TUESDAY: 6 December 2022. Morning Paper. Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.



The lucrative nature of oil business and a thriving siphoning syndicate could be at the centre of many job losses at
management level at Long Pipeline Ltd (LPL) in the recent past. The struggle to control the multi-million-dollar State
agency which handles the core energy stocks for the country has made LPL to have a record four Managing Directors in
three years.

Festo Kinde, the Managing Director (MD) of LPL, has had a tough time defending tender awards and dealing with
controversies involving business rivalries and political power plays since the company does not have key policies to
guide it. The company has failed to develop a risk policy despite being involved in a volatile business. The latest case of
mysterious fuel losses at LPL systems disguised as “pipeline losses” has pitted him against oil marketers displeased with
the volumes being lost, which they believe is stolen and sold in the same market they intend to sell their products.
Insiders say his action to suspend one stock analyst caused a stir in the inner circle of the staff at the core of the siphoning
syndicate. This circle is willing to go to any length to protect its interests. Those familiar with the affairs point to political
intrigues involving push-and-pull between two factions of the ruling party, each keen on controlling the giant

None of the Managing Directors at the firm has had a smooth exit. Festo Kinde’s predecessor, Janet Moguina, held the
position for less than one year before she was sent on compulsory leave and her position advertised under unclear
circumstances. Before then, LPL had suspended another MD, Peter Salas, who was later charged with abuse of office
including irregularly awarding a Sh.29 million contract for the installation of auto-transformers. Preceding Peter Salas
was Charles Mwadime who was fired by the board in the year 2018 on grounds of nepotism and abuse of office.
To calm the latest jitters, Festo Kinde released a memo last Wednesday assuring the staff that all was well save for the
investigations on the suspended staff. The memo was worded as follows:

“Management’s attention has been drawn to reports appearing in sections of the print media to the effect that there is
panic amongst staff owing to the investigations following theft of fuel in the organisation. In this regard, management
wishes to inform staff that so far, only one member of staff (name withheld), a Stock Control Analyst, was suspended
from duty for in-depth investigations to be carried out.”

The suspended member of staff is suspected to have accessed the advances table in the system and advanced Kam Ochiel
300,000 litres of petroleum without authorisation. A number of job losses at LPL have left the organisation with many
bitter ex-workers who hold sensitive information on illegal deals, further deepening woes within the company.


1. Managing Directors were not lasting long at LPL. With reference to stewardship theory, explain FIVE fundamental values the previous MDs may have lacked. (10 marks)

2.To minimise controversies involving business rivalries, power plays and fuel losses, LPL should develop a risk appetite framework.

Explain FIVE considerations to make the framework effective. (10 marks)

3. Analyse FIVE ethical issues that might have affected LPL staff and board of directors. (10 marks)

4. Suggest FIVE possible reasons why good corporate governance practices are necessary for companies like LPL. (10 marks)

(Total 40 marks)


1. Examine FOUR roles of the nomination committee in Board appointments. (4 marks)

2. Policy Governance is a comprehensive set of integrated principles that, when consistently applied, allows governing boards to realise owner-accountable organisations.

Analyse FIVE of these principles. (5 marks)

3. Summarise SIX recommendations of the Cadbury Report on good corporate governance. (6 marks)

(Total: 15 marks)


1. According to the Code of Corporate Governance Practices for Issuers of Securities to the public, 2015, the Board of a listed company is expected to establish clear roles and responsibilities in discharging its fiduciary duties.

Evaluate SEVEN of these duties. (7 marks)

2. Assess FOUR causes of principal-agent problems in organisations. (8 marks)

(Total: 15 marks)


1. Highlight FIVE roles of the board of directors. (5 marks)

2. The interests of current shareholders should be protected from cases of abuse by future management. Such protection can be achieved through shareholder agreement.

Describe FIVE elements of such an agreement. (5 marks)

3.In the course of executing its mandate, the Board of Directors is expected to undertake risk management.

Explain FIVE benefits of regular risk reporting. (5 marks)

(Total: 15 marks)


1. Evaluate FIVE drawbacks of undertaking Corporate Social Responsibility. (5 marks)

2. Illustrate FIVE criticisms of Carver’s governance board model. (5 marks)

3. Explain FIVE benefits of developing a compliance programme. (5 marks)

(Total: 15 marks)

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