adl 08 corporate governance v2

8/3/2019 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 canserve any useful purpose in improving governance? Support you answer withexamples.Question 2. Chairman of the BOD has a pivotal role in the performance of BOD, Doyou agree? Support your answer with reasons and example.Question 3. What are the three major committees of the Board? Discuss their roleand usefulness?Question 4. The concept of the Chairman cum Managing Director in Public SectorUndertakings has been in vogue for quite some time. This defeats the purpose ofChairman of Board for Directors exercising checks and balances on the

performance of Managing Director / Chief Executive Officer. DiscussQuestion 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 Responsibilityd. CII's Recommendation on Corporate governancee. Sexual Harassment in work place

Assignment - BQuestion 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 componentin. Improving corporate governance. Do you agree? Who should do this evaluationand how?Question 3. Discuss the various developments in the field of CorporateGovernance 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 ofthe United Group at Indore. The United Group consisted of three industries, alllocated within 30 Km of the corporate office, Indore. Madhya Pradesh MedicalEquipments Ltd. (MPMEL) was one of the industries of this group. Each industryof 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 namefor its quality and customer responsiveness. By 1983, with employee strength ofaround 300 MPMEL with very harmonious industrial relations, and the latesttechnology had registered a good turn over o over Rs. 80 Crores. But there thesuccess story ended. Mr. Raj Anand , The original promoter of the group died inan 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 noqualms about swindling money wherever possible and had least regards andconsiderations for the professional management and the employees.


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MPMEL's down ward journey had truly begun. By 1987, it had witnessed change of4CEOs and 12 middle /junior levels managers. Most of present set of managerswere hand picked by Virat and groomed in his culture of scant concern for theemployees and the organizational growth. In the following years, the MPMEL lostmany of its major customers, Performance, quality of its medical equipment andindustrial relations deteriorated. It was defaulting often on its payment to the

lending bankers and even the salary payment to its employees was often delayedand 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 ofBaroda) had stopped further payments & over drafting to MPMEL and had servednotices to MPMEL for clearance of its dues.

b. Four of its old and professional directors of the Boars ofDirectors, had resigned and replaced by cronies and relatives of VA

c. Industrial relations in the MPMEL were bad and there was total lackof 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 inNovember, 1988 for irregular payment of salaries, adhoc promotions and inactionof outstanding issues. The striking employees had physically beaten up the CEOand some other managers and damaged a number of buildings and windows. They hadhowever, spared the main air- conditioned production complex. The strike hadended by police intervention and signing of a Long -Term Agreement (LTA)with theUnion employees. Promised actions by the management were over due.

d. The other two industries of the United Group were only slightlybetter but heading downwards.

e. MPMEL was still operative and producing good quality equipment atabout 50% capacity. The rejection rate however, had increased considerably andthere was a large dump of rejected quality equipment. The quality control

department was totally disheartened due to dismissal of its good manager sixmonths ago without any replacement and no one was paying any attention to theirconcerns 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 goodadministrator and a person of high integrity was determined to bring about amajor change in MPMEL. Within a month of his taking over, after his discussionswith a section of employees and their union leaders, senior managers, someexperts (two of them were ex-MDs) and the Chairman of the BOD, he realized thattheir problems had nothing to do with their products and technology but theyseem to weave around the management of Human Resources and excessive withdrawalof 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 ofaction you propose to take?Question 2. What actions in particular you plan to take to change the culture ofMPMEL?Assignment - C1. Essence of Corporate Governance is--

(a) Effective accountability(b) Good management(c) Codes of conduct

d)Transparency2. Corporate Governance is a system of--

(a) Structuring, operating and controlling a company


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(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 sector4. 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 onlybe remedied through--

(a) Stricter laws(b) Movement of moral regeneration(c) Codes of conduct

(d) More privatization6. 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 these8. Which one of the following is not a category of shareholders 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)CEOb)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 BOD13. The BOD should consists of--

(a) Only executive directors


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(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 disclosures15. 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 governancein 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 wascalled--

(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


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(c) half a day's(d) None of these

25. In Indian conditions a voluntary code of Corporate Governance would be moremeaningful, 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 India26. 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 - ACode "?

(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 fullboard. 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 headedby --

(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 tofill 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 isright proper and----


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(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 normallyconsidered 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 above39. Ethical issues are truly managerial dilemma they represent a conflictbetween 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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adl 08 corporate governance v2

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