Corporate Finance :Corporate social responsibility

发布时间：2020-12-17 11:11来源： 融跃教育CFA

  Questions 1:

  A consultant sees the following information about a publicly listed company:

  ● The company has a 12-person board of directors.

  ● The board is chaired by the chief executive officer (CEO) of the company.

  ● All members of the audit committee are outside directors with relevant financial and accounting experience.

  Which of the following changes would provide the greatest improvement in the corporate governance of this company?

  A 、The chairman of the board should be an independent director.

  B、The company’s Vice President of Finance should be a member of the audit committee.

  C 、The board of directors should have an odd number of directors to preclude tied votes.

  Questions 2:

  Which of the following scenarios can best be described as offering superior protection of shareholder interests?

  A 、When common law is practiced

  B 、When CEO duality is common

  C 、When stakeholder theory prevails

  View answer resolution

  【Answer to question 1】A

  【analysis】

  A is correct. In good corporate governance practices the chair of the board and CEO roles are independent. If the chair of the board is a chief executive of the company, it may hamper efforts to undo the mistakes made by him or her as chief executive. There is a general trend in governance toward reduced influence for executive directors, as exemplified by the decreasing incidence of CEO duality.

  B is incorrect. All members of the audit committee should be independent members of the board.

  C is incorrect. There is no single optimal number of directors, either odd or even.

  【Answer to question 2】A

  【analysis】

  A is correct. Unlike civil law systems, common law systems provide judges with the ability to create law by setting precedents that are followed in subsequent cases. Shareholders are viewed as better protected under common law because judges may rule against management actions in situations that are not specifically addressed by statutes.

  B is incorrect. Under CEO duality, the CEO also serves as chairperson of the board. All else equal, this decreases the protection of shareholder interests in favor of those of management.

  C is incorrect. Stakeholder theory incorporates the interests of non-shareholders such as customers, suppliers, and employees. This inevitably dilutes the focus on shareholders.