Ethics and Corporate Governance

ASSIGNMENT – 1
Question1: What is a code of good Corporate Governance? Do you consider it can serve any useful purpose in improving governance? Support you answer with examples.

Question 2: Chairman of the BOD has a pivotal role in the performance of BOD, Do you agree? Support your answer with reasons and example.

Question 3: What are the three major committees of the Board? Discuss their role and usefulness?
Question 4: The concept of the Chairman cum Managing Director in Public Sector Undertakings has been in vogue for quite some time. This defeats the purpose of Chairman of Board for Directors exercising checks and balances on the performance of Managing Director / Chief Executive Officer. Discuss

Question 5: Write short notes on any three of the following:
Legal aspects and liabilities of directors.
The Cadbury Code of best practices.
Corporate Social Responsibility
CII’s Recommendation on Corporate governance
Sexual Harassment in workplace

ASSIGNMENT – 2
Question1: The CII’s desirable code of corporate governance stresses more on the role of the Board of Directors and therefore has limited values. Comment.

Question2: Performance evaluation of the BOD seems to be an essential component in improving corporate governance. Do you agree? Who should do this evaluation and how?

Question3:- Discuss the various developments in the field of Corporate Governance in India in recent Years?

Case Study
Ram Krishan Dhir (RKD) was extremely happy to be selected as the corporate MD of the United Group at Indore. The United Group consisted of three industries, all located within 30 Km of the corporate office, Indore. Madhya Pradesh Medical Equipment’s Ltd. (MPMEL) was one of the industries of this group. Each industry of 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 name for its quality and customer responsiveness. By 1983, with employee strength of around 300 MPMEL with very harmonious industrial relations, and the latest technology had registered a good turn over o over Rs. 80 Crores. But there the success story ended. Mr. Raj Anand, The original promoter of the group died in an 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 no qualms about swindling money wherever possible and had least regards and considerations for the professional management and the employees.
MPMEL`s down ward journey had truly begun. By 1987, it had witnessed change of 4CEOs and 12 middle /junior levels managers. Most of present set of managers were handpicked by Virat and groomed in his culture of scant concern for the employees and the organizational growth. In the following years, the MPMEL lost many of its major customers, Performance, quality of its medical equipment and industrial relations deteriorated. It was defaulting often on its payment to the lending bankers and even the salary payment to its employees was often delayed and 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 of Baroda) had stopped further payments & over drafting to MPMEL and had served notices to MPMEL for clearance of its dues.
     b. Four of its old and professional directors of the Board of Directors, had resigned and replaced by cronies and relatives of VA
     
     c. Industrial relations in the MPMEL were bad and there was total lack of 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 in November, 1988 for irregular payment of salaries, adhoc promotions and inaction of outstanding issues. The striking employees had physically beaten up the CEO and some other managers and damaged a number of buildings and windows. They had however, spared the main air- conditioned production complex. The strike had ended by police intervention and signing of a Long –Term Agreement (LTA) with the Union employees. Promised actions by the management were overdue.

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

      e. MPMEL was still operative and producing good quality equipment at about 50% capacity. The rejection rate however, had increased considerably and there was a large dump of rejected quality equipment. The quality control department was totally disheartened due to dismissal of its good manager six months ago without any replacement and no one was paying any attention to their concerns and suggestions.

f. The turnover in 1988 had dropped to Rs. 36 crore.
RKD, an MBA and an ex DIG Police, with an excellent track record as a good administrator and a person of high integrity was determined to bring about a major change in MPMEL. Within a month of his taking over, after his discussions with a section of employees and their union leaders, senior managers, some experts (two of them were ex-MDs) and the Chairman of the BOD, he realized that their problems had nothing to do with their products and technology but they seem to weave around the management of Human Resources and excessive withdrawal of funds by the Chairman. There were strong indications of continuing rumblings, dissatisfaction among employees and lack of faith in management despite the LTA.
Questions:
                 1. Analyze the situation, as RKD, as you see it and suggest a course of action you propose to take?

2. What actions in particular you plan to take to change the culture of MPMEL?

ASSIGNMENT – C
1. Essence of Corporate Governance is—
Effective accountability
Good management
Codes of conduct 
Transparency
2. Corporate Governance is a system of--
Structuring, operating and controlling a company
Good management
Codes of conduct
Ensuring maximum profits for the share holder
3. The concept of Corporate Governance is application to--
Private sector only
Public sector only
Government only
Both private and public sector
4. The questions of Corporate Governance have come up mainly due to--
Liberalization of economy
Deregulation of industry and business
Public demand for better performance
All the above
5. As per Raja J Chelliah weakness in the system of governance in India can only be remedied through--
Stricter laws
Movement of moral regeneration
Codes of conduct
More privatization
6. A Corporate must be socially responsible for--
Society expect so
It is in the self inter of the corporate
It mitigate pressure and government regulations
All the above
7. Corporate Governance is poorly defined even today because--
Values and ethics cannot be typecast into a one - size -fits -all frameworks.
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 these
8. Which one of the following is not a category of share- holders in India?
Promoters
Financial Institutions
Individual Investors
Ministries of Government of India
9. In the private sector who has the firm hold over the companies?
Individual investors
Promoters
Financial Institutions
Customers
10. In the public sector who selects/ appoints the board members?
The PSU concerned
Controlling administrative ministry
The BOD
Financial Institutions
11. The head of the BOD is normally called--
CEO
President
Chairman
Managing Director
12. For effective corporate governance CEO of the company--
Should always head the BOD
Should never head the BOD
Be allowed to exercise his choice to head the board
Should be allowed to appoint the head of the BOD
13. The BOD should consists of--
Only executive directors
Majority of executive directors
Only non-executive director
A good mix of executive and non - executive directors
14. Which one of the following is not a parameter of best boards?
Accountability of share holders
Maximization of profits
Independence of decision making
Transparency of disclosures
15. Desirable corporate governance in India - A code was prepared by--
Government of India
FICCI
Confederation of Indian Industries
None of these
16. Directors are Liable for--
Negligence and breach of trust
Misfeasance
None of the above
Both (a) and (b) above

17. The directors appointed by financial institutions on the BOD are called--
Non-Executive directors
Executive directors
Nominee directors
Institutional directors
18. The Companies Act 1956 came into force on--
1 January, 1956
1January, 1957
1 Apirl, 1956
1April, 1957
19. One of the terms of reference for SEBI's committee on corporate governance in May 1999was-
To draft a code of corporate best practices.
To offer comments on the Sir Cadbury's report.
To draft instructions for an effective BOD.
None of these
20. The formula for Economic Value Added is--
Operating expenses (+) overhead expenses (-) Interest
ROI (-) Weighted average cost of capital (x) capital invested 
Operating Profit (+) Capital Cost (-) Taxes
None of these 
      (Correct is: = Net Operating Profit After Taxes (NOPAT) - (Capital *
Cost of Capital)
21. Cadbury Committee report was publishes in UK in--
1990
1980
1992
1993
22. Cadbury Committee was set up to address the--
Problem of good corporate governance
Financial aspects of corporate governance
Problem of degeneration of values
Malpractices in the corporate
23. Cadbury Committee along with its report published a document which was called--
Code of conduct for corporate
Code of ethical conduct
Code of best practices
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.
2 days 
1 day
half a day's
None of these

25. In Indian conditions a voluntary code of Corporate Governance would be more meaningful, which out of the following supported the comment--
Greenburg Committee
Kumar Mangalam Birla Committee
CII National Council
Institute of Company Secretaries of India
26. Which out of the following is not expected out of an effective BOD? 
Transparency of disclosure
Accountability to shareholders 
Dependency of decision making
Responsiveness to society
27. Who prepared the report titles "Desirable Corporate Governance in India - A Code "?
Government of India 
FICI
CI I` s Task Force
UTI
28. The above report was based on the draft report prepared by--
Dr. Goswami
FICCI
Dr. CV Alexander
Mr Kumaramangalam
29. The major roadblock for effective Governance has been--
Political Interference
Vested interests of management
Lack of control mechanism
Lack of societal pressure
30. Desirable Corporate Governance: A Code (DCGC) recommends that the full board. Should meet minimum of following items--
Six times a year
Once a year
Twice a year
31. The National Task Force on Corporate Governance (set up by CII) was headed by--
Dr. Goswami
Mr. Rahul Bajaj
Dr. Omkar Goswami
Mr C K Birla
32. The word "value" is derived from the French /Latin word--
Valeo
Vaelram
Valoir
Valer
 
33.A value is a ----------------    concept-- ( choose the word most suited to fill       
the blank )          
Behavioral
Perceptual
Management
Decision
34. Conflict of interest--
Situation where Shareholders are in conflict with other Stakeholders
Different stakeholder groups and individual employees trying to balance their various interests
Dispute between the Boards of Directors
Situation where company and the Government is at loggerheads.
35. The ethics of Corporate Governance is therefore the determination of what is right proper and………………
Good
Pleasing
Just
Practical
36. The word "Ethics" is derived from--
The Greek word "Ethos"
The French word "Valoir"
The Latin word "Valeu"
The Latin word "Vallis"
37. The subject of business ethics is multi- leveled. The three levels normally considered are individual, organization and …………………
Government
Society
Industry
Business
38. Misrepresentation is referred as--
Error in a Court of Law committed by a Pubic Limited Company
Making false and misleading statements
Misunderstanding consumer needs
None of above
39. Ethical issues are truly managerial dilemma they represent a conflict between an organization economic performance and its--
Reputation
Growth
Social / ethical performance
Employees job satisfaction
40. A good Corporate Governance structure is a working system for--
Recognizing the myth that is 'democracy'
Appropriate monitoring of compliance and performance
Lobbying for necessary legislation when the courts do not give favorable decisions
None of these