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Exam style questions and answers

D: NED’s would not set strategy, rather they would scrutinise and question the
strategy set by the board on behalf of shareholders.

E: It is important to note that NED’s should not support strategies which they do
not believe are appropriate. Their role is to question and scrutinise strategy
rather than blindly follow it.

12 B, D, E

A: The audit committee is required to monitor and review the company’s
accounts and internal controls and so at least one member should have recent,
relevant financial experience.

B: This is in line with best practice. The audit committee should carry out its
roles independently of the board but report findings to the board as required.

C: The compliance issues in XXP are likely to be complex however many of
them will revolve around the finances of the company and without accountancy
knowledge on the committee these will be difficult to understand.

D: This is best practice.

E: This is best practice

13 B, D, E

A: A remuneration committee should be made up of NED’s only, at least one of
which should have recent relevant financial experience.

B: The finance director is an executive and therefore has no place on the
remuneration committee. In addition, he was also a friend of Mr Chat and so his
views should have been disregarded.

C: The pension award was not illegal, just unethical and not in line with best
practice.

D: The ex-colleagues did not qualify as independent non-executive directors.

E: Mr Chat should not have been able to dictate his own pay. His views should
have been disregarded by the committee.

14 A, B, E

A: This will help to retain the current board since they will believe themselves to
be fairly rewarded regardless of performance in the role.

B: The payment of a bonus for staying more than an agreed time period will
also aid retention.

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