CFA Practice Question

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CFA Practice Question

Which of the following are problems that an effective corporate governance system would mitigate or eliminate?

I. Proxy voting is not permitted.
II. Board members are unable to conduct in-depth evaluations of the issues affecting the company's business.
III. A company requires a simple two-thirds vote for passing a shareholder resolution and a simple majority vote to pass board-sponsored initiatives.
IV. The only way for shareholders to submit resolutions to consider specific issues is at the company's annual general meeting.
A. I, II and IV
B. I, III and IV
C. I, II, III and IV
Explanation: These are all warning signs of weak corporate governance.

User Contributed Comments 5

User Comment
rufi III-this might make sense, as too many smalll sahreholders might be problematic to handle
achu NOTE item 2: Board Members are unable to conduct in-depth evaluations of the issues affecting the Company's business.

So GOOD corp governance means the BODs get details, not just an overview of the company.
reganbaha lots of small shareholders, will only have a smallish portion of the shares issue, so no problem there
jpducros I don't understand why III is a signal of weak corporate governance.
hks101 III is a sign of weak corporate governance because it is unfair to the shareholders. So the board only requires a majority of votes from shareholders to pass their initiatives but the board is requiring 2/3 vote from shareholders to pass an initiative brought up by shareholders. harder to get 2/3 votes vs simple majority.
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