CIMA BA4 · Chapter 5 · Question 3 of 10
What does 'comply or explain' mean in the context of a principles-based governance code?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Companies either follow the code's provisions or explain in their annual report why they have not done so
Explanation
Under a comply-or-explain approach, such as the UK Corporate Governance Code for listed companies, companies disclose whether they have complied with the code and give reasons for any departure. Shareholders then judge whether the explanation is acceptable. It is not a criminal regime like a rules-based statute.
More Corporate governance: principles and approaches MCQs
- Q5Which of the following is a characteristic of a rules-based approach to corporate governance, as exemplified by the US Sarbanes-Oxley Act?
- Q6Which of the following is an advantage of a principles-based approach to corporate governance compared with a rules-based approach?
- Q7An 'insider' system of corporate ownership, common in parts of continental Europe and Asia, is characterised by which of the following?
- Q8Which of the following is NOT generally regarded as a stakeholder of a company?
- Q9The OECD Principles of Corporate Governance include the equitable treatment of shareholders. Which practice would most clearly breach this…