ACCA ACCA Corporate Governance 2

Question 1

Which theory of corporate governance suggests that managers (agents) may act in their own interests rather than those of shareholders (principals)?

Accepted Answer

Agency theory

Answer

Agency theory identifies the conflict of interest that can arise when managers act as agents for shareholders, potentially prioritizing personal gain.

Question 2

What is the main purpose of a nomination committee in a listed company?

Accepted Answer

To recommend new board appointments

Answer

The nomination committee is responsible for identifying and recommending candidates for board positions to ensure an appropriate balance of skills.

Question 3

In corporate governance, what does the term 'independence' mean when applied to a non-executive director (NED)?

Accepted Answer

The NED has no material relationships that could impair judgment

Answer

An independent NED is one who has no relationships or circumstances that could affect their ability to exercise objective, unbiased judgment.

Question 4

Which of the following is NOT typically considered a responsibility of the board of directors?

Accepted Answer

Day-to-day operational management

Answer

Day-to-day operational management is delegated to executive management, while the board focuses on strategy, oversight, and governance.

Question 5

What is 'tunneling' in the context of corporate governance?

Accepted Answer

Expropriation of company assets by controlling shareholders for personal benefit

Answer

Tunneling refers to the illegal transfer of assets or profits from a company to its controlling shareholders, harming minority investors.

ACCA - Association of Chartered Certified Accountants Certification Practice Test

ACCA - Association of Chartered Certified Accountants Certification Practice Test

ACCA ACCA Corporate Governance 2