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    Chapter 2 - Corporate Governance Review Questions

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    Marienella Marollano
    The document contains a chapter with 10 review questions about corporate governance. It discusses that good governance is important for small businesses and is necessary for proper decision making and business management. While there are no absolute rules for all organizations, the essence of any corporate governance system is to allow freedom within a framework of effective accountability. Directors derive their authority from statutory law and are accountable to shareholders, who demand accountability in areas like financial performance, transparency, and board composition. Management is responsible for accurate and timely financial reporting, while shareholders provide oversight and the board ensures accountability and strategy implementation.

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    Chapter 2 - Corporate Governance Review Questions

    Uploaded by

    Marienella Marollano
    177 views3 pages
    The document contains a chapter with 10 review questions about corporate governance. It discusses that good governance is important for small businesses and is necessary for proper decision making and business management. While there are no absolute rules for all organizations, the essence of any corporate governance system is to allow freedom within a framework of effective accountability. Directors derive their authority from statutory law and are accountable to shareholders, who demand accountability in areas like financial performance, transparency, and board composition. Management is responsible for accurate and timely financial reporting, while shareholders provide oversight and the board ensures accountability and strategy implementation.

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    The document contains a chapter with 10 review questions about corporate governance. It discusses that good governance is important for small businesses and is necessary for proper decision making and business management. While there are no absolute rules for all organizations, the essence of any corporate governance system is to allow freedom within a framework of effective accountability. Directors derive their authority from statutory law and are accountable to shareholders, who demand accountability in areas like financial performance, transparency, and board composition. Management is responsible for accurate and timely financial reporting, while shareholders provide oversight and the board ensures accountability and strategy implementation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    177 views3 pages

    Chapter 2 - Corporate Governance Review Questions

    Uploaded by

    Marienella Marollano
    The document contains a chapter with 10 review questions about corporate governance. It discusses that good governance is important for small businesses and is necessary for proper decision making and business management. While there are no absolute rules for all organizations, the essence of any corporate governance system is to allow freedom within a framework of effective accountability. Directors derive their authority from statutory law and are accountable to shareholders, who demand accountability in areas like financial performance, transparency, and board composition. Management is responsible for accurate and timely financial reporting, while shareholders provide oversight and the board ensures accountability and strategy implementation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    CHAPTER 2: REVIEW QUESTIONS

    1. “Small business enterprises do not need good governance.” Do you agree? Explain.

    No. Governance is the process of decision-making and the process by which decisions are
    implemented (or not implemented) and such is not limited to small business enterprises
    (SMEs). Even SMEs are engaged in making proper decisions and approaches in business
    management and for this reason, a good governance is necessary.

    Moreover, according to Lagua (2017), poor governance practices are often identified as
    the main reasons leading to business performance, fraud and unanticipated failures.

    2. Does good governance requires absolute rules that must be adopted by all
    organizations?

    No. There is no absolute rule which must be adopted by all organizations. There is no
    simple universal formula for good governance.

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

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

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

    Directors derive their power to manage the corporation from statutory law. Section 8.01
    of the Revised Model Business Corporation Act (RMBCA) states that “all corporate powers
    shall be exercised by or under the authority of, and the business and affairs of the corporation
    managed under the direction of, its board of directors.”

    5. To whom is the board of directors accountable?

    The board of directors and its audit committee oversee management and, in that role, are
    expected to protect the rights of the shareholders.
    6. On what aspects do shareholders demand accountability from the board of
    directors?

    The shareholders require accountability in the following:

    (1) Financial performance


    (2) Financial Transparency
    (3) Stewardship
    (4) Quality of internal control
    (5) Composition of the board of directors and the nature of its activities

    7. What is management’s responsibility as far as financial reporting is concern?

    They provide accurate and timely reports to shareholders and other stakeholders. From a
    financial reporting perspective, they shall:

    (1) Choose which accounting principles best portray the economic substance of
    company transactions.
    (2) Implement a system of internal control that assures completeness and accuracy in
    financial reporting.
    (3) Ensure that the financial statements contain accurate and complete disclosure.

    8. Describe the broad role of the shareholders in a corporation.

    Provide effective oversight through election of board members, approval of major


    initiatives such as buying or selling stock, annual reports on management compensation,
    from the board.

    9. Describe the broad role of the Board of Directors.

    The major representative of stockholders to ensure that the organization is run according
    to the organization’s charter and ha there is proper accountability.

    10. What are the specific activities of the board of directors?

    Some of the specific activities of the board of directors are:


    (1) Overall Information
    a. Demonstrating leaderships
    b. Crisis management
    c. Ensuring effective communication with shareholders and other stakeholders.
    (2) Performance
    a. Formulating and overseeing implementation of corporate strategy.
    b. Approving the plan, budget, and corporate policies.
    c. Agreeing key performance indicators.
    (3) Compliance / Legal Performance
    a. Understanding and protecting the financial position of the organization.
    b. Approving annual financial reports, annual reports, and other public documents /
    sensitive reports.
    c. Ensuring an effective system of internal controls exists ad is operating as
    expected.

    MULTIPLE CHOICES

    (1) C
    (2) D
    (3) B
    (4) B
    (5) A

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