CFA ESG Investing Cert - Chapter 5 Governance Factors Exam Questions With Verified Answers

Corporate governance is the process by which a company is __ and __. It is framed by local law and culture, and almost all countries now have a __, but __-__ corporate governance code to set standards and expectations. - Answer managed, overseen, formal, non-binding However, within these formal frames, governance comes down to __ and how they __; they need __ and they need to be able to make relevant people __ for their decisions. - Answer people, interact, information, accountable Accountability is reflected in sufficient __ of management, so that the management is encouraged, pressed and challenged to efficiently deliver for the long-term good of the business. - Answer oversight Alongside __ sits __ as the other core tenet of good governance. This is seen most clearly in the area of__, where the aim is an alignment of the interests of management with those of the long-term shareholder. This means that long-term __ __ in the business is reflected as a reward to individual managers. - Answer accountability, alignment, pay, value creation To deliver these two main aims of accountability and alignment, each board is expected to establish three __ and __ committees to cover the crucial areas of __, __ and __. - Answer independent, effective, nominations, audit, remuneration Corporate governance codes and guidelines, and the laws that underpin them, typically get changed in reaction to __in individual companies. The __ __ in the UK was the world's first governance code and was used as a model for many others. - Answer scandals, Cadbury Code The scandals frequently feature excessive, acquisitive __ and __, combined with __ management and boards that practice little __. - Answer growth, ambition, overconfident, challenge Effective boards need a mix of skills and experience across their membership, and a boardroom culture that enables those different perspectives to be brought to bear on the key issues facing the company. Independence matters, independence of thought most of all, but knowledge and expertise also matter - Answer Good boards ensure that the company operates in an ethical and appropriate way and has a corporate culture that is conducive to long-term __ __ in the interests of all __. - Answer value creation, stakeholders Two-tier boards are typical in __, and single-tier boards are more typical of the __. The USA and France generally have a single executive on the board, often acting as both __ and __. Japanese single-tier boards are dominated by __ __ with only a small handful of non-executives; most unitary boards sit between these models. - Answer Germany, the Netherlands, Scandinavia and China; USA, the UK, Japan, France and most of the rest of the world; chair, CEO, executive directors Audits focus on close attention and assurance of the financial statements. However, they only entail a limited requirement to read __ __ published alongside the financial statements and disclose __. - Answer other material, inconsistencies