CIMA BA4 · Chapter 5 · Question 9 of 10
The OECD Principles of Corporate Governance include the equitable treatment of shareholders. Which practice would most clearly breach this principle?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Allowing directors to trade in the company's shares using undisclosed price-sensitive information
Explanation
Equitable treatment requires that all shareholders, including minority and foreign shareholders, are treated fairly and that insider trading and abusive self-dealing are prohibited. Directors trading on undisclosed information benefit at other shareholders' expense. Disclosed differences in class rights, open meetings and simultaneous disclosure are consistent with the principle.
More Corporate governance: principles and approaches MCQs
- Q1Which of the following best defines corporate governance?
- Q2In agency theory as applied to a listed company, who are the principals and who are the agents?
- Q3What does 'comply or explain' mean in the context of a principles-based governance code?
- Q4Which of the following is an example of an agency cost?
- Q5Which of the following is a characteristic of a rules-based approach to corporate governance, as exemplified by the US Sarbanes-Oxley Act?