Examination Paper of Corporate Governance
IIBM Institute of Business Management 1
IIBM Institute of Business Management
Subject Code-C103 Examination Paper MM. 100
Corporate Governance
Section A: Objective Type (30 Marks)
• This section consists of Multiple Choice questions & short questions.
• Answer all the questions.
• Part one questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
Multiple Choices:
1. Corporate Governance is
a) About ethical conduct in business
b) Direct or indirect concern in organization
c) A manufacturing system
d) None of the above
2. The term corporate governance is derived from the-
a) Greek word
b) English word
c) French word
d) Latin word
3. The definition “Corporate Governance is the system by which business directed and controlled” is given by-
a) SEBI committee
b) OECD committee
c) Cadbury committee
d) All of the above
4. Internal control is implemented by the-
a) Board of directors
b) Audit committee
c) Management
d) All of the above
5. OECD stands for__________________
6. Which of the following have the power to hire fire and compensate the top management?
a) Board of directors
b) Audit committee
c) Shareholders
d) Management
Examination Paper of Corporate Governance
IIBM Institute of Business Management 2
7. CII stands for ____________________
8. The managers are expected to act in the interest of-
a) Audit committee
b) Stakeholders
c) Employees
d) Customers
9. To endorse the organization strategy, develop directional policy, appoint, supervise and remunerate senior executives and to ensure accountability of the organization to its owners and authorities is the responsibility of
a) CEO
b) Ma
c) Top management
d) Board of directors
10. SEBI stands for_________________
Part Two:
1. What are the scopes of corporate governance?
2. Discuss the basic rights of shareholders?
3. List the type of “Auditors”.
4. Write a short note on corporate social responsibility.
END OF SECTION A
Section B: Caselets (40 Marks)
• This section consists of Caselets.
• Answer all the questions.
• Each caselet carries 20 marks.
• Detailed information should form the part of your answer (Word limit 150 to 200 word
Caselet 1
Real Juice Company
The company is in the business of producing and marketing fruit juices. Ritu joshi and Rohit Jain were looking at the ad copy and turning it over and over again in their mind. The copy read, “The best fitness plan for you real fruit, honest juice and no sugar. This was the main copy line. The more Ritu joshi repeated this line in her mind the uneasier she became. Something is Examination Paper of Corporate Governance
IIBM Institute of Business Management 3
wrong in the copy, she said to Rohit jain, the marketing head. We cannot say best for health when we know for sure that the juice contain preservatives and food color.
Rohit jain said, I don’t see if anything is wrong in this. With food colors and preservatives added we couldn’t say it is best. This is what is wrong m replied Ritu.
Rohit said, but this is hyperbole and permitted by law. There is nothing wrong in saying this. Have you not almost noticed all detergent brands say for best wash or whitest wash? This is simply a way of putting your claim of brand’s superiority. We are not talking about detergent washes and fabrics it is a health and fitness fruit juice. We could not say something like’, a great way to plan your fitness programme’ or something like that. We are saying real fruit, honest juice, and no sugar’ … not a word about food color and preservatives’. Any consumer can contest our claim.”
Rohit Jain though for a moment then said, “let us get the legal opinion from our lawyer, Amit soni, to be on the safe guard.
Amit listened to what Ritu had to say then said, “Companies use advertising to provide information to consumers and offer alternatives in a competitive market situation. Advertising is false when it says A=B and that is not true. But the ad is misleading; it falls under the category of unfair trade practice.” Loudly reading the ad copy, Amit said’” hyperbole such as best, newest most effective way, are permissible and consumers are unlikely to take such claims with ant seriousness. When a brand says its air-conditioner is best or most efficient, consumers know that this is just a manner of speech and do not truly believe and put their money on such claims.
“Yes, Real juice passes the legal test fine, but ethically it won’t be correct,” said Ritu joshi. “Please understand. Here you are not making a claim,” said Amit soni.
Amit soni said,” comparative advertising is healthy but the advertiser must be clear about the claims to be made. In this case, you are saying that Teal juice is good because it comes in cans and bottled drinks are not as good. This is a direct attack on bottled drinks. Advertiser does not disclose all the parameters they have considered in their conclusion of ‘best’. They may select some major ones or may cheese to highlight the trivial ones and ignore the major ones. These things happen every day and are not strictly provided under the law. There must be prima facie evidence of damage or misrepresentation to establish a case of unfair trade practice.”
“so, we are legally safe,” said Rohit jain. “We will reword this campaign, but our other campaigns have passed to muster.”
Ritu joshi felt differently, she said, “legally we may safe, but we have to also take an ethical view.”
We must not forget that our primary platform is health and fitness. This convenience angle is also crating and impression of ‘good for health’. I believe that as responsible advertisers, we have to be more concerned about the ethical aspects than merely the legal angle. This is where we come to the line between what is legal and what is ethical. We may be legally right but our act could be unethical if the word or pictures in the ad could lead the consumer to believe something that is not true. The aura of the fitness instructor used as endorser creates an impression that the information is coming to consumers from an environment where there are people whose opinion consumer’s view as being correct. Otherwise why use the instructor as endorser.”
Question:
1. Analyze the issues in the case.
2. Why should advertiser bother about ethics if the ads measure up to legal parameters
Examination Paper of Corporate Governance
IIBM Institute of Business Management 4
Caselet 2
Over the course of Microsoft’s history, the board has developed corporate governance practices to help it fulfill its responsibilities to shareholders to oversee the work of management and the company’s business results. The governance practices are memorialized in these guidelines to assure that the board will have the necessary authority and practices in place to review and evaluate the company’s business operation as needed and to make decision that are independent of the company’s management. The guidelines are also intended to align the interests of directors and management with those of Microsoft’s shareholders.
The guidelines are subject to future refinement or changes as the board may find necessary or advisable for Microsoft in order to achieve these objectives.
Board composition and selection: independent Directors
1. Board Size: The board believes 8 to 10 is an appropriate size based on the company’s present circumstances. The board periodically evaluates whether a larger or smaller slate of directors would be preferable
2. Selection of Board members: All members are elected annually by the company’s shareholders, except as noted below with respect to vacancies.
The board may fill vacancies in existing or new directors’ positions.
3) Board membership criteria: The governance and nominating committee works with the board on the annual basis to determine the appropriate characteristics, skills and experience for the board as a whole and its individual board members, the board takes into accounts many factor including general understanding of marketing, finance and other discipline relevant to the success of a large publicity –traded company in today’s business environment; understanding of Microsoft’s business on a technical level.
4) Board Composition: Mix of management and independent directors. The board believes that, except during periods of temporary vacancies, a majority of its directors must be independents.
5) Term Limits: Director who have served on the board for an extended period of time are able to provide valuable insight into the operation and future of the company based on their experience with an understanding of the company’s history, policies and objectives.
6) Retirement Policy: The board believes that 75 is an appropriate retirement age for outside directors.
7) Directors with significant job changes: The board believes that any director who retires from his or her present employment, or who materially changes his or her position, should tender resignation to the board.
8) Selection of CEO and Chairman: The board selects the company’s CEO and Chairman in the manner that it determines to be in the best interests of the company’s shareholders.
Board meetings: involvement of Senior Management
9) Board meeting-agenda: The Chairman of the board and CEO, taking into account suggestions from other members of the board, will set the agenda for each board meeting, and will distribute the agenda in advance to each director.
10) Advance distribution of material: All information relevant to board’s understanding of matters to be discussed at an upcoming board meeting should be distributed in writing or electronically to all members in advance.
11) Access to employees: The board should have access to company employees in order to ensure that directors can ask all questions and glean all information necessary to fulfill their duties.
Examination Paper of Corporate Governance
IIBM Institute of Business Management 5
12) Executive session of independent directors: The independent directors of the company will meet regularly o executive session, i.e., with no management directors or management present, at least three times each fiscal year.
Performance Evaluation: Succession Planning
13) Annual CEO Evaluation: The chair of the governance and nominating committee leads the independent directors in conducting a review at least annually of the performance of the CEO and communicates the result of the review to the CEO.
14) Succession Planning: As part of the annual officer evaluation process, the compensation committee works with the CEO to plan for CEO succession, as well as to develop plan for interim succession for the CEO in the event of an unexpected occurrences.
15) Board self-evaluation: The governance and nominating committee is responsible for conducting an annual evaluation of the performance of the full board and reports its conclusion to the board.
Compensation
16) Board compensation review: Company management should report to the board on an annual basis as to how the company’s director compensation practices compare with those of other large public corporations.
17) Directors’ stock ownership: The board believes that, in order to align the interests of directors and shareholders, directors should have a significant financial stake in the company.
Committees
18) Number and types of committees: The board has 5 committees- an Audit committee, a compensation committee, governance and nominating committee, a finance committee, and an antitrust compliance committee. The board may add new committees or remove existing committees as it deems advisable in the fulfillment of its primary responsibilities.
a. Audit committee
b. Compensation committee
c. Governance and Nominating committee
d. Finance committee
19) Composition of committee: Committee chairperson. The audit, compensation, governance and nominating and antitrust compliance committees consist solely of independent directors.
20) Committee Meetings and Agenda: The chairperson of each committee is responsible for developing, together with relevant company managers, the committee’s general agenda and objectives and for setting the specific agenda for committee meeting.
Miscellaneous
21) Review of governance guidelines: The practices memorialized in these guidelines have developed over a period of years. The board expects to review these guidelines at least every two years as appropriate.
Questions:
1. List the number and types of committees.
2. Discuss the Performance evaluation planning in brief.
Examination Paper of Corporate Governance
IIBM Institute of Business Management 6
END OF SECTION B
Section C: Applied Theory (30 Marks)
• This section consists of Long Questions.
• Answer all the questions.
• Each question carry 15 marks each.
• Detailed information should from the part of your Answer (Word limit 200 to 250 words)
1. Define corporate governance; explain the principles of corporate governance?
2. Distinguish between the Anglo-American Model and the German Model.
END OF SECTION C
S-2-301012
IIBM Institute of Business Management 1
IIBM Institute of Business Management
Subject Code-C103 Examination Paper MM. 100
Corporate Governance
Section A: Objective Type (30 Marks)
• This section consists of Multiple Choice questions & short questions.
• Answer all the questions.
• Part one questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
Multiple Choices:
1. Corporate Governance is
a) About ethical conduct in business
b) Direct or indirect concern in organization
c) A manufacturing system
d) None of the above
2. The term corporate governance is derived from the-
a) Greek word
b) English word
c) French word
d) Latin word
3. The definition “Corporate Governance is the system by which business directed and controlled” is given by-
a) SEBI committee
b) OECD committee
c) Cadbury committee
d) All of the above
4. Internal control is implemented by the-
a) Board of directors
b) Audit committee
c) Management
d) All of the above
5. OECD stands for__________________
6. Which of the following have the power to hire fire and compensate the top management?
a) Board of directors
b) Audit committee
c) Shareholders
d) Management
Examination Paper of Corporate Governance
IIBM Institute of Business Management 2
7. CII stands for ____________________
8. The managers are expected to act in the interest of-
a) Audit committee
b) Stakeholders
c) Employees
d) Customers
9. To endorse the organization strategy, develop directional policy, appoint, supervise and remunerate senior executives and to ensure accountability of the organization to its owners and authorities is the responsibility of
a) CEO
b) Ma
c) Top management
d) Board of directors
10. SEBI stands for_________________
Part Two:
1. What are the scopes of corporate governance?
2. Discuss the basic rights of shareholders?
3. List the type of “Auditors”.
4. Write a short note on corporate social responsibility.
END OF SECTION A
Section B: Caselets (40 Marks)
• This section consists of Caselets.
• Answer all the questions.
• Each caselet carries 20 marks.
• Detailed information should form the part of your answer (Word limit 150 to 200 word
Caselet 1
Real Juice Company
The company is in the business of producing and marketing fruit juices. Ritu joshi and Rohit Jain were looking at the ad copy and turning it over and over again in their mind. The copy read, “The best fitness plan for you real fruit, honest juice and no sugar. This was the main copy line. The more Ritu joshi repeated this line in her mind the uneasier she became. Something is Examination Paper of Corporate Governance
IIBM Institute of Business Management 3
wrong in the copy, she said to Rohit jain, the marketing head. We cannot say best for health when we know for sure that the juice contain preservatives and food color.
Rohit jain said, I don’t see if anything is wrong in this. With food colors and preservatives added we couldn’t say it is best. This is what is wrong m replied Ritu.
Rohit said, but this is hyperbole and permitted by law. There is nothing wrong in saying this. Have you not almost noticed all detergent brands say for best wash or whitest wash? This is simply a way of putting your claim of brand’s superiority. We are not talking about detergent washes and fabrics it is a health and fitness fruit juice. We could not say something like’, a great way to plan your fitness programme’ or something like that. We are saying real fruit, honest juice, and no sugar’ … not a word about food color and preservatives’. Any consumer can contest our claim.”
Rohit Jain though for a moment then said, “let us get the legal opinion from our lawyer, Amit soni, to be on the safe guard.
Amit listened to what Ritu had to say then said, “Companies use advertising to provide information to consumers and offer alternatives in a competitive market situation. Advertising is false when it says A=B and that is not true. But the ad is misleading; it falls under the category of unfair trade practice.” Loudly reading the ad copy, Amit said’” hyperbole such as best, newest most effective way, are permissible and consumers are unlikely to take such claims with ant seriousness. When a brand says its air-conditioner is best or most efficient, consumers know that this is just a manner of speech and do not truly believe and put their money on such claims.
“Yes, Real juice passes the legal test fine, but ethically it won’t be correct,” said Ritu joshi. “Please understand. Here you are not making a claim,” said Amit soni.
Amit soni said,” comparative advertising is healthy but the advertiser must be clear about the claims to be made. In this case, you are saying that Teal juice is good because it comes in cans and bottled drinks are not as good. This is a direct attack on bottled drinks. Advertiser does not disclose all the parameters they have considered in their conclusion of ‘best’. They may select some major ones or may cheese to highlight the trivial ones and ignore the major ones. These things happen every day and are not strictly provided under the law. There must be prima facie evidence of damage or misrepresentation to establish a case of unfair trade practice.”
“so, we are legally safe,” said Rohit jain. “We will reword this campaign, but our other campaigns have passed to muster.”
Ritu joshi felt differently, she said, “legally we may safe, but we have to also take an ethical view.”
We must not forget that our primary platform is health and fitness. This convenience angle is also crating and impression of ‘good for health’. I believe that as responsible advertisers, we have to be more concerned about the ethical aspects than merely the legal angle. This is where we come to the line between what is legal and what is ethical. We may be legally right but our act could be unethical if the word or pictures in the ad could lead the consumer to believe something that is not true. The aura of the fitness instructor used as endorser creates an impression that the information is coming to consumers from an environment where there are people whose opinion consumer’s view as being correct. Otherwise why use the instructor as endorser.”
Question:
1. Analyze the issues in the case.
2. Why should advertiser bother about ethics if the ads measure up to legal parameters
Examination Paper of Corporate Governance
IIBM Institute of Business Management 4
Caselet 2
Over the course of Microsoft’s history, the board has developed corporate governance practices to help it fulfill its responsibilities to shareholders to oversee the work of management and the company’s business results. The governance practices are memorialized in these guidelines to assure that the board will have the necessary authority and practices in place to review and evaluate the company’s business operation as needed and to make decision that are independent of the company’s management. The guidelines are also intended to align the interests of directors and management with those of Microsoft’s shareholders.
The guidelines are subject to future refinement or changes as the board may find necessary or advisable for Microsoft in order to achieve these objectives.
Board composition and selection: independent Directors
1. Board Size: The board believes 8 to 10 is an appropriate size based on the company’s present circumstances. The board periodically evaluates whether a larger or smaller slate of directors would be preferable
2. Selection of Board members: All members are elected annually by the company’s shareholders, except as noted below with respect to vacancies.
The board may fill vacancies in existing or new directors’ positions.
3) Board membership criteria: The governance and nominating committee works with the board on the annual basis to determine the appropriate characteristics, skills and experience for the board as a whole and its individual board members, the board takes into accounts many factor including general understanding of marketing, finance and other discipline relevant to the success of a large publicity –traded company in today’s business environment; understanding of Microsoft’s business on a technical level.
4) Board Composition: Mix of management and independent directors. The board believes that, except during periods of temporary vacancies, a majority of its directors must be independents.
5) Term Limits: Director who have served on the board for an extended period of time are able to provide valuable insight into the operation and future of the company based on their experience with an understanding of the company’s history, policies and objectives.
6) Retirement Policy: The board believes that 75 is an appropriate retirement age for outside directors.
7) Directors with significant job changes: The board believes that any director who retires from his or her present employment, or who materially changes his or her position, should tender resignation to the board.
8) Selection of CEO and Chairman: The board selects the company’s CEO and Chairman in the manner that it determines to be in the best interests of the company’s shareholders.
Board meetings: involvement of Senior Management
9) Board meeting-agenda: The Chairman of the board and CEO, taking into account suggestions from other members of the board, will set the agenda for each board meeting, and will distribute the agenda in advance to each director.
10) Advance distribution of material: All information relevant to board’s understanding of matters to be discussed at an upcoming board meeting should be distributed in writing or electronically to all members in advance.
11) Access to employees: The board should have access to company employees in order to ensure that directors can ask all questions and glean all information necessary to fulfill their duties.
Examination Paper of Corporate Governance
IIBM Institute of Business Management 5
12) Executive session of independent directors: The independent directors of the company will meet regularly o executive session, i.e., with no management directors or management present, at least three times each fiscal year.
Performance Evaluation: Succession Planning
13) Annual CEO Evaluation: The chair of the governance and nominating committee leads the independent directors in conducting a review at least annually of the performance of the CEO and communicates the result of the review to the CEO.
14) Succession Planning: As part of the annual officer evaluation process, the compensation committee works with the CEO to plan for CEO succession, as well as to develop plan for interim succession for the CEO in the event of an unexpected occurrences.
15) Board self-evaluation: The governance and nominating committee is responsible for conducting an annual evaluation of the performance of the full board and reports its conclusion to the board.
Compensation
16) Board compensation review: Company management should report to the board on an annual basis as to how the company’s director compensation practices compare with those of other large public corporations.
17) Directors’ stock ownership: The board believes that, in order to align the interests of directors and shareholders, directors should have a significant financial stake in the company.
Committees
18) Number and types of committees: The board has 5 committees- an Audit committee, a compensation committee, governance and nominating committee, a finance committee, and an antitrust compliance committee. The board may add new committees or remove existing committees as it deems advisable in the fulfillment of its primary responsibilities.
a. Audit committee
b. Compensation committee
c. Governance and Nominating committee
d. Finance committee
19) Composition of committee: Committee chairperson. The audit, compensation, governance and nominating and antitrust compliance committees consist solely of independent directors.
20) Committee Meetings and Agenda: The chairperson of each committee is responsible for developing, together with relevant company managers, the committee’s general agenda and objectives and for setting the specific agenda for committee meeting.
Miscellaneous
21) Review of governance guidelines: The practices memorialized in these guidelines have developed over a period of years. The board expects to review these guidelines at least every two years as appropriate.
Questions:
1. List the number and types of committees.
2. Discuss the Performance evaluation planning in brief.
Examination Paper of Corporate Governance
IIBM Institute of Business Management 6
END OF SECTION B
Section C: Applied Theory (30 Marks)
• This section consists of Long Questions.
• Answer all the questions.
• Each question carry 15 marks each.
• Detailed information should from the part of your Answer (Word limit 200 to 250 words)
1. Define corporate governance; explain the principles of corporate governance?
2. Distinguish between the Anglo-American Model and the German Model.
END OF SECTION C
S-2-301012
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