CS Intermediate Level
Corporate Governance and Ethics flashcards
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What are the four pillars of good corporate governance?
Accountability: those who make decisions answer for them. Fairness: all shareholders and stakeholders are treated equitably. Transparency: material information is disclosed openly. Responsibility: the board acts in the company's and stakeholders' best interests.
How do agency theory and stewardship theory differ in their view of managers?
Agency theory: managers (agents) may pursue their own goals at shareholders' (principals') expense, so governance exists to constrain them and align their interests. Stewardship theory: managers act in the organisation's collective interest by inclination, so governance should empower and trust them rather than only constrain them.
What is the Carver board model?
John Carver's 'policy governance' model. The board sets broad policy boundaries: the ends the organisation should achieve and the limits on how staff may pursue them. It then delegates all operational decisions within those boundaries to the chief executive.
Why should the roles of Chair, CEO and Corporate Secretary be held by different people?
Splitting the three roles prevents excessive power concentrating in one person. Each role checks the others: the Chair oversees the CEO, and the Corporate Secretary supports good governance independent of executive pressure. It is a core governance safeguard directly linked to agency theory.
What did Percival v Wright [1902] 2 Ch 421 decide?
Directors bought shares from shareholders without disclosing that the board was negotiating a sale of the whole company at a much higher implied value. Held: directors' fiduciary duties are owed to the company as a whole, not to individual shareholders, so they had no duty to disclose the negotiations.
What are the three lines of defence in risk governance?
1. Management, which owns and manages risk day to day. 2. Risk and compliance functions, which oversee and support risk management. 3. Independent audit, which provides independent assurance. Each line has a distinct role.
What is the triple bottom line?
A way of judging organisational performance against three outcomes together: people, planet and profit, rather than financial profit alone. It traces back to stakeholder theory.
What is a conflict of interest, and what is a related party transaction?
Conflict of interest: a situation where a director's or employee's personal interest could improperly influence their organisational decisions. Related party transaction: a transaction between the organisation and a party connected to it, such as a director or a company a director controls. It requires disclosure and often independent approval to guard against self-dealing.
What layers make up the Kenyan legal and regulatory framework for governance and ethics?
The Constitution. Statute: the Companies Act, 2015 and sector-specific law. Regulatory codes: the GS and GG standards and Mwongozo. Professional standards: ICPSK's own code. International frameworks also shape Kenyan practice, directly and indirectly.
What does a whistleblowing channel do, and why does it matter?
It lets staff report suspected misconduct safely, ideally anonymously and with protection against retaliation. It is one of the most effective ways organisations actually discover internal wrongdoing before it escalates.
How does the guide define corporate governance?
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How does the shareholder (Anglo-American) model of governance differ from the stakeholder (Continental European/Japanese) model?
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What prompted the modern governance codes, and which two are the classic examples?
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How does ethics relate to the law?
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What does stakeholder theory hold?
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What does legitimacy theory hold?
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How does resource dependence theory view the board?
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What does transaction cost theory explain?
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How do deontology and utilitarianism judge whether an action is right?
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How do virtue theory and rights theory judge an action?
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What is the traditional board model?
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What is the cooperative governance model, and where is it used?
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How does a patron governance model differ from a fund raising board model?
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How are family-owned firms governed differently?
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Why are Kenya's independent offices and constitutional commissions an emerging governance model?
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Who appoints the Chair, the CEO and the Corporate Secretary?
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Who typically appoints the external auditor, and why that way?
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What does Dorchester Finance Co Ltd v Stebbing [1989] BCLC 498 establish?
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Where do directors' duties primarily come from, and what are they?
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What does a board performance assessment examine?
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What are constitutive documents? Give an example for a company, a trust and a society.
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How does a shareholder agreement differ from the articles of association?
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What is a board manual or charter, and what is its legal status?
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How does a code of corporate governance differ from a code of ethics?
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What is strategic risk, and who is responsible for it?
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What is a risk appetite framework?
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Name the five types of risk the guide lists.
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How does the internal auditor differ from the external auditor?
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What does the audit committee oversee, and who typically chairs it?
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What is a social audit?
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What CSR strategies can an organisation follow, and what is greenwashing?
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Why do institutional investors matter to governance?
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Distinguish ethics, morality, values and integrity.
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What are the five steps of the structured approach to resolving an ethical dilemma?
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What did Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461 decide?
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What does Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 establish?
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Why is insider trading an ethics question as well as a market-regulation one?
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What did the Court of Appeal hold in Mumo Matemu v Trusted Society of Human Rights Alliance & 5 others [2013] eKLR?
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Which international frameworks shape Kenyan governance and ethics practice, and how?
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In a governance case study, what three kinds of core problem should you distinguish before answering?
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