ADL 08 Corporate Governance V2

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ADL 08 Corporate Governance V2
Assignment – A
Question 1. What is a code of good Corporate Governance? Do you consider it can
serve any useful purpose in improving governance? Support you answer with
examples.
Question 2. Chairman of the BOD has a pivotal role in the performance of BOD, Do
you agree? Support your answer with reasons and example.
Question 3. What are the three major committees of the Board? Discuss their role
and usefulness?
Question 4. The concept of the Chairman cum Managing Director in Public Sector
Undertakings has been in vogue for quite some time. This defeats the purpose of
Chairman of Board for Directors exercising checks and balances on the
performance of Managing Director / Chief Executive Officer. Discuss
Question 5. Write short notes on any three of the following:
a. Legal aspects and liabilities of directors.
b. The Cadbury Code of best practices.
c. Corporate social Responsibility
d. CII’s Recommendation on Corporate governance
e. Sexual Harassment in work place
Assignment – B
Question 1. The CII’s desirable code of corporate governance stresses more on
the role of Board of Directors and therefore has limited values. Comment.
Question 2. Performance evaluation of the BOD seems to be an Essential component
in. Improving corporate governance. Do you agree? Who should do this evaluation
and how?
Question 3. Discuss the various developments in the field of Corporate
Governance in India in recent Years?
Case Study
MADHYA PRADESH MEDICAL EQUIPMENTS LIMITED (MPMEL)
Ram Krishan Dhir (RKD) was extremely happy to be selected as the corporate MD of
the United Group at Indore. The United Group consisted of three industries, all
located within 30 Km of the corporate office, Indore. Madhya Pradesh Medical
Equipments Ltd. (MPMEL) was one of the industries of this group. Each industry
of the group had its own CEO who was directly answerable to the corporate MD.
MPMEL established in 1980, with Japanese collaboration, had soon earned a name
for its quality and customer responsiveness. By 1983, with employee strength of
around 300 MPMEL with very harmonious industrial relations, and the latest
technology had registered a good turn over o over Rs. 80 Crores. But there the
success story ended. Mr. Raj Anand , The original promoter of the group died in
an air crash and his eldest son Mr. Virat Anand (VA) took control of entire
business in January ,1984. Virat was a spoiled brat, lived in luxury, had no
qualms about swindling money wherever possible and had least regards and
considerations for the professional management and the employees.
MPMEL’s down ward journey had truly begun. By 1987, it had witnessed change of
4CEOs and 12 middle /junior levels managers. Most of present set of managers
were hand picked by Virat and groomed in his culture of scant concern for the
employees and the organizational growth. In the following years, the MPMEL lost
many of its major customers, Performance, quality of its medical equipment and
industrial relations deteriorated. It was defaulting often on its payment to the
lending bankers and even the salary payment to its employees was often delayed
and even withheld. By February 1989, when RKD was taking over as corporate MD,
the situation was:
a. Two of its leading lending banks (Syndicate Bank and Bank of
Baroda) had stopped further payments & over drafting to MPMEL and had served
notices to MPMEL for clearance of its dues.
b. Four of its old and professional directors of the Boars of
Directors, had resigned and replaced by cronies and relatives of VA
c. Industrial relations in the MPMEL were bad and there was total lack
of trust between the management and employees. A number of local “DADAS” were in
control of the employees and MPMEL employees had gone on a violent strike in
November, 1988 for irregular payment of salaries, adhoc promotions and inaction
of outstanding issues. The striking employees had physically beaten up the CEO
and some other managers and damaged a number of buildings and windows. They had
however, spared the main air- conditioned production complex. The strike had
ended by police intervention and signing of a Long -Term Agreement (LTA)with the
Union employees. Promised actions by the management were over due.
d. The other two industries of the United Group were only slightly
better but heading downwards.
e. MPMEL was still operative and producing good quality equipment at
about 50% capacity. The rejection rate however, had increased considerably and
there was a large dump of rejected quality equipment. The quality control
department was totally disheartened due to dismissal of its good manager six
months ago without any replacement and no one was paying any attention to their
concerns and suggestions.
f. The turn over in 1988 had dropped to Rs. 36 crore.
RKD, an MBA and an ex DIG Police, with an excellent track record as a good
administrator and a person of high integrity was determined to bring about a
major change in MPMEL. Within a month of his taking over, after his discussions
with a section of employees and their union leaders, senior managers, some
experts (two of them were ex-MDs) and the Chairman of the BOD, he realized that
their problems had nothing to do with their products and technology but they
seem to weave around the management of Human Resources and excessive withdrawal
of funds by the Chairman. There were strong indications of continuing rumblings,
dissatisfaction among employees and lack of faith in management despite the LTA.
Question 1. Analyze the situation, as RKD, as you see it and suggest a course of
action you propose to take?
Question 2. What actions in particular you plan to take to change the culture of
MPMEL?
Assignment – C
1. Essence of Corporate Governance is–
(a) Effective accountability
(b) Good management
(c) Codes of conduct
d)Transparency
2. Corporate Governance is a system of–
(a) Structuring, operating and controlling a company
(b) Good management
(c) Codes of conduct
(d) Ensuring maximum profits for the share holder
3. The concept of Corporate Governance is application to–
(a) Private sector only
(b) Public sector only
(c) Government only
d)Both private and public sector
4. The questions of Corporate Governance have come up mainly due to–
(a) Liberalization of economy
(b) Deregulation of industry and business
(c) Public demand for better performance
(d) All the above
5. As per Raja J Chelliah weakness in the system of governance in India can only
be remedied through–
(a) Stricter laws
(b) Movement of moral regeneration
(c) Codes of conduct
(d) More privatization
6. A Corporate must be socially responsible for–
(a) Society expect so
(b) It is in the self inter of the corporate
(c) It mitigate pressure and government regulations
(d) All the above
7. Corporate Governance is poorly defined even today because–
(a) Values and ethics cannot be typecast into a one – size -fits -all
frameworks.
(b) The Cadbury Committee of 1992 has erected a convention of severity of
standards.
(c) At the end of the day , giant corporations will continue to dominate
society
(d) None of these
8. Which one of the following is not a category of share- holders in India?
(a) Promoters
(b) Financial Institutions
(c) Individual Investors
(d) Ministries of Government of India
9. In the private sector who has the firm hold over the companies?
(a) Individual investors
(b) Promoters
(c) Financial Institutions
(d) Customers
10. In the public sector who selects/ appoints the board members?
(a) The PSU concerned
(b) Controlling administrative ministry
(c) The BOD
(d) Financial Institutions
11. The head of the BOD is normally called–
a)CEO
b)President
(c) Chairman
(d) Managing Director
12. For effective corporate governance CEO of the company–
(a) Should always head the BOD
(b) Should never head the BOD
(c) Be allowed to exercise his choice to head the board
(d) Should be allowed to appoint the head of the BOD
13. The BOD should consists of–
(a) Only executive directors
(b) Majority of executive directors
(c) Only non-executive director
(d) A good mix of executive and non – executive directors
14. Which one of the following is not a parameter of best boards?
(a) Accountability of share holders
(b) Maximization of profits
(c) Independence of decision making
(d) Transparency of disclosures
15. Desirable corporate governance in India – A code was prepared by–
(a) Government of India
(b) FICCI
(c) Confederation of Indian Industries
(d) None of these
16. Directors are Liable for–
(a) Negligence and breach of trust
(b) Misfeasance
(c) None of the above
(d) Both (a) and (b) above
17. The directors appointed by financial institutions on the BOD are called–
(a) Non-Executive directors
(b) Executive directors
(c) Nominee directors
(d) Institutional directors
18. The Companies Act 1956 came into force on–
(a) 1 January, 1956
(b) 1January, 1957
(c) 1Apirl, 1956
(d) 1April, 1957
19. One of the terms of reference for SEBI’s committee on corporate governance
in May 1999 was–
(a) To draft a code of corporate best practices.
(b) To offer comments on the Sir Cadbury’s report.
(c) To draft instructions for an effective BOD.
(d) None of these
20. The formula for Economic Value Added is–
(a) Operating expenses (+) overhead expenses (-) Interest
(b) ROI (-) Weighted average cost of capital (x) capital invested
(c) Operating Profit (+) Capital Cost (-) Taxes
(d) None of these
21. Cadbury Committee report was publishes in UK in–
(a) 1990
(b) 1980
(c) 1992
(d) 1993
22. Cadbury Committee was set up to address the–
(a) Problem of good corporate governance
(b) Financial aspects of corporate governance
(c) Problem of degeneration of values
(d) Malpractices in the corporate
23. Cadbury Committee along with its report published a document which was
called–
(a) Code of conduct for corporate
(b) Code of ethical conduct
(c) Code of best practices
(d) None of the above
24. Desirable Corporate Governance in India – A code had recommended that a full
board’s meeting agenda item should require at least——-discussion.
(a) 2 days
(b) 1 day
(c) half a day’s
(d) None of these
25. In Indian conditions a voluntary code of Corporate Governance would be more
meaningful, which out of the following supported the comment–
(a) Greenburg Committee
(b) Kumar Mangalam Birla Committee
(c) CII National Council
(d) Institute of Company Secretaries of India
26. Which out of the following is not expected out of an effective BOD?
(a) Transparency of disclosure
(b) Accountability to shareholders
(c) Dependency of decision making
(d) Responsiveness to society
27. Who prepared the report titles “Desirable Corporate Governance in India – A
Code “?
(a) Government of India
(b) FICI
(c) CII’s Task Force
(d) UTI
28. The above report was based on the draft report prepared by–
(a) Dr. Goswami
(b) FICCI
(c) Dr. CV Alexander
(d) Mr Kumaramangalam
29. The major roadblock for effective Governance has been–
(a) Political Interference
(b) Vested interests of management
(c) Lack of control mechanism
(d) Lack of societal pressure
30. Desirable Corporate Governance: A Code (DCGC) recommends that the full
board. should meet minimum of following items–
(a) Six times a year
(b) Once a year
(c) Twice a year
31. The National Task Force on Corporate Governance (set up by CII) was headed
by —
(a) Dr. Goswami
(b) Mr. Rahul Bajaj
(c) Dr. Omkar Goswami
(d) Mr C K Birla
32. The word “value” is derived from the French /Latin word–
(a) Valeo
(b) Vaelram
(c) Valoir
(d) Valer
33.A value is a —————– concept– ( choose the word most suited to
fill the blank )
(a) Behavioral
(b) Perceptual
(c) Management
(d) Decision
34. Conflict of interest–
(a) Situation where Shareholders are in conflict with other Stakeholders
(d) Different stakeholder groups and individual employees trying to balance
their various interests
(c) Dispute between the Boards of Directors
(d) Situation where company and the Government is at loggerheads.
35. The ethics of Corporate Governance is therefore the determination of what is
right proper and—-
(a) Good
(b) Pleasing
(c) Just
(d) Practical
36. The word “Ethics” is derived from–
(a) The Greek word “Ethos”
(b) The French word “Valoir”
(c) The Latin word “Valeu”
(d) The Latin word “Vallis”
37. The subject of business ethics is multi- leveled. The three levels normally
considered are individual, organization and —
(a) Government
(b) Society
(c) Industry
(d) Business
38. Misrepresentation is referred as–
(a) Error in a Court of Law committed by a Pubic Limited Company
(b) Making false and misleading statements
(c) Misunderstanding consumer needs
(d) None of above
39. Ethical issues are truly managerial dilemma they represent a conflict
between an organization economic performance and its–
(a) Reputation
(b) Growth
(c) Social / ethical performance
(d) Employees job satisfaction
40. A good Corporate Governance structure is a working system for–
(e) Recognizing the myth that is ‘democracy’
(f) Appropriate monitoring of compliance and performance
(g) Lobbying for necessary legislation when the courts do not give favorable
decisions
(h) None of these

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