PRELIMINRY EXAMINATION

AE10

CHAPTER 1

QUESTIONS

1. What does governance mean?

Governance means the process of decission making and the process by which decission are
implemented ( or not implemented) through the exercise of power or authority by leaders of the
country and / or organizations.

2. Explain whether the following statement is true or false.

"Governance is created only by government of a country"

This statement is not true because governance comprises all the process of governing such as by a
market or by a network over a social system and whether through the laws, norms, power or language
of an organize society. It can also be done and used by corporations, internationals, nationals and locals.

3. Explain how governance can be used in the following context and give appropriate examples:

a. National Governance
Good governance in the context of countries is a broad term, and in that regards, it is difficult to
find a unique definition. In the sense that when the state is more capable, for instance through
the collection of taxes, there should be more autonomy because the bureaucrats are able to
conduct things well without being instructed with a lot of details. In less capable states,
however, less discretion and more rules setting are desirable. Another way to think about good
governance is through outcomes. Since governments carry out with goals like the provision of
public goods to its citizens, there is no better way to think about good governance other than
through deliverables, which are precisely the one demanded by citizens, like security, health,
education, water, the enforcement of contracts, protection to property, protection to the
environment and their ability to vote and get paid fair wages.

b. Local Governance
Good governance is argued to be the most important in local governments. It tries to promote
more relationships between government and empowered citizens, neighborhood councils and
community councils. Good governance with local government aims to increase civil engagement
with more members of the community in order to get the best options that serves the people.
c. Corporate Governance
In corporate affairs, good governance can be observed in relationships between governance and
corporate management, between governance and employee standards and between
governance and corruption in the workplace. Good governance in regards to corporate sectors
 varies between actors. Legislation has been enacted in an attempt to influence good governance
in corporate affairs. In the United States, the Sarbanes–Oxley Act of 2002 set up requirements
for businesses to follow. Whistleblowing has also been widely used by corporations to expose
corruption and fraudulent activity.
d. International Governance
In international affairs, analysis of good governance can look at any relationships between
governments and markets, between governments and citizens, between governments and the
private or voluntary sector, between elected officials and appointed officials and between
government and Civil Society Organisations (CSOs).

4. Explain briefly the eight (8) basic characteristics of good governance.

1. Participation
The key cornerstone of a good governance is the participation of both men and women. It is
important to point out that representative democracy does not necessarily mean that the
concern of the most vulnerable in society would not be taken in consideration in decision
making. This mean freedom of association and expression on one hand and civil society on the
other hand.
2. Rule of Law
Good governance requires fair legal framework that are enforced impartially and full protection
of human rights.
3. Transparency
Transparency means that the information are freely available and accessible to those who will
be affected such decision and their enforcement.
4. Responsiveness
Responsiveness when it comes to the organizations stakeholders. Good governance requires an
organization to provide information to their stakeholders in an understandable forms and
media.
5. Consensus Oriented
Good governance requires mediation of the different interest in society to reach a broad
consensus on what is in the best interest of the whole community and how this can be achieved.
6. Equity & Inclussiveness
A society’s well being depends on ensuring that all its members feel that they have a stake in it
and do not feel excluded from the mainstream of society. This requires all groups, but
particularly the most vulnerable, have opportunities to improve or maintain their well being.
7. Effectiveness and Efficiency
Producing good results that meet the needs of society while making the best use of resources at
their disposal.
8. Accountability
It is the key requirement of good governance because all institution whether governmental,
private sector or even civil society organization must be accountable to the public and their
stakeholders because they are those who will be affected by its decisions and actions.
5. Transparency and accountability are synonymous. Explain whether the statement is correct or not.

Transparency and accountability are not synonymous, because they are just connected to each other.
Accountability cannot be enforced without transparency and the rule of law. Transparency must be
present first before the accountability of the said persons happens.

6. Explain whether the following statement is true or false.

" Responsiveness ussually results to effectiveness and efficiency."

The statement is true, because responsiveness of an institution produce good results that meet the
needs of society while making the best use of resources at their disposal.

7. Define corporate governance.

Corporate governance is the system of rules, practices and processes by which businesscorporations are
directed and controlled. Good corporate governance is all about controlling one's business and so is
relevant, and indeed vital for all organization whatever size or structure.

8. What does corporate governance structure involve?

The corporate governance structures specifies the distribution of rights and responsibilities among
different participants in the corporation, such as the board, managers, shareholders and other
stakeholders and spells out the rule and procedures for making decisions on corporate affairs.

9. State the purpose of corporate governance.

The purpose of corporate governance is to facilitate effective entrepreneurial and prudent management
tgat can deliver long-term success of a company. In simple terms, the fundamental aim of corporate
governance is to enhance shareholders' value and protect the interest of other stakeholders by
improving the corporate performance and accountability.

10. Explain the basic objectives of corporate governance.

1. Fair and equitable treatment of shareholders

A corporate governance structure ensure equitable and fair treatment of all shareholders of the
company, because shareholders deserve an equitable treatment and this equity is safeguarded
by a good governance structure in any organization.
2. Self-assesment
It is important to asses the firms behavior and action before they are scrutinized by regulatory
agencies. Because having a strong corporate governance are better able to limit exposure to
regulatory risk and fines.
3. Increase stakeholders' wealth
 It is protect the long-term interest of the shareholders. Firms with strong corporate governance
structure are seem to have higher valuation attached to their shares by businessmen.
4. Transparency and full disclosure
Good corporate governance aims at ensuring a higher degree of transparency is an organization
by encouraging full disclosure of transactions in the company accounts.

11. Explain the three basic principles of effective corporate governance.

1. Transparency and full disclosure

A second principle of corporate governance is transparency. Without transparency, it is difficult
to have accountability. After all, shareholders can only hold corporate directors accountable if
they know what is going on at the companies they own.
2. Accountability
When corporate governance embodies the principle of accountability, shareholders know that
performance will be measured. They know that good performance will be rewarded, and poor
performance will not. And, most important, they know that misconduct will not be tolerated.
One important measure of accountability involves executive compensation. Common sense
would indicate that good corporate governance should align compensation with performance.
However, recent history has to make you wonder if the principle of accountability is lacking in
today’s corporate governance.
3. Corporate control
The Company undertakes to protect shareholders' rights and ensure equal treatment of
shareholders. The Board of Directors shall give all shareholders the opportunity to obtain
effective redress for violations of their rights.

MULTIPLE QUESTIONS:

1. D

2. A

3. B

4. A

5. B

6. D

7. B
CHAPTER 2

QUESTIONS

1. "Small business enterprises don't need good governance" Do you agree? Explain.

Small business enterprises need a good governance because good governance is not when a business
makes a ‘right’ decision. Good governance is when a business ensures that there is a good decision-
making process in place. Without good governance, an organisation lacks policies and procedures to
ensure accuracy, consistency and responsiveness to key stakeholders including customers, shareholders
and regulators. That is why small business must also have a simple governance structure, small
businesses must also ensure they have good governance in place. This can be achieved by having a
trusted advisor, like a business coach or an accountant, or having some form of administrative support.
Regardless of the size of your organisation, good corporate governance is good for your business.

2. Does good governance require absolute rules that must be adopted by all organization?

Good governance doesn't require absolute rule because there are no absolute rules which must be
adopted by all organization.

3. What is the essence of any system of corporate governance?

The essence of any system of corporate governance is to allow the board and management tge freedom
to drive their organization forward and to exercise that freedom within a framework of effective
accountability.

4. Where does the board of directors derived its authority?

It derives from the shareholders or owners, they are the one who delegate responsibilities through
election of Board of Directors.

5. To whom is the board of directors accountable?

Board of Directors are accountable to the shareholders.

6. On what aspects do shareholders demand accountability from the board of directors?

In return for the responsibilites (and power) given to the management and the board governace
demands accountavility back through the system to the shareholders.

7. What is management's responsibility as far as financial reporting concerned?

Management have the responsibilities to act within the laws of society and to meet various
requirements of creditors, employees and the stakeholders.
8. Describe the broad role of the shareholders in a corporation.

Shareholders invest in a corporation by buying its stock and receive economic benefits in return.
Shareholders are not involved in the day-to-day management of business operations, but they have the
right to elect representatives (directors) and to receive information material to investment and voting
decisions.

9. Describe the broad role of the Board of Directors

The role of the board of directors is to ensure the company's prosperity by collectively directing the
company's affairs, while meeting the appropriate interests of its shareholders and relevant stakeholders.

10. What are the specific activities of the Board of Directors?

The specific activities of the board of directors are recruiting, supervising, retaining, evaluating and
compensating the manager and the CEO or general manager are probably the most important functions
of the board of directors. They provide direction for the organization and establish a policy based
governance system. Another responsibility of the board is to develop a governance system. The
governance system involves how the board interacts with the general manager or CEO. Another
responsibility is the fiduciary duty to protect the organization’s assets and member’s investment. The
board has a fiduciary responsibility to represent and protect the member’s/investor’s interest in the
company. So the board has to make sure the assets of the company are kept in good order. This includes
the company’s plant, equipment and facilities, including the human capital (people who work for the
company. And last is to monitor and control function. The board of directors has a monitoring and
control function. The board is in charge of the auditing process and hires the auditor. It is in charge of
making sure the audit is done in a timely manner each year.

MULTIPLE CHOICES

1. B

2. D

3. B

4. B

5. A