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Msfi 513 :Corporate Governance And Ethics Question Paper
Msfi 513 :Corporate Governance And Ethics
Course:Masters In Business Administration
Institution: Kenya Methodist University question papers
Exam Year:2013
KENYA METHODIST UNIVERSITY
SCHOOL OF BUSINESS AND MANAGEMENT
END OF SEMESTER EXAMINATION FOR MASTER IN BUSINESS ADMINISTRATION DECEMBER, 2013
UNIT CODE : MSFI 513
UNIT TITLE : CORPORATE GOVERNANCE AND ETHICS
TIME: 3 HOURS
Instructions:
Answer question one and any other three questions.
Question One
"The foundation to governance is the action of the individual. These actions are guided by a person’s moral stance." In reference to the above statement elaborate the characteristics that are important in the development of appropriate moral stance.
(20 marks)
Each internal stakeholder has an operational role within the company that promotes corporate governance. Explain.
(5 marks)
Question Two
There are various kinds of principal agent conflict with appropriate corporate firm examples. Expound on these types of conflicts.
(15 marks)
Transaction cost theory and agency theory essentially deal with the same issues and problems, where agency theory focuses on three individual agent transaction cost theory focuses on the individual transaction. Discuss
(10 marks)
Question Three
Summarize the key provision of the code of corporate governance on the following issues.
The board
Chairman and chief executive
Information and professional development
Performance evaluation
The level and make up of remuneration. (5 marks each)
Question Four
The board of Director’s roles and responsibilities contribute a lot to promotion of corporate governance. Discuss
(15 marks)
Explain reasons that may lead to the removal of the Directors
(10 marks)
Question Five
Read the following case study and answer the questions given.
Three years ago, the outgoing CEO/Chairman of Kiko Co. decided to retire having served in the combined role for over ten years of a full 30 year Kiko Co. career. Succession was not an issue since Dan Ku had been operating as second in command for a number of years and had recently stepped firmly into "the old mans" shoes. What followed was a roller coaster ride for investors where the minor dips were more than compensated by the exhilarating rise in share price. Dan Ku trembled the size of the company through his aggressive "Slash and burn" acquisitive strategy, taking the company into uncharted markets around the globe where he bought, stripped and resold huge companies reaping profit in the process.
The BOD is rightfully pleased with their CEO’s performance and the part they play in that success, seven out of ten board members being company executive. The remaining 3 were drafted in by the ex-CEO/Chairman due to their key expertise in Kiko Co’s traditional markets. None have regular contact with shareholders. The board meets irregularly and do not tend to do more than simply review current performance. Mr. Dan Ku has complete freedom to act and this is widely seen as the reason for the company’s positive trading position.
Shareholders are also pleased with performance. However, some institutional investors have aired their concerns as to the sustainability of the current strategy, whether finance exist within Kiko Co. to support it and whether risks associated with unknown markets make the company over exposed and vulnerable.
Required:
With reference to the scenario, discuss changes to governance structure that you would recommend for this company.
(15 marks)
Assuming the changes recommended in part (a) are carried out, describe the possible role of a new board of directors.
(10 marks)
Question Six
Explain how you would conduct the performance evaluation of the board.
(10 marks)
Elaborate the responsibilities of the remuneration committee.
(15 marks)
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