IAS Prelims 2013 Paper 2 CSAT Solved (Part 7 of 18)

Passage-2

Corporate governance is based on principles such a conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment w conducting business in an ethical manner. Another point which is highlighted on corporate governance is the need for tbo6e in control to be able to distinguish between what are personal and corporate funds while managing a company. Fundamentally, there is a level of confidence that is associated with a company that is known to have good corporate governance. The presence of an active group of independent directors on the board contributes a great deal towards ensuring confidence in the market. Corporate governance is known to be one of the criteria that foreign institutional investors are increasingly depending on when deciding on which companies to invest in. It is also known to have a positive influence on the share price of the company. Having a clean image on the corporate governance front could also make it easier for companies to source capital at more reasonable costs. Unfortunately, corporate governance often becomes the center of discussion only after the exposure of a large scam.

  1. According to the passage, which of the following should be the practice or practices in good corporate governance?

    1. Companies should always comply with labor and tax laws of the land.

    2. Every company in the country should have a government representative as one of the independent directors on the board to ensure transparency.

    3. The manager of a company should never invest his personal funds in the company.

    Select the correct answer using the codes given below:

    1. 1 only

    2. 2 and 3 only

    3. 1 and 3 only

    4. 1, 2 and 3

    Answer: a

  2. According to the page, which of the following is/are the major benefit/benefits of good corporate governance?

    1. Good corporate governance leads to increase in sharp price of the company.

    2. A company with good corporate governance always increase its business turnover rapidly.

    3. Good corporate governance is the main criterion for foreign institutional investors when they decide to buy a company.

    Select the correct answer using the codes given below

    1. 1 only

    2. 2 and 3 only

    3. 1 and 3 only

    4. 1, 2 and 3

    Answer: a