Business Organizations and Corporate Governance

Directions: Choose the correct option for the given question and consider the following statements.

The vouching of remuneration to directors involve the checking of

1. Special resolution.
2. Statement of accounts.
3. Approval note of the Central Government.
4. Minutes Book. Which of the statements given above are correct?

Directions: Choose the correct option for the given question and consider the following statements.

1. Corporate governance requires the appointment of audit committees by public limited companies.
2. The members of an audit committee should be those non-executive directors who do not represent the controlling group.
3. The independence of the statutory auditors is likely to be affected, if he deals directly with the audit committee. Which of the statements given above are correct?

Directions: Choose the correct option for the given question:

Match List-I with List-II and select the correct answer using the code given below the lists. List-I (Type of Company) (a) Statutory company (b) Registered company (c) Company limited by shares (d) Company limited by guarantee List-II (Feature)

1. Member's liability is limited to the face value of shares
2. Regulated by the provisions of the Companies Act
3. Generally formed for promotion of culture, art, science, religion etc.
4. Formed under Special Act

The passage states that Indian corporate houses are not

Directions: Read the following passage and answer the question that follows.

Recently, we have seen many instances of fraud and misuse in the corporate world. Elsewhere, we see corporate governance reforms being enacted with a sense of urgency. It is time to act in India as well — we should not be waiting for problems to occur. We should avoid ‘governance by embarrassment’ and be proactive. What should be done in India? There is need to dwell on the steps that need to be taken, especially from the perspective of corporations and regulatory agencies.
The most important task, it would appear, is revitalising the institution of independent directors. The independent directors of a company should be faithful fiduciaries, protecting the long term interests of shareholders while ensuring fairness to employees, investors, customers, regulators, the government of the land and society. Unfortunately, very often, directors are chosen based on friendship and, sadly, pliability. Therefore, it is appropriate to define what we mean by ‘independent directors’. An independent director is one who will be objective in board decisions. Generally, this independence stems from stature, competence, integrity, character, upbringing, confidence in oneself, openness and, of course, from not having any material income (apart from the director’s fee) derived from the company while he/she is on the board. Today, unfortunately, in the majority of cases, independence is only true on paper. This is the case not just in India, but all over the world. In India, we have seen many instances of legal counsels being appointed to the boards of the company they advise. Such actions will not enhance the independence of the board. Rather, they will become ‘decorative and decorous baubles with no real purpose, as Professor Myles Mace calls it.   
The need of the hour is to strengthen the independence of the board. We have to put in place stringent standards for the independence of the directors. The board should adopt global standards for director -independence, and should disclose how each independent director meets these standards. It is desirable to have a comprehensive report showing the names of the company employees or fellow board members who are related to each director on the board. This report should accompany the annual report of all listed companies.
Another important step is to regularly assess the board members for performance. The assessment should focus on issues like competence, preparation, participation and contribution. Ideally, this evaluation should be performed by a third party. Underperforming directors should be allowed to leave at end of their term in a gentle manner, so that they do not lose face.

According to the passage, which of the following is/are not cited as reason(s) to have independent directors on the board?

a. Independent directors are panacea for all ills. b. Institution of directors is dead and serving no purpose. c. Independent directors are faithful fiduciaries.

Directions: Read the following passage and answer the question that follows.

Recently, we have seen many instances of fraud and misuse in the corporate world. Elsewhere, we see corporate governance reforms being enacted with a sense of urgency. It is time to act in India as well — we should not be waiting for problems to occur. We should avoid ‘governance by embarrassment’ and be proactive. What should be done in India? There is need to dwell on the steps that need to be taken, especially from the perspective of corporations and regulatory agencies.
The most important task, it would appear, is revitalising the institution of independent directors. The independent directors of a company should be faithful fiduciaries, protecting the long term interests of shareholders while ensuring fairness to employees, investors, customers, regulators, the government of the land and society. Unfortunately, very often, directors are chosen based on friendship and, sadly, pliability. Therefore, it is appropriate to define what we mean by ‘independent directors’. An independent director is one who will be objective in board decisions. Generally, this independence stems from stature, competence, integrity, character, upbringing, confidence in oneself, openness and, of course, from not having any material income (apart from the director’s fee) derived from the company while he/she is on the board. Today, unfortunately, in the majority of cases, independence is only true on paper. This is the case not just in India, but all over the world. In India, we have seen many instances of legal counsels being appointed to the boards of the company they advise. Such actions will not enhance the independence of the board. Rather, they will become ‘decorative and decorous baubles with no real purpose, as Professor Myles Mace calls it.   
The need of the hour is to strengthen the independence of the board. We have to put in place stringent standards for the independence of the directors. The board should adopt global standards for director -independence, and should disclose how each independent director meets these standards. It is desirable to have a comprehensive report showing the names of the company employees or fellow board members who are related to each director on the board. This report should accompany the annual report of all listed companies.
Another important step is to regularly assess the board members for performance. The assessment should focus on issues like competence, preparation, participation and contribution. Ideally, this evaluation should be performed by a third party. Underperforming directors should be allowed to leave at end of their term in a gentle manner, so that they do not lose face.

'Governance by embarrassment' seems strongly deprecated by the author because

Directions: Read the following passage and answer the question that follows.

Recently, we have seen many instances of fraud and misuse in the corporate world. Elsewhere, we see corporate governance reforms being enacted with a sense of urgency. It is time to act in India as well — we should not be waiting for problems to occur. We should avoid ‘governance by embarrassment’ and be proactive. What should be done in India? There is need to dwell on the steps that need to be taken, especially from the perspective of corporations and regulatory agencies.
The most important task, it would appear, is revitalising the institution of independent directors. The independent directors of a company should be faithful fiduciaries, protecting the long term interests of shareholders while ensuring fairness to employees, investors, customers, regulators, the government of the land and society. Unfortunately, very often, directors are chosen based on friendship and, sadly, pliability. Therefore, it is appropriate to define what we mean by ‘independent directors’. An independent director is one who will be objective in board decisions. Generally, this independence stems from stature, competence, integrity, character, upbringing, confidence in oneself, openness and, of course, from not having any material income (apart from the director’s fee) derived from the company while he/she is on the board. Today, unfortunately, in the majority of cases, independence is only true on paper. This is the case not just in India, but all over the world. In India, we have seen many instances of legal counsels being appointed to the boards of the company they advise. Such actions will not enhance the independence of the board. Rather, they will become ‘decorative and decorous baubles with no real purpose, as Professor Myles Mace calls it.   
The need of the hour is to strengthen the independence of the board. We have to put in place stringent standards for the independence of the directors. The board should adopt global standards for director -independence, and should disclose how each independent director meets these standards. It is desirable to have a comprehensive report showing the names of the company employees or fellow board members who are related to each director on the board. This report should accompany the annual report of all listed companies.
Another important step is to regularly assess the board members for performance. The assessment should focus on issues like competence, preparation, participation and contribution. Ideally, this evaluation should be performed by a third party. Underperforming directors should be allowed to leave at end of their term in a gentle manner, so that they do not lose face.

Which of the following is not an instance of being independent ‘only on paper’, even as the author concedes this is not unique to India?

a. Directors, the corporate houses have on the board, do not protect the long-term interests of shareholders and other stakeholders. b. Directors are not objective in their decisions and that affects corporate governance. c. Legal counsels are being appointed to the boards of the company they advise. d. Directors are very often chosen based on friendship and pliability.

Directions: Read the following passage and answer the question that follows.

Recently, we have seen many instances of fraud and misuse in the corporate world. Elsewhere, we see corporate governance reforms being enacted with a sense of urgency. It is time to act in India as well — we should not be waiting for problems to occur. We should avoid ‘governance by embarrassment’ and be proactive. What should be done in India? There is need to dwell on the steps that need to be taken, especially from the perspective of corporations and regulatory agencies.
The most important task, it would appear, is revitalising the institution of independent directors. The independent directors of a company should be faithful fiduciaries, protecting the long term interests of shareholders while ensuring fairness to employees, investors, customers, regulators, the government of the land and society. Unfortunately, very often, directors are chosen based on friendship and, sadly, pliability. Therefore, it is appropriate to define what we mean by ‘independent directors’. An independent director is one who will be objective in board decisions. Generally, this independence stems from stature, competence, integrity, character, upbringing, confidence in oneself, openness and, of course, from not having any material income (apart from the director’s fee) derived from the company while he/she is on the board. Today, unfortunately, in the majority of cases, independence is only true on paper. This is the case not just in India, but all over the world. In India, we have seen many instances of legal counsels being appointed to the boards of the company they advise. Such actions will not enhance the independence of the board. Rather, they will become ‘decorative and decorous baubles with no real purpose, as Professor Myles Mace calls it.   
The need of the hour is to strengthen the independence of the board. We have to put in place stringent standards for the independence of the directors. The board should adopt global standards for director -independence, and should disclose how each independent director meets these standards. It is desirable to have a comprehensive report showing the names of the company employees or fellow board members who are related to each director on the board. This report should accompany the annual report of all listed companies.
Another important step is to regularly assess the board members for performance. The assessment should focus on issues like competence, preparation, participation and contribution. Ideally, this evaluation should be performed by a third party. Underperforming directors should be allowed to leave at end of their term in a gentle manner, so that they do not lose face.

In the line 'they will become decorative and decorous baubles with no real purpose', 'they' does not refer to

1. boards with faithful fiduciaries
2. boards with independent directors
   
3. boards with legal counsels
   
4. members on the board

Directions: Read the following passage and answer the question that follows.

Recently, we have seen many instances of fraud and misuse in the corporate world. Elsewhere, we see corporate governance reforms being enacted with a sense of urgency. It is time to act in India as well — we should not be waiting for problems to occur. We should avoid ‘governance by embarrassment’ and be proactive. What should be done in India? There is need to dwell on the steps that need to be taken, especially from the perspective of corporations and regulatory agencies.
The most important task, it would appear, is revitalising the institution of independent directors. The independent directors of a company should be faithful fiduciaries, protecting the long term interests of shareholders while ensuring fairness to employees, investors, customers, regulators, the government of the land and society. Unfortunately, very often, directors are chosen based on friendship and, sadly, pliability. Therefore, it is appropriate to define what we mean by ‘independent directors’. An independent director is one who will be objective in board decisions. Generally, this independence stems from stature, competence, integrity, character, upbringing, confidence in oneself, openness and, of course, from not having any material income (apart from the director’s fee) derived from the company while he/she is on the board. Today, unfortunately, in the majority of cases, independence is only true on paper. This is the case not just in India, but all over the world. In India, we have seen many instances of legal counsels being appointed to the boards of the company they advise. Such actions will not enhance the independence of the board. Rather, they will become ‘decorative and decorous baubles with no real purpose, as Professor Myles Mace calls it.   
The need of the hour is to strengthen the independence of the board. We have to put in place stringent standards for the independence of the directors. The board should adopt global standards for director -independence, and should disclose how each independent director meets these standards. It is desirable to have a comprehensive report showing the names of the company employees or fellow board members who are related to each director on the board. This report should accompany the annual report of all listed companies.
Another important step is to regularly assess the board members for performance. The assessment should focus on issues like competence, preparation, participation and contribution. Ideally, this evaluation should be performed by a third party. Underperforming directors should be allowed to leave at end of their term in a gentle manner, so that they do not lose face.