Question 1

Which of the following is not a function of the board of a large public company?

Athe selection of auditors

Bmonitoring the CEO's performance

Cmanaging the day-to-day operations of the corporation

Dthe oversight of management in the application of policies and guidelines about the principalrisks faced by the company

Question 2

A board committee is best described as a subset of the board formed to achieve which ofthe following outcomes?

Aenhance the effectiveness of the board

Breport to shareholders on specific issues

Cenable directors to reduce their individual liability

Dbeing independent by having exclusively independent directors

Question 3

Which statement best describes the view taken by Nobel Prize-winning economist Milton Friedman in relation to companies?

ACompanies are an integral part of society and, as such, should adopt the highest ethical principles.

BCompanies, as part of society, should act in the interests of harmonisation of society and theenvironment.

CCompanies should detach themselves from the environment and focus on maximising thebenefits to society.

DCompanies must obey community rules and should focus on maximising returns to shareholders by appropriate means.

Question 4

Stakeholder theory is best described as being based on the presumption that the corporation has direct concerns about its relationships with

Athe corporate regulator.

Bthe directors of the corporation.

Cthe shareholders of the corporation.

Da wide range of groups that affect and/or are affected by the corporation.

Case study

The stereotypical Australian company board of directors is the so-called one-tier board structure, whereby directors are assumed to represent the shareholders and provide both a supervisory and management role of the executive management. The composition of the directors can vary considerably, but most of Australia's large companies will have a mix of executive and non-executive directors. In this setting, the directors act as the direct link between the shareholders and the executive managers of the company. The one-tier board structure is the predominant structure in most Anglo Saxon countries, including the US and the UK.

The other typical board structure is the "two-tier" model. This particular structure exists in several European countries and has prominence in Germany. Fundamental to this structure is the existence of two separate boards i.e. a "management board" and a "supervisory board". Basically the management board is concerned with the specific business and operational dealings of the company and is comprised solely of executive management of the company. In contrast, the supervisory board is made up of shareholders and employees and has the role of "supervising" the management.

Question: Is one type "better" than the other? Explain your answer.