Page 1 of Assignment

ASSIGNMENT 2023 FIRST SEMESTER

CGE101
CORPORATE GOVERNANCE

Question 1 [15]
1.1 Explain, in your own words, the relationship between the shareholders of a company
and the board of directors. (5)

1.2 One definition of corporate governance is the system by which companies are directed
and controlled. Briefly explain where the mandate of a board to govern an
organisation comes from or originate and also indicate how the board goes about the
process of directing and controlling the company. (10)

Question 2 [20]

In their 2022 Governance Report, the board of Mr Price made the following comment;
The board comprises of an independent chairman, lead independent director (LID), chief
executive officer (CEO), chief financial officer (CFO) and non-executive directors. During the
reporting period, the 11 directors comprised of two executive directors, six independent
nonexecutive directors and three non-executive directors.

2.1 Explain the difference between an executive director and a non-executive director. 5)

2.2 What is the significance of having an independent chairman; and a lead independent
director ? (5)

2.3 Both King IV and the JSE listing requirements gives guidance on the composition of
the Board. Write a short essay on the requirements/recommendations that these two
documents provide with regards to the composition of the board. (10)

Question 3 [20]
In their Annual Integrated Report, Capitec makes the following statement:
Our directors have a fiduciary duty to act with care and skill, and to exercise their powers
and perform their functions as directors in the best interest of the group. (2021, pg. 59)

3.1 Discuss the concept of fiduciary duties by indicating what it is, where it comes from
and what it implies for Directors. (7)

3.1.1 As part of a fiduciary duty, he/she is required to declare any personal

financial interest in a matter under discussion. Explain what is meant with the term
personal financial , and give an example of it. (3)

3.1.2 Describe the process that needs to be followed once a director has declared their
interest. (3)

3.2 Explain the remedies that are available to shareholders in the event of a director not
fulfilling his or her fiduciary duty. (4)

3.3 Why is insider trading seen as a breach of a directors fiduciary duty? (3)

Page 4 of Assignment
 ASSIGNMENT 2023 FIRST SEMESTER
CGE101
CORPORATE GOVERNANCE

Question 4 [20]

Principle 8 of the King IV Code read as follows: The board should ensure that its
arrangements for delegation within its own structures promote independent judgement, and
assist with the balance of power and with the effective discharge of its duties. (Wiese 2017,
pg. 21)

4.1 Briefly discuss how Boards usually structure themselves in order to ensure that they
execute their duties effectively? (10)

4.2 Explain how the delegation of responsibilities within a board contribute to independent
judgement? (7)

4.3 What do you think the King committee had in mind when they used the term balance
of power (3)

Question 5 [15]

5.1 Explain in your own words how the Board can structure its relationship with the CEO
and the executive team to ensure that the company achieve operational performance
and sustainability. (7)
5.2 The Companies Act, King IV and the JSE listing requirements gives guidance on the
Boards responsibility to report and give feedback to the shareholders. Explain what is
required of the Board with regards to this aspects. (8)

Question 6 [10]

Dambisa Mayo is a well-known economist, and she serves as a Director in the

Boards of several multi-national companies. In an interview she was asked about the
Board s responsibility, and she made the following comment:
With respect to new board members, I think the salient point here is for them to
understand the mandate of the board and the levers that boards have in order to
effect change. The mandate of the board has three key aspects. One is to oversee
the strategy of the company, and we do this by having a full-on strategy day. 1

6.1 Write a short essay on what you see as the mandate of the Board. You should
highlight and discuss at least five aspects. Please note that if you copy and paste
from the textbook, you will be penalized. (10)

ASSIGNMENT TOTAL: [100]

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