Tag: Management

Big Staffie plc has just joined the FTSE 350.

A business consultant called Keith has made the following two statements about the company and the UK Corporate Governance Code.

Statement 1 – As Big Staffie plc is in the FTSE 350, the Listing Rules mean that the Code applies so the company must not depart from any of its requirements.

Statement 2 If Big Staffie plc went on to join the FTSE 100, compliance with the Code would be a statutory requirement.

Are these statements made by Keith  true or false?

Select ONE answer:

1. Statement 1 – True and Statement 2 – False
2. Statement 1 – False and Statement 2 – True
3. Statement 1 – True and Statement 2 – True
4. Statement 1 – False and Statement 2 – False

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > The Code applies to all FTSE 350 companies by virtue of the Listing Rules. While they are expected to comply with the main principles, non-compliance with supporting principles and provisions is allowed provided it is properly explained. Even in the FTSE 100 the Code is applied via the Listing Rules, not statute.

This work is licensed under a Creative Commons Attribution 4.0 International License.

The board of directors of Big Staffie plc, a FTSE 350 company, are considering the balance of the company’s board.

In particular, the company’s chairman is considering which of the company’s non-executive directors can be classified as independent. 

Even if a non-executive director has worked as an employee for the company in the past, they may still be classified as independent if the period of employment finished at least?

Select ONE answer:

1. Two years ago
2. Three years ago
3. Four years ago
4. Five years ago

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > This is set out in the provision supporting B1 (effectiveness: the composition of the board) in the Code.

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex has just been appointed as a non-executive director of Big Staffie plc, a FTSE 350 company.

Keith, a business consultant told him that under the UK Corporate Governance Code, Alex would have the following responsibilities as a non-executive director:

Responsibility 1 – Satisfying himself about the integrity of the company’s financial information
Responsibility 2 – Reporting on the performance of the company
Responsibility 3 – Determining appropriate levels of remuneration for executive directors
Responsibility 4 – Satisfying himself that financial controls and systems of risk management are robust and defensible

Which will be Alex’s responsibilities?

Select ONE answer:

1. 1, 2 and 3
2. 2, 3 and 4
3. 1, 2 and 4
4. 1, 3 and 4

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > The role of a non-executive director is to monitor the reporting of performance by the executive directors, not to do the reporting themselves. These rules are set out in the supporting principle for the main principle A4 (leadership: non-executive directors) in the Code.

This work is licensed under a Creative Commons Attribution 4.0 International License.

In seeking to address the problem of the separation of ownership and control, corporate governance attempts to align the interests of which ONE of the following stakeholders?

Select ONE answer:

1. Employees
2. Regulators
3. Auditors
4. Managers

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > The separation of ownership and control refers to the classic ‘agency problem’, in which investors (shareholders) who own the company delegate to the managers (as agents) the responsibility for running the business for the ultimate benefit of the owners. Corporate governance is fundamentally concerned with ensuring that the managers act as the owners would want them to do.

This work is licensed under a Creative Commons Attribution 4.0 International License.