Corporate Governance – marking scheme 2017

Question one

a) Clearly, with the use of relevant examples discuss what corporate governance is and its
importance.
 a system by which organizations are controlled.
 corporate governance is concerned with holding the balance between economic and
social goals and between individual and communal goals;
 the aim is to align as nearly as possible the interests of individuals, corporations and
society.
 a set of relationships between a company’s directors, its shareholders and other
stakeholders
 any 5x1=5

b) Giving relevant examples, discuss some of the key issues of corporate governance associated
with the collapse of Kenyan companies within the last decade.

• Governance practices are effective and appropriate

• There is transparency and accountability to the various stakeholders

• The corporation complies with legal and regulatory requirements

• There is disclosure of all pertinent information to stakeholders

• There is effective monitoring and management of risk, innovation and change

• The corporation remains relevant, legitimate and competitive; and

• The corporation is viable, solvent and sustainable.

Any 5x3=15

c) What were that essential principles of excellence in management Suzano practiced in her
business? Discuss them in line with good governance practices.

 Accountability,
 commitment to client satisfaction
 respect for people, the community and the environment
3x3 plus 1mark for examples

d) What evidence is there in the case above to show that ‘good ‘corporate governance can
improve corporate performance? (5 marks)

 Less control from the family – led to business growth

 Provided shareholders professional platform to supervise
  Different pillars were put in place
 Let to merger up due to confidence by other company

Question 2

a) Differentiate between the internal and external auditors, clearly stating their roles in
relation to corporate governance (10marks)

b) Giving relevant examples, discuss some of the key issues of corporate governance
associated with the collapse of Kenyan companies within the last decade. (15marks)

Question 3

a) What is the purpose of performance measurement?

 Allows managers to track their performance
 Planning control
 Evaluation
 Managing change
 Resource allocation
 Long term focus
 Communication
b) Describe the role of auditors in corporate governance
 Define or measure performance
 Audit performance
 Encourage or assist management
 Assess performance information
 Assist elected officials

Question 4

a) Skeptics often claim that businesses should focus on profits and leave social and
environmental issues to the government or non-profit organizations to deal with. Argue for or
against this statement. (15 marks)

any 5 well discussed points either for or against

b) Discuss objectives of the code of ethics (10 marks)

 Set out the values, ethics and beliefs upon which the company premises its policies and
behavior.
 To secure adherence to uniform principles
 To promote and maintain confidence in the integrity of corporations
  To harmonise the concepts of social responsibility
 To prevent and resist the development of undesirable practices
 To lay down standards for personal and corporate behavior
Any 5x2

Question 5

a) Discuss the advantages and disadvantages of creating business ethics in organizations.

(10 marks)

 Advantages
 Gives confidence to various stakeholders
 Credibility of the business
 Efficiency in resource utilization
 Law and order
 Disadvantage
 Many checks and balances that may delay business growth
 Some groups may be more advantaged than others

b) Describe the individual and collective roles of directors in an organization (10 marks)

 Offer direction to the company

 Put down mechanisms
 Appoint qualified executives
 Evaluate and manage risks
 Manage all stakeholders relationships
 Ensures company operates within the law

c) Briefly state the rights of shareholders and how they can be protected (5 marks)

 Elect board of directors

 Participate and vote in agm
 To share in the residue profits
 To secure methods of ownership
 Obtain relevant information timely