Corporate Finance MCQ - Corporate Finance Section 1

31 The board of directors most likely acts in the best interest of the company and the shareholders when:

It is board’s duty to act in the best interest of the company and the shareholders. It also looks after management performance in executing the strategy set by the board. In order to ensure strong execution of the strategy, the board must have the authority to select and terminate senior management.

32 Which of the following is least likely a reason for incorporating environmental and societal factors into the investment analysis?

Environmental, social, and governance investment analysis does provide a more comprehensive understanding of a company's risks and improve investment performance. Also, it can be implemented across all asset classes and is not limited to equity investments.

33 Following information is provided for a publicly listed company. The company has a 8-person board of directors. The board is chaired by the chief executive officer (CEO) of the company. All members of the audit committee are outside directors with relevant financial and accounting experience. Which of the following changes will significantly improve the corporate governance of this company?

To ensure good governance practices, the chairman of the board and the CEO of the company should be independent. Otherwise, if the chair of the board is a CEO of the company, it may hamper the efforts to undo the mistakes made by him or her as a chief executive.

34 Which of the following is most likely true about the strong corporate code of ethics?

The code of ethics is developed and implemented by the governance committee.

35 Which of the following committees is most likely to have members from the executive management?

To ensure good governance practices, the audit and remuneration committees should be composed entirely of independent board members. Other committees such as environment, health and safety can have members from executive management.