CORPORATE GOVERNANCE AND ETHICS DECEMBER 2023 PAST PAPER

TUESDAY: 5 December 2023. 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.

QUESTION ONE

SAFARILAND HOLDINGS LIMITED (SHL)
Safariland Holdings Ltd (SHL) is a leading multinational based in Nairobi dealing with diverse business interests ranging from telecommunications to renewable energy. SHL has embraced a stakeholder-oriented approach to corporate governance, inspired by the African communitarian philosophy. The Board of Directors, led by the Chairperson Amani Sawa, believes in balancing the interests of shareholders, employees, customers and the broader community. This approach aligns with stakeholder theory, ensuring that the company’s decisions consider the impact on all parties involved.

Internally, SHL maintains a comprehensive Code of Conduct and Ethics manual that serves as a compass for employees, outlining the ethical standards and principles that guide their behavior within and outside the workplace. The manual is regularly updated to align with emerging global best practices and local regulatory requirements. Recognising the dynamic nature of its operating environment, the company has instituted a robust risk management framework. The Risk Oversight Committee, a subcommittee of the Board, regularly assesses and monitors the company’s exposure to various risks.

This proactive approach helps SHL adapt swiftly to changing circumstances, safeguarding its stakeholders‘ interests. At the heart of SHL’s operations is a commitment to ethical behavior. This extends from the executive suite to the entry level positions. Employees undergo regular training sessions on ethical decision-making, strengthening the company’s dedication to integrity. The company encourages a speak-up culture, allowing employees to report ethical concerns without fear of reprisal. To facilitate this, a whistleblowing policy is in place to take care of any integrity issues at SHL.

The company recognises the interconnectedness of business and society. The company has implemented various Environmental, Social and Corporate Governance (ESG) initiatives, including a comprehensive environmental sustainability programme and community engagement projects. The ESG Committee, headed by Chief Sustainability Officer Perwa Ruwewa, oversees the integration of these initiatives into the company’s strategic planning.

Operating in a highly regulated environment, SHL places paramount importance on compliance with laws and regulations. The legal and compliance department, led by Ganya Mekwa, conducts regular audits to ensure adherence to local and international laws. The company maintains an open line of communication with regulatory bodies, fostering a cooperative relationship that goes beyond mere compliance. SHL’s commitment to exemplary corporate governance and ethics positions it as a beacon of responsible business in Kenya. By embracing stakeholder-oriented governance, upholding ethical standards, managing risks effectively, championing ESG initiatives and ensuring legal compliance, SHL not only secures its own longevity but also contributes positively to the socio-economic fabric of the nation. This is a testament to the company’s dedication to the principles that underpin sustainable and ethical business practices world-wide.

Required:

1. Explain FIVE ways in which SHL could implement its stakeholder-oriented approach to corporate governance as influenced by the philosophy of African communitarianism. (10 marks)

2. Describe FIVE SHL’s possible approaches to environmental sustainability within its ESG initiatives. (10 marks)

3. Appraise FIVE ways in which SHL could ensure effectiveness of its Code of Conduct and Ethics manual.
(10 marks)

4. A whistle blowing policy is in place to take care of any integrity issues at SHL.

Explain FIVE objectives of this policy. (10 marks)

(Total: 40 marks)

 

QUESTION TWO

1. Highlight FIVE benefits of a Board Charter. (5 marks)

2. Highlight FIVE roles of institutional investors in promoting corporate governance. (10 marks)

(Total: 15 marks)

 

QUESTION THREE

1. Describe FIVE ways in which internal controls promote good corporate governance. (5 marks)

2. Analyse THREE types of costs according to transaction cost theory. (6 marks)

3. The Board should be constituted in a way that ensures it has different skills and expertise within itself.

Outline FOUR guidelines on how this may be achieved. (4 marks)

(Total: 15 marks)

 

QUESTION FOUR

1. Bylaws generally cover the areas of a corporation’s internal management.

Identify FOUR provisions of these laws. (4 marks)

2. Hesabika Trust has recently launched the Code of Governance for Churches in Kenya, with the support from the Institute of Certified Secretaries.

Outline THREE benefits that may arise from churches embracing this code in their operations. (6 marks)

3. The Patron Board Governance Model is a system where the board of directors primarily consists of representatives elected or appointed by the organisations patrons or customers.

Propose FIVE demerits of this model. (5 marks)

(Total: 15 marks)

 

QUESTION FIVE

1. Utilitarianism is one of the prominent ethical theories that has relevance in the context of corporate governance and ethics as propounded by Jeremy Bentham and John Stuart Mill. It provides a framework for business to consider the ethical implication of their actions and the potential impact on various stakeholders.

As a governance and ethics consultant, advise ABC company on FIVE limitations of the theory. (5 marks)

2. Highlight THREE types of compliance risk. (3 marks)

3. An ethical policy serves as a guide for making ethical decisions, maintaining a culture of integrity and fostering trust among staff members and other stakeholders.

In view of the above statement, identify SEVEN components of an ethical policy. (7 marks)

(Total:15 marks)

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