- 10 Marks
Question
The Managing Director of Dakubo Ltd, a company which engages in the business of iron rods production, on his own, contracted a loan of GH¢1,000,000 from Dilidom Bank. The loan is repayable in twelve months’ time. The Managing Director disclosed the contents of the agreement to his wife who is neither a Director nor a member of the company. In further disregard for the regulations of the company, the Managing Director squandered the loan contracted from the bank.
Required:
i) Explain the concept of Good Corporate Governance.
(5 marks)
ii) From the scenario above, state FIVE (5) principles of Good Corporate Governance that may have been breached by the Managing Director of Dakubo Ltd. (5 marks)
Answer
i) The concept of Good Corporate Governance:
The concept of good corporate governance is a function of a company/corporation. The concept of good corporate governance is to promote fairness, openness, and transparency in its responsibilities to stakeholders. Good corporate governance practices facilitate economic efficiency by focusing on value-enhancing activities and aid efficient allocation of scarce resources. This is achieved when companies/firms efficiently employ their assets, attract low-cost capital, meet societal expectations, and improve overall performance.
The concept of corporate governance incorporates the question of accountability, ethics, and social responsibility to society and stakeholders and concerns the structures and procedures associated with the direction in which an organization plans to chart. Whatever its definition, good corporate governance relates to the fundamental processes whereby ultimate corporate authority and responsibility are shared and exercised by shareholders, directors, and management to ensure that corporate assets provided by investors are being put to appropriate and profitable use.
(5 marks)
ii) Principles of Good Corporate Governance breached:
From the scenario, the following principles of good corporate governance were breached by the Managing Director of Dakubo Ltd:
- Ethics
- Fairness
- Transparency
- Accountability
- Responsibility
- Efficiency
- Confidentiality
- Candour
- Honesty
(Any 5 points @ 1 mark each = 5 marks)
- Tags: Company Law, Corporate Governance, Directors' Duties, Ethics, Principles of Governance
- Level: Level 1
- Uploader: Dotse