E3: Chapter 3 – Knowledge Check: The role of governance and ethics in the strategy process

Shoppers Ltd operates a small chain of supermarkets in Lesotho.

The management of Shoppers Ltd has recently decided to support ‘Money Day’ – a charity event that raises money for good causes. This involves allowing staff to undertake a number of challenges designed to raise money from customers.

Shoppers Ltd’s Finance Director has estimated that supporting the event will cost Shoppers, through lost productivity, around $0.5m. However, the Board of Directors decided to proceed with the event as it was felt that the positive publicity would eventually attract customers, leading to a net positive financial benefit to the company.

According to the ethical stances model developed by Johnson, Scholes and Whittington, which one of the following ethical stances has Shoopers adopted?

Choose the option below that, according to the SMART criteria, would NOT be a recommended feature of an objective:

The CEO and majority shareholder of the company Media Moguls, is Jared Holden. The media has described Mr. Holden’s ethical stance as a minimalist approach, considering he responds only to laws or regulations and continuously challenges government authority.

In response to a question asked of him regarding his recent cost-cutting measures, Mr. Holden responded that profit is good and that Media Moguls exists for its business partners and investors only. Some of his cost-cutting measures included shutting down offices and making its staff redundant, and applying the minimum statutory redundancy payments to these staff.

Out of the four illustrations of ethical stances provided by Johnson and Scholes, which one is most likely illustrated by Mr. Holden?

When the government introduces new laws regarding minimum wage, health and safety standards, or any new labor laws, Bluxom Corporation chooses to challenge each one by doing the very least that is required. There were four strategies for how to respond to social pressure and the manner in which to do so, that were suggested by Carroll to organisations.

Bluxom Corporation’s social stance can be best categorised by which ONE of the following options?

Credit Avenue Bank owns 20% of a concrete pipe manufacturing company, known as Turbo Pipe. The company has built a negative reputation for itself due to its high consumption of water and energy used during production. In hopes of repairing Turbo Pipe’s reputation, the managing director Steven has decided to implement both rainwater harvesting and solar power at its largest factory. Turbo Pipe’s shareholders would have to provide further capital investment in order to take these steps to repair its reputation.

On what grounds may Steven be able to persuade Credit Avenue to inject the needed capital?

There are strong commercial reasons for implementing and pursuing good ethical practices. Select ALL of the following that constitute business reasons for acting ethically:

A newly hired accountant was given the job of preparing profit forecasts for the company as part of her induction training. Without first reviewing the forecasts that the new hire completed, the company’s Finance Director used them at the following board meeting.

In this scenario, which ONE of the five threat categories of CIMA’s Code of Ethics is described?

At DiversityX Co, an accountant found himself confronted with an ethical dilemma of potentially violating a fundamental ethical principle. Below is an explanation of how he went about resolving the dilemma:

“He took the first step of the pre-determined internal protocol and informed his immediate manager of the dilemma first. As time went by, the issue still appeared to be unresolved. He then decided to report the issue to the manger’s manager, who then told him not to worry about the matter and no further actions should be taken.”

The accountant’s actions can be best described by which ONE of the following options?

In order to expand its operations, a cosmetic company by the name of FreshFace Ltd is planning to attract external investment. The company felt compelled to temporarily shut down its factory due to experiencing a contamination issue at one of its production plants. In order to try and escape the adverse effects and possible damage of the recent shutodwn, FreshFace Ltd’s finance director was advised by its CEO to promptly address the concern of potential investors, and downplay the incident as simply a routine operational problem that will be quickly rectified.

Choose the option below that describes the threat to ethical principle that the finance director is faced with:

The financial director at Brand Construction Co gave a presentation to financial journalists and investment analysts in which he gave a very ambitious forecast regarding the company’s future. He indicated that revenue is predicted to double in the coming year and that profits would grow by nearly 70%.

While researching the information to use in this presentation, the financial director was under considerable time constraints and never even consulted with other members on the accuracy of the information to be presented. He also left out of the presentation the fact that there was potential legal action being brought against Brand Construction Co by their national government for possible tax evasion, which could significantly affect the company’s profit.

What fundamental principle does the above scenario conflict with?

Jason is a CIMA member, and as a financial controller of GreyTin Co., a large company manufacturing kitchen equipment, he is currently looking for a new supplier of metal parts. At the moment he is considering three suppliers, one of which is QuickParts Ltd. and is owned by Jason’s old school friend, Greg. Since Greg knows that Jason is good friends with GreyTin Co.’s procurement manager, he asks if Jason could ‘put in a good word for QuickParts Ltd.’

If Jason was to follow through with his friend Greg’s request, which of the following options would he be breaching?

Based in the Republic of Ireland, Elite Fitness is a successful gym that is looking into establishing operations in the UK through franchising. The marketing director of Elite Fitness, Butch Jones, is creating the franchise proposal for the board of directors which he will soon present. He has already begun discussing the proposal with many of the company’s gym managers and they have declared that they’re not interested in relocating and managing the new franchises in the UK.

Mr. Jones has violated what TWO ethical principles?

An accountant is drafting a feasibility report on a number of prospective suppliers, when suddenly he is approached by a representative of one of them. The representative is from a company named Ozgard Ltd. and he offers the accountant a better position at his company but only if it is given the supplier contract.

In the above scenerio, which of the five threat categories listed in CIMA’S Code of Ethics is likely to undermine the accountant’s ability to act in accordance with fundamental ethical principles?

Which THREE of the following are included within Carroll’s four-part model of corporate social responsibility?

Select the one decision below that does NOT require the oversight of corporate governance:

Esihle is a CIMA member and financial controller of Fintechs, a large company in the financial services sector.

Esihle has planned her Continuing Professional Development (CPD) for the year and intends to attend a number of technical update courses with a local training provider.

Esihle currently has a heavy workload and the training provider has offered to give her the completion certificates for the courses whether she attends or not – as long as she pays the course fees.

If Esihle takes the training provider’s offer, which TWO of the following CIMA fundamental ethical principles would she be breaching?

Aero Inc is a company that is knowingly composed of directors that are of similar ethnic and educational backgrounds. A mix of directors with different experiences and backgrounds is encouraged in the name of good corporate governance.

If the company were to take this advice, what benefit is this likely to have for the company?

John Masters is CEO at Johnson Farms, a company that supplies agricultural goods. The company is looking for ways to achieve long-term growth of its business and believe they may have come across that opportunity due to coal findings on one of the company’s sites. Now, John plans to start with the coal mining business and shift the entire deposit within 10 years. This is not a good decision, because:

Which TWO of the following statements regarding Corporate Social Responsibility (CSR), ethics and sustainability are correct?

When an accountant endorses a colleague’s promotion to the point that their future objectivity is undermined, which type of threat has occurred?