Question Tag: Stakeholder Management

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FM – Nov 2021 – L3 – Q4 – Corporate Governance and Financial Strategy

Assess LL's corporate objectives, the finance director's view, and treasury strategies within a low-interest economic environment.

Leye Limited (LL) is a privately-owned toy manufacturer in Nigeria, operating internationally as both a supplier and a customer. While privately owned, LL’s revenue and asset base are comparable to some publicly listed companies. It has numerous shareholders but has no plans for public listing. Major shareholders have expressed an interest in buying out smaller investors.

LL has a strong history of profitability, which satisfies both directors and shareholders. They avoid strategies that increase risk significantly, such as acquisitions or overseas manufacturing setups, accepting a comparatively lower growth rate than competitors.

The company’s capital structure is composed of 70% equity and 30% debt (based on book values), with debt comprising secured and unsecured bonds carrying interest rates between 7% and 8.5%, maturing in 5 to 10 years. In a low-inflation and potentially declining interest rate environment, the company treasurer is exploring refinancing options.

LL’s primary financial objective is annual dividend growth, with a non-financial objective of treating all stakeholders with fairness and equality. The Board is currently reassessing these objectives. While the new Finance Director advocates for shareholder wealth maximization as the sole objective, other directors favor a balanced approach, including goals such as profit after tax, return on investment, and operational performance improvements.

Required:

a. Evaluate the appropriateness of LL’s current objectives and the Finance Director’s suggestion. Discuss the issues the Board should consider in setting new corporate objectives, concluding with a recommendation. (10 Marks)

b. Discuss factors the treasury department should consider when formulating financing or refinancing strategies in the given economic context. Explain how these factors might influence the determination of corporate objectives. (10 Marks)

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FM – Nov 2022 – L3 – Q7 – Corporate Governance and Financial Strategy

Analyze the Chairman's proposals to improve EPS and discuss methods to align stakeholder objectives.

The Chairman of Opeyemi plc, a company listed on the Alternative Investment Market, has circulated a memorandum to the company’s directors and senior managers which contains the following statements:

“Looking to the year ahead, there are a number of measures which I propose to increase the company’s earnings per share (EPS).

Payments to trade creditors should be made as late as possible, even if this means extending our credit beyond the terms allowed by our suppliers. The company currently runs a substantial overdraft, and this measure will cut the level of bank interest and charges.

Relatively high capital expenditure in recent years has resulted in substantial depreciation charges in the profit or loss account. All capital spending, including that on the Oloro II project – designed to reduce toxic emissions from the manufacturing plant – should be postponed except where such spending can be shown to be essential to current operations.

Staff pay should be frozen at this year’s level for the forthcoming year. The company’s sponsorship of the local charity events run by the Staff Social Club should also, regrettably, be ended.

By boosting profits and therefore EPS, these measures will help us to achieve the highest possible stock market capitalisation.”

Required:

a. Prepare a response to the Chairman’s proposals which examines the possible consequences of the proposals for the price of the company’s shares and for the company’s stakeholders. (9 Marks)

b. Discuss FOUR ways that encourage managers to achieve stakeholder objectives. (6 Marks)

(Total 15 Marks)

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CSME – May 2021 – L2 – Q4 – Corporate Social Responsibility (CSR)

Explanation of social responsibility levels by Gray, Owen, and Adams, and ethical stances by Johnson and Scholes.

Gray, Owen, and Adams (1996) provided a framework for classifying different groups of people and their views of the relationship between business organizations and society.

Required:

a. State and explain SEVEN levels or positions on social responsibility by Gray, Owen, and Adams (1996). (15 Marks)
b. State Johnson and Scholes FOUR possible ethical stances for a business entity. (5 Marks)

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CSME – Nov 2016 – L2 – Q2b – Corporate Governance

Defines the characteristics of a good company in the context of corporate governance.

What kind of company is a good company?

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BMF – May 2018 – L1 – SA – Q14 – The Role of Professional Accountants in Business and Society

Focuses on employee-related code of conduct policies.

The code of conduct in respect of employees as a stakeholder group might include all of the following EXCEPT
A. Equal opportunities for all employees regardless of gender, race, or religion
B. Refusal to tolerate harassment of employees by colleagues and managers
C. Respect for the privacy of confidential information about each employee
D. Concern for the health and safety of employees
E. Unfair dealing with the company’s customers

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SCS – Nov 2020 – L3 – Q4a – Strategy implementation

Explain how effective collaboration can help the shareholders achieve the goals and objectives of GGOH.

The shareholders of GGOH decided that they will at all times maintain four individuals as members of the Board, and the Chairmanship will alternate between the two shareholders every two years. This could be a potential for conflicts between the shareholders.

Required:
How can effective collaboration help them achieve the goals and objectives of GGOH? (10 marks)

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BMF – May 2022 – L1 – SA – Q14 – The Business Environment

Describing a stakeholder group with minimal power but strong interest in business decisions.

Consequent upon the global pandemic, a company is about to take a decision to shut down a food processing plant. The management will therefore best describe one of the stakeholder groups that has small power to influence its decision but has a strong interest on the issue as a group.
A. Of key players
B. With minimal effort
C. To keep satisfied
D. To follow intently
E. To keep informed

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BMF – Nov 2019 – L1 – SB – Q3 – The Role of Professional Accountants in Business and Society

Explain the term "Corporate code of ethics" and discuss ways to deal with stakeholders and benefits of code of ethics.

(a) Explain the term ‘Corporate code of ethics’ and state the contents thereof. (5 Marks)

(b) The code of conduct recommends the way each stakeholder group might be treated ethically. Explain briefly TWO ways of dealing with employees, customers, and competitors ethically. (6 Marks)

(c) State the THREE main benefits of a corporate code of ethics. (9 Marks

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BMF – Mar July 2020 – L1 – SA – Q15 – Management, Individual, and Organisational Behaviour

Best approach for a company to manage conflicting interests among stakeholders.

Different stakeholders have different interests in a company, and these might be irreconcilable and in conflict with each other. What should a company do when stakeholders have conflicting interests?
A. Apply confrontational procedures
B. Ignore the interests of all the stakeholder groups
C. Fully satisfy the interests of each stakeholder group
D. Act in the interests of the most powerful stakeholder group
E. Act in the interests of the least powerful stakeholder group

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CSEG – May 2016 – L2 – Q5a – Corporate social responsibility

Make a case for Corporate Social Responsibility (CSR) to help a petroleum company's board formulate an appropriate CSR strategy, focusing on benefits and rationale.

You have recently been appointed head of corporate affairs of a reputable company that operates in the upstream sector of the petroleum industry in Ghana. In a recent management meeting, a disagreement arose among executives regarding the nature of the company’s philosophy and strategy towards social responsibility. In order to resolve the disagreement, you have been asked by the company’s board of directors to submit a position paper that will enable it to formulate an appropriate corporate social responsibility strategy for the company.

Required: In a brief report to the board, make a clear case for Corporate Social Responsibility (CSR) to help your company’s board formulate an appropriate CSR strategy.

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FM – Nov 2021 – L3 – Q4 – Corporate Governance and Financial Strategy

Assess LL's corporate objectives, the finance director's view, and treasury strategies within a low-interest economic environment.

Leye Limited (LL) is a privately-owned toy manufacturer in Nigeria, operating internationally as both a supplier and a customer. While privately owned, LL’s revenue and asset base are comparable to some publicly listed companies. It has numerous shareholders but has no plans for public listing. Major shareholders have expressed an interest in buying out smaller investors.

LL has a strong history of profitability, which satisfies both directors and shareholders. They avoid strategies that increase risk significantly, such as acquisitions or overseas manufacturing setups, accepting a comparatively lower growth rate than competitors.

The company’s capital structure is composed of 70% equity and 30% debt (based on book values), with debt comprising secured and unsecured bonds carrying interest rates between 7% and 8.5%, maturing in 5 to 10 years. In a low-inflation and potentially declining interest rate environment, the company treasurer is exploring refinancing options.

LL’s primary financial objective is annual dividend growth, with a non-financial objective of treating all stakeholders with fairness and equality. The Board is currently reassessing these objectives. While the new Finance Director advocates for shareholder wealth maximization as the sole objective, other directors favor a balanced approach, including goals such as profit after tax, return on investment, and operational performance improvements.

Required:

a. Evaluate the appropriateness of LL’s current objectives and the Finance Director’s suggestion. Discuss the issues the Board should consider in setting new corporate objectives, concluding with a recommendation. (10 Marks)

b. Discuss factors the treasury department should consider when formulating financing or refinancing strategies in the given economic context. Explain how these factors might influence the determination of corporate objectives. (10 Marks)

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FM – Nov 2022 – L3 – Q7 – Corporate Governance and Financial Strategy

Analyze the Chairman's proposals to improve EPS and discuss methods to align stakeholder objectives.

The Chairman of Opeyemi plc, a company listed on the Alternative Investment Market, has circulated a memorandum to the company’s directors and senior managers which contains the following statements:

“Looking to the year ahead, there are a number of measures which I propose to increase the company’s earnings per share (EPS).

Payments to trade creditors should be made as late as possible, even if this means extending our credit beyond the terms allowed by our suppliers. The company currently runs a substantial overdraft, and this measure will cut the level of bank interest and charges.

Relatively high capital expenditure in recent years has resulted in substantial depreciation charges in the profit or loss account. All capital spending, including that on the Oloro II project – designed to reduce toxic emissions from the manufacturing plant – should be postponed except where such spending can be shown to be essential to current operations.

Staff pay should be frozen at this year’s level for the forthcoming year. The company’s sponsorship of the local charity events run by the Staff Social Club should also, regrettably, be ended.

By boosting profits and therefore EPS, these measures will help us to achieve the highest possible stock market capitalisation.”

Required:

a. Prepare a response to the Chairman’s proposals which examines the possible consequences of the proposals for the price of the company’s shares and for the company’s stakeholders. (9 Marks)

b. Discuss FOUR ways that encourage managers to achieve stakeholder objectives. (6 Marks)

(Total 15 Marks)

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CSME – May 2021 – L2 – Q4 – Corporate Social Responsibility (CSR)

Explanation of social responsibility levels by Gray, Owen, and Adams, and ethical stances by Johnson and Scholes.

Gray, Owen, and Adams (1996) provided a framework for classifying different groups of people and their views of the relationship between business organizations and society.

Required:

a. State and explain SEVEN levels or positions on social responsibility by Gray, Owen, and Adams (1996). (15 Marks)
b. State Johnson and Scholes FOUR possible ethical stances for a business entity. (5 Marks)

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CSME – Nov 2016 – L2 – Q2b – Corporate Governance

Defines the characteristics of a good company in the context of corporate governance.

What kind of company is a good company?

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BMF – May 2018 – L1 – SA – Q14 – The Role of Professional Accountants in Business and Society

Focuses on employee-related code of conduct policies.

The code of conduct in respect of employees as a stakeholder group might include all of the following EXCEPT
A. Equal opportunities for all employees regardless of gender, race, or religion
B. Refusal to tolerate harassment of employees by colleagues and managers
C. Respect for the privacy of confidential information about each employee
D. Concern for the health and safety of employees
E. Unfair dealing with the company’s customers

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SCS – Nov 2020 – L3 – Q4a – Strategy implementation

Explain how effective collaboration can help the shareholders achieve the goals and objectives of GGOH.

The shareholders of GGOH decided that they will at all times maintain four individuals as members of the Board, and the Chairmanship will alternate between the two shareholders every two years. This could be a potential for conflicts between the shareholders.

Required:
How can effective collaboration help them achieve the goals and objectives of GGOH? (10 marks)

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BMF – May 2022 – L1 – SA – Q14 – The Business Environment

Describing a stakeholder group with minimal power but strong interest in business decisions.

Consequent upon the global pandemic, a company is about to take a decision to shut down a food processing plant. The management will therefore best describe one of the stakeholder groups that has small power to influence its decision but has a strong interest on the issue as a group.
A. Of key players
B. With minimal effort
C. To keep satisfied
D. To follow intently
E. To keep informed

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BMF – Nov 2019 – L1 – SB – Q3 – The Role of Professional Accountants in Business and Society

Explain the term "Corporate code of ethics" and discuss ways to deal with stakeholders and benefits of code of ethics.

(a) Explain the term ‘Corporate code of ethics’ and state the contents thereof. (5 Marks)

(b) The code of conduct recommends the way each stakeholder group might be treated ethically. Explain briefly TWO ways of dealing with employees, customers, and competitors ethically. (6 Marks)

(c) State the THREE main benefits of a corporate code of ethics. (9 Marks

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BMF – Mar July 2020 – L1 – SA – Q15 – Management, Individual, and Organisational Behaviour

Best approach for a company to manage conflicting interests among stakeholders.

Different stakeholders have different interests in a company, and these might be irreconcilable and in conflict with each other. What should a company do when stakeholders have conflicting interests?
A. Apply confrontational procedures
B. Ignore the interests of all the stakeholder groups
C. Fully satisfy the interests of each stakeholder group
D. Act in the interests of the most powerful stakeholder group
E. Act in the interests of the least powerful stakeholder group

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CSEG – May 2016 – L2 – Q5a – Corporate social responsibility

Make a case for Corporate Social Responsibility (CSR) to help a petroleum company's board formulate an appropriate CSR strategy, focusing on benefits and rationale.

You have recently been appointed head of corporate affairs of a reputable company that operates in the upstream sector of the petroleum industry in Ghana. In a recent management meeting, a disagreement arose among executives regarding the nature of the company’s philosophy and strategy towards social responsibility. In order to resolve the disagreement, you have been asked by the company’s board of directors to submit a position paper that will enable it to formulate an appropriate corporate social responsibility strategy for the company.

Required: In a brief report to the board, make a clear case for Corporate Social Responsibility (CSR) to help your company’s board formulate an appropriate CSR strategy.

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