SECTION A: ANSWER ALL QUESTIONS IN THIS SECTION $(40$ MARKS$)$

QUESTION $1$

DTC is a newly established company based in Lesotho, a country with strong principles of corporate governance. There are four theories that seek to explain corporate governance. Explain in detail, what is meant by agency theory and identify any three principals and their agents. $(12$ marks$)$

QUESTION $2$

Thato is a newly appointed Chief Executive Officer $($CEO$)$ at one of the leading banks in Botswana. The Chairman of the Board has just resigned and there is a proposal by the shareholders to nominate Thato as the chairman. List TWO $(2)$ advantages and TWO $(2)$ disadvantages of a CEO becoming the Chairman of the Board. $(8$ marks$)$

QUESTION $3$

Chemic Limited manufactures cleaning chemicals at its factory in Maseru. It has $200$ employees, which makes it the largest employer in its industry within a $30-$mile radius. The factory is located on the side of Maqalika Dam, $5$ kilometers from the main north road. Identify FIVE $(5)$ Corporate Social Responsibilities of Chemic Limited. $(10$ marks$)$

QUESTION $4$

Corporate scandals are usually an indication of the lack of responsibilities and accountabilities from the Board. Despite not being the day$-$to$-$day decision$-$ makers $($The Board$),$ they are expected to govern the corporate. Explain any FIVE $(5)$ roles of the board of directors. $(10$ marks$)$

SECTION B: ANSWER ANY TWO $(2)$ QUESTIONS IN THIS SECTION $(40$ MARKS$)$

QUESTION $1$

Due to an increase in global corporate scandals, there has been continuous reviews and amendments of codes and reports in different countries. In the Republic of South Africa, the King Report was then introduced. Identify and explain in detail any FIVE $(5)$ principles of the King IV report. $(20$ marks$)$

QUESTION $2$

Company SDB has, for many years, been dominated by the Chief Executive Officer $($CEO$).$ The Board of Directors has never queried nor challenged decisions made by the CEO due to their loyalty to her. Some minority shareholders have tried numerous times to voice their concerns about the lack of the Audit and Risk Committees in the Board operations. Explain in detail the importance of an audit committee and the risk committee in board operations. $(20$ marks$)$

QUESTION $3$

Suppose you are appointed as an expert in corporate governance and are therefore assigned to do an analysis of the corporate companies versus the family$-$owned companies. Your research yielded results such that, of the $50$ companies you have researched on$,20\%$ of large companies have a share ownership and $30\%$ are family$-$owned. You are then requested to do a presentation about the differences between these two company structures. Differentiate in detail, the differences between the corporate companies and the family$-$owned companies. $(20$ marks$)$

SECTION C: ANSWER ALL QUESTIONS IN THIS SECTION $(20$ MARKS$)$

READ THE CASESTUDY BELOW AND ANSWER THE QUESTION$($S$)$ THAT FOLLOW

BEC Company $($Pty$)$ LTD is an electricity distributor in Lesotho. It currently distributes electricity through a network of cables to local companies and Lesotho citizens. BEC shares are owned by three other companies with an interest in the company$$s profitability. The board of BEC has made a proposal to import electricity from Mozambique, adding to the two already existing transmission networks which are $$Muela Hydropower and ESKOM respectively. The CEO and minority shareholders are unhappy about this proposal, their reason being that the operations and profitability of BEC are satisfactory.

BEC for many years has been dominated by the CEO because of his $20$ years employment in the company. The Board has never voted against him, challenged, or disagreed with his proposals since they are closely associated and appointed by him. The minority shareholders had recently voiced their opinions regarding the lack of truly independent non$-$executive directors $($NEDs$),$ as those appointed are very close business associates to the CEO. This proposal was dismissed by the CEO as he emphasized that he knew BEC better than anyone and will decide on what is best for the company.

His view was that all the members of the board, who he appointed were experts in their respective duties and had a diverse skillset needed to direct the company. Some of the Executive Directors did not understand the concerns of the minority shareholders.

QUESTION $1$

Explain in detail what an independent non$-$executive director is$.(5$ marks$)$

QUESTION $2$

Identify and explain any FIVE $(5)$ roles of the NEDs in the board operations. $(10$ marks$)$

QUESTION $3$

Explain why the already existing NEDs are not considered independent, refer to the case study. $(5$ marks$)$