
<A>a market-based system.
a stakeholder system.
a bank-based system.
a public policy system.
<R>1
<T>1
178<Q>A German company, Albrecht AG, has a dual board structure for
its board of directors. This means that, in addition to the supervisory
board, the company also operates a:
<A>Unitary board.
Management board.
Non-executive board.
Auditing board.
<R>2
<T>1
179<Q>Business ethics are primarily molded by the expectations of:
<A>directors.
customers.
government.
society.
<R>4
<T>1
180<Q>The interest conflict between managers and shareholders refers to:
<A>Information problem.
Communication problem.
Gender problem.
Agency problem.
<R>4
<T>1
181<Q>If managers spend the company’s budget on luxury vacations and
high-end products, this refers to:
<A>Controlling problem.
Gender problem.
Agency problem.
Communication problem.
<R>3
<T>1
182<Q>The contractual relationship between managers and shareholders
is:
<A>Bailor and bailee.
Employer and employee.
Agent and principal.
Receivable and Payable.
<R>3
<T>1
183<Q>The system by which companies are directed and controlled is:
<A>Management system.
Information system.
Payroll system.
Corporate governance.
<R>4
<T>1
184<Q>“Doing the right things” mentions:
<A>Management.
Customer relation.
Governance.
Public relationship.
<R>3
<T>1
185<Q>“Getting things done right” mentions:
<A>Governance.
Public relationship.
Management.
Customer Care.
<R>3
<T>1
186<Q>Which of the following is NOT a perspective on corporate
governance?
<A>Public policy perspective.
Stakeholder perspective.
Stewardship perspective.
Management perspective.
<R>4
<T>1
187<Q>The public policy perspective on corporate governance requires
senior management to:
<A>Ensure the interest of the public at large.
Balance between economic and social goals.
Achieve long-term sustainable value for shareholders.
Act as the stewards of the company’s resources.
<R>1
<T>1
188<Q>The stewardship perspective on corporate governance requires
senior management to:
<A>Ensure the interest of the public at large.
Balance between economic and social goals.
Achieve long-term sustainable value for shareholders.
Act as the stewards of the company’s resources.
<R>4
<T>1
189<Q>A structured system for the direction and control of a company
that specifies the distribution of rights and responsibilities between
stakeholders is:
<A>Management system.
Corporate governance.
Information system.
Risk management system.
<R>2
<T>1
190<Q>Corporate governance of a company in which all the directors
receive bonuses based on annual profits faces the problem of:
<A>Domination by a small group.
Inadequate control function.
Emphasis on short-term profitability.
Misleading financial statements.
<R>3
<T>1
191<Q>Corporate governance of a company in which the sales are made by
individual salespeople who routinely bypass the company’s strict credit
check procedure faces the problem of:
<A>Domination by a small group.
Inadequate control function.
Lack of supervision.
Misleading financial statements.
<R>3
<T>1
192<Q>Corporate governance of a company in which finance directors
manipulate the accounts to hide irrecoverable debts faces the problem of:
<A>Domination by a small group.
Inadequate control function.
Lack of supervision.
Misleading financial statements and information.
<R>4
<T>1
193<Q>Corporate governance of a company in which the CEO, CFO, and
Chief Accountant are siblings faces the problem of:
<A>Domination by a small group.
Inadequate control function.
Lack of supervision.
Misleading financial statements.
<R>1
<T>1
194<Q>In good corporate governance, the Board
of Directors comprises:
<A>Executive Directors, Non-executive directors, Senior management.
Executive Directors, Non-executive directors, Shareholders.
Executive Directors, Non-executive directors, Committees of the board.
Executive Directors, Non-executive directors, workforce.
<R>3
<T>1
195<Q>In good corporate governance, who works on behalf of the
shareholders to evaluate whether or not the company’s financial statements
are true and fair?
<A>Directors.
Internal audits.
External audits.
Employees.
<R>3
<T>1
196<Q>Corporate values and culture are critical to good corporate
governance because:
<A>It affects individual behavior.
It reduces the income level of employees.
It puts the decision of the board into effect.
It ensures the interest of managers.
<R>1
<T>1
197<Q>Which of the following is NOT characteristic of a bank-based
financial system?
<A>Banks are highly concentrated and integrated.
Banks and businesses have a close relationship.
Households have great access to housing.
Households are risk-avoidance.
<R>3
<T>1
198<Q>Which of the following is NOT characteristic of a bank-based
financial system?
<A>Banks and businesses are highly integrated.
Household prefers to bear little risk.
Comparatively more government intervention.
Banks have fewer close relationships with businesses.
<R>4
<T>1
199<Q>Which of the following is the characteristic of a market-based
financial system?
<A>Banks are highly concentrated and integrated.
Banks and businesses have a close relationship.
Households prefer to hold equity securities.
Households are risk-avoidance.
<R>3
<T>1
200<Q>Which of the following is the characteristic of a market-based
financial system?
<A>Household prefers to bear little risk.
Comparatively more government intervention.
Markets are more important than banks in lending businesses.
Bank lending is the most important source of business finance.
<R>3
<T>1
201<Q>Organizations that invest money on behalf of other people are:
<A>Commercial banks.
Individual shareholders.
Security companies.
Institutional shareholders.
<R>4
<T>1
202<Q>Governance structure which adopts the principles of good
corporate governance such as OECD’s Principle of Corporate Governance
is:
<A>Shareholder-led approach.
Principle-based approach.
Management-dominated approach.
Regulation-based approach.
<R>2
<T>1
203<Q>The presence of the management board and the supervisory board
is:
<A>The unitary structure.
The dual structure.
The single board.
The sole structure.
<R>2
<T>1
204<Q>Germany governance structure is a typical example of:
<A>The unitary structure.
The dual structure.
The single board.
The sole structure.
<R>2
<T>1
205<Q>A business culture reflects:
<A>The paying scheme for directors and managers.
The structure of the board.
The basic values and beliefs of a company.
The commitment of the business to its stakeholders.
<R>3
<T>1
206<Q>Corporate responsibility refers to:
<A>The structure of the board.
The basic values and beliefs of a company.
The commitment of the business to its stakeholders.
The principles for the governance structure.
<R>3
<T>1
207<Q>Which of the following pairs of factors are likely to enable
managers to run a company in their own interests (Agency problem)?
<A>Low levels of management accountability and shareholders access to
the same information as management.
High levels of management accountability and managers access better
information than shareholders.
High levels of management accountability and shareholders access to the
same information as managers.
Low levels of management accountability and managers access better
information than shareholders.
<R>4
<T>1
<G>Chapter 11: Application – Analysis
208<Q>The view of corporate governance that “the law requires directors
to act in the best interests of the company when acting as stewards of its
resources” is arisen from which of the following perspectives?
<A>The public policy perspective.
The corporate perspective.
The stakeholder perspective.
The stewardship perspective.
<R>4
<T>1
209<Q>The stakeholder perspective on corporate governance means:
<A>A balance between economic and social goals and between individual
and communal goals.
Senior management should balance the interest of shareholders with those
of other stakeholders to achieve long-term sustained value for
shareholders.
Directors act in the best interest of the company when acting as “stewards”
of the company’s resources.
Directors disguise the true financial performance of the company from
shareholders.
<R>1
<T>1
210<Q>The corporate perspective on corporate governance means:
<A>A balance between economic and social goals and between individual
and communal goals.
Senior management should balance the interest of shareholders with those
of other stakeholders to achieve long-term sustained value for
shareholders.
Directors act in the best interest of the company when acting as “stewards”
of the company’s resources.
Directors disguise the true financial performance of the company from
shareholders.
<R>2
<T>1
211<Q>The stewardship perspective on corporate governance means:
<A>A balance between economic and social goals and between individual
and communal goals.
Senior management should balance the interest of shareholders with those
of other stakeholders to achieve long-term sustained value for
shareholders.
Directors act in the best interest of the company when acting as “stewards”
of the company’s resources.
Directors disguise the true financial performance of the company from
shareholders.
<R>3
<T>1
212<Q>Which of the following is a symptom of a serious conflict of
interests?
<A>The directors act in the best interests of the company.
Managers account to shareholders for their stewardship of the company’s
resources.
A board of directors makes decisions to satisfy their own wish for more
power and rewards rather than considering the interests of shareholders.
Directors’ rewards and bonuses vary according to the company’s
performance.
<R>3
<T>1
213<Q>Bank-based financial systems can be characterised by:
<A>Banks are highly concentrated and integrated in terms of providing
both banking and non-banking services.
Bank lending is the least important source of business finance.
Banks and businesses are less integrated.
Households prefer to bear more risk and so hold more equity.
<R>1
<T>1
214<Q>Market-based financial systems are NOT characterised by:
<A>Households bear more risk and so hold more equity.
Households have greater access to investments in physical assets.
Markets are more important than banks for long-term finance.
Banks have close relationships with the businesses they lend to.
<R>4
<T>1
215<Q>The corporate perspective on corporate governance requires senior
management to:
<A>Ensure the interest of the public at large.
Balance between economic and social goals.
Achieve long-term sustainable value for shareholders.
Act as the stewards of the company’s resources.
<R>3
<T>1
216<Q>The stakeholder perspective on corporate governance requires
senior management to:
<A>Ensure the interest of the public at large.
Balance between economic and social goals.
Achieve long-term sustainable value for shareholders.
Act as the stewards of the company’s resources.
<R>2
<T>1
217<Q>Encouraging the efficient use of resources through efficient
investment reflects:
<A>The public policy perspective.
The stakeholder perspective.
The corporate perspective.
The stewardship perspective.
<R>2
<T>1
218<Q>In good corporate governance, monitoring and judging directors’
performance based on the returns that the company has achieved under
their stewardship ensures:
<A>Management ethics.
Interest of managers.
Management accountability.
Management Openness.
<R>3
<T>1
219<Q>In good corporate governance, disclosure of information ensures:
<A>Management ethics.
Interest of managers.
Openness and Transparency.
Management Accountability.
<R>3
<T>1
220<Q>The workforce is critical to good corporate governance because:
<A>It affects the ethical behavior of individuals in a company.
It puts the decision of the board into effect.
It supports the long-term sustainable success of a company.
It provides an evaluation of financial statements.
<R>3
<T>1
221<Q>To ensure good corporate governance, employees should:
<A>Reduce the working time in order to supervise the management.
Go on a strike for a higher wage.
Raise concerns about potential ethical problems.
Share the company’s private information with competitors.
<R>3
<T>1
222<Q>Which of the following is NOT characteristic of a bank-based
financial system?
<A>Banks and businesses are highly integrated.
Household prefers to bear little risk.
Comparatively more government intervention.
Markets are more important than banks in lending businesses.
<R>4
<T>1
223<Q>Which of the following is the characteristic of a market-based
financial system?
<A>Banks and businesses are highly integrated.
Comparatively more government intervention.
Banks have fewer close relationships with businesses.
Household prefers to deposit with banks
<R>3
<T>1
224<Q>The set of legal or regulatory methods put in place to ensure
effective corporate governance is:
<A>Corporate structure.
Board structure.
Management structure.
Governance structure.
<R>4
<T>1
225<Q>There are two statements about governance structure:
“All companies in the world must adopt statutes in governance structure”
“Different countries use different combinations of statutes and codes of
practice”.
Which of the following statement is TRUE?
<A>(1) is correct and (2) is incorrect.
Both (1) and (2) are correct.
Both (1) and (2) are incorrect.
(1) is incorrect and (2) is correct.
<R>4
<T>1
226<Q>In a dual governance structure, the management board has the
power to:
<A>Manage the company.
Appoint and remove members of the management boards.
Perform independent reviews.
Inspect books and records.
<R>1
<T>1
227<Q>The stewardship approach to corporate governance requires
directors of limited companies:
<A>to act at all times in the best interest of the company.
to allow shareholders to see detailed accounting records on request.
to hold regular monthly meetings to answer shareholders' questions.
to consult the shareholders over difficult management decisions.
<R>1
<T>1
228<Q>Good practice in corporate governance requires that openness and
transparency should be supported by:
<A>reducing the potential for conflicts of interest.
disclosure of information.
reconciling the interests of shareholders and directors.
judging the performance of directors on the basis of return on investments.
<R>3
<T>1
229<Q>Which of the following is a list of the five key elements of good
corporate governance?
<A>Board of directors, senior management, employees, external auditors,
and internal auditors.
Senior management, shareholders, employees, external auditors, and
internal auditors.
Board of directors, senior management, shareholders, external auditors,
and internal auditors.
Senior management, stakeholders, external auditors, internal auditors, and
government, regulators.
<R>3
<T>1
230<Q>Bank-based financial systems are NOT characterised by:
<A>Households have less access to investments in physical assets such as
housing.
Bank lending is the most important source of business finance.
Banks and businesses are highly integrated.
Markets are stable.
<R>4
<T>1
231<Q>In a bank-based financial system, the financial system will be
characterised by:
<A>The households have greater access to investments in physical assets
than a market-based financial system.
Comparatively less government regulation than a market-based financial
system.
Comparatively more close relationships between banks and businesses than
in a market-based financial system.
Comparatively less integration of baking and non-banking services than a
market-based financial system.
<R>3
<T>1
232<Q>Which of the following statement is TRUE for a dual board
structure?
<A>In a dual board structure, the management board is responsible for
both management of the business and supervision of all business and
financial matters as requested by shareholders.
A dual board structure comprises 2 types of boards which are the
management board and the supervisory board.
A dual board structure comprises 2 types of boards which are the unitary
board and the supervisory board.
In a dual board structure, the management board has the power to appoint
and remove members of the supervisory board.
<R>2
<T>1
233<Q>A German company, Guttheim AG, has adopted a dual board
structure for its board of directors. This means that the company’s
supervisory board will have been elected by:
<A>The management board.
The company’s shareholders.
The company’s shareholders and directors.
The company’s shareholders and employees.
<R>4
<T>1
234<Q>The directors of Clamin plc state in the annual report that they
comply with the requirements of the UK Corporate Governance Code. This
is because they believe that the aim of the company is to balance economic
and social goals, and individual and communal goals by encouraging the
efficient use of resources through efficient investment. The directors of
Clamin plc have adopted the:
<A>Corporate perspective on corporate governance.
Public policy perspective on corporate governance.
Stewardship perspective on corporate governance.
Stakeholder perspective on corporate governance.
<R>4
<T>1
235<Q>WM plc adopts corporate responsibility as a key element in its
strategies. This will mean that the company seeks to:
<A>meet the minimum obligations it owes to stakeholders.
exceed the minimum obligations it owes to stakeholders.
meet the minimum obligations it owes to shareholders.
exceed the minimum obligations it owes to shareholders.
<R>2
<T>1
236<Q> Golden plc is a company that makes sweets targeted at children.
The company advertises the product during prime-time children’s
television programs and popular Youtube channels with a high number of
child subscribers. Its targeting of children has been branded as ‘unethical’.
Which business function is impacted by this ethical issue:
<A> Operations.
Procurement.
Human resources.
Marketing.
<R>4
<T>1
<G>Chapter 11: Synthesis and Judgement
237<Q>In comparison with the corporate and the public policy
perspectives on corporate governance, the stakeholder perspectives place
the LEAST emphasis on:
<A>accountability.
alignment of interests of shareholders and other stakeholders.
good information.
efficient use of resources.
<R>3
<T>1
238<Q>The board of directors of LK plc is concerned that the current
chief executive's actions are undermining the ethical culture at the
company. She fails to listen to the concerns of managers about the unfair
treatment of suppliers, and she has failed to learn from a recent scandal in
which the company was fined for data protection breaches. To improve the
ethical culture at LK plc, which of the following is the most important
action for the board to take?
<A>Draft a code of business ethics for LK plc's employees.
Rewrite LK plc's policies regarding suppliers and customers.
Demonstrate leadership by encouraging LK plc's chief executive to be more
open.
Brief shareholders more fully about LK plc's incentive scheme for
managers.
<R>3
<T>1
239<Q>In ABC plc, the chairman is Jonathan, and the CEO is his
daughter. All the directors receive bonuses based on annual profits. The
company’s sales are made by individual salespeople who routinely bypass
the company’s strict credit check procedures, which leads to several
irrecoverable debts. From this information, what are the likely corporate
governance issues at ABC plc:
<A>Domination by a small group.
Emphasis on short-term profitability.
Lack of supervision of employees.
Domination by a small group; Emphasis on short-term profitability; Lack
of supervision of employees.
<R>4
<T>1
240<Q>Which of the following statements about whistle-blowing is/are
true?
Statement (1): Whistle-blowing involves the disclosure by an employee of
illegal or unethical behaviour in the workplace.
Statement (2): Employees should always report concerns about unethical
behaviour to their line manager in the first instance.
<A>Neither of them.
Statement (1) only.
Statement (2) only.
Both of them.
<R>2
<T>1
241<Q>The following statements concern principles for business ethics.
Statement (1): The Nolan Principles include integrity, objectivity,
accountability, openness, and honesty.
Statement (2): The Institute of Business Ethics’ ethical values include
respect, transparency, fairness, openness, and trust.
Identify whether each statement is accurate.
<A>Statement (1) is accurate; Statement (2) is inaccurate.
Statement (1) is inaccurate; Statement (2) is inaccurate.
Statement (1) is accurate; Statement (2) is accurate.
Statement (1) is inaccurate; Statement (2) is accurate.
<R>3
<T>1
242<Q>Which of the following is NOT identified by the Institute of
Business Ethics as an attribute of ethical leaders?
<A>Openness.
Ability to listen.
Courage.
Respect.
<R>4
<T>1
<G>Chapter 12: Memorized – Understanded
<Q>Portmanteau plc aims to comply with the UK Corporate Governance
Code. There are to be six members of the company’s nomination
committee, so the number of independent non-executive directors on the
committee must be at least:
<A>Two.
Three.
Four.
Six.
<R>2
<T>1
<Q>Hatfield plc is a small listed company inside the FTSE 350 that holds a
premium listing. According to the UK Corporate Governance Code, how
often should it hold a formal and rigorous evaluation of the board’s
performance?
<A>Annually.
Every two years.
Every three years.
Every five years.
<R>1
<T>1
<Q>Marchant plc is a premium listed company. Which of the following
statements about its compliance with the UK Corporate Governance Code
is true?
<A>It must comply with all the requirements of the Code.
It may, in particular circumstances, depart from the principles and
provisions of the Code.
It can be flexible in how it applies the Code.
It is not affected by the requirements of the Code.
<R>1
<T>1
<Q>The board of Catterick plc, a premium listed company, is considering
the status of Katy, one of the company’s directors. Katy may be determined
as being independent if which of the following applies to her?
<A>Katy has not been an employee of the company within the last five
years.
Katy has had a material business relationship with the company within the
last three years.
Katy receives from the company additional remuneration above the fee for
being a director.
Katy represents a significant shareholder.
<R>1
<T>1
<Q>Which of the following is NOT one of the five main sections contained
in the UK Corporate Governance Code?
<A>Board leadership and company purpose.
Composition, succession, and evaluation.
Company operations and performance.
Remuneration.
<R>3
<T>1
<Q>According to the UK Corporate Governance Code, how many
members on the board of a premium listed company should be independent
Non-Executive Directors?
<A>Maximum 3 members.
At least 2 members.
At least half the board, excluding the Chair.
Maximum 2 members.
<R>3
<T>1
<Q>According to the UK Corporate Governance Code, in a premium listed
company, a non-executive director (NED) cannot be classified as an
independent NED, if:
<A>The director worked as an employee for the company more than 5
years ago.
The director has not a close family relationship with any of the company’s
advisers. Directors or senior employees.
The director takes part in a performance-related pay scheme.
The director holds an insignificant proportion of the company’s shares.
<R>3
<T>1
<Q>Biz plc currently has a premium listing of the LSE. It has 12 board
members, including the chair. How many independent non-executive
directors should Biz plc have to comply with the Provision of the UK
Corporate Governance Code?
<A>Three.
Four.
Six.
Eight.
<R>3
<T>1
<Q>The requirement for an annual re-election of directors applies to:
<A>all directors.
all executive directors only.
all executive directors and non-executive directors who have served nine
years.
all non-executives who have served nine years.
<R>1
<T>1
<Q>According to the UK Corporate Governance Code, a company should
seek to improve corporate governance by ensuring that:
<A>the chairman and chief executive are the same individual to avoid
confusion over who has responsibility for running the company.
the chairman and chief executive are different individuals to prevent one
person from having too much power in a company.
the chairman and chief executive are different individuals in case one dies
or becomes incapacitated by ill health.
the company chairman does not take up outside directorship.
<R>2
<T>1
<Q>With regard to the board of directors of a premium listed company
(excluding the chairman), the UK Corporate Governance Code requires
that the proportion who are independent non-executive directors should
be:
<A>between 10% and 24%.
between 25% and 39%.
between 40% and 49%.
50% or over.
<R>4
<T>1
