Question

Sax Co. sells insurance, and it has recently become a listed company. In accordance with corporate governance guidelines, the finance director of Sax is reviewing the company’s corporate governance practices.

Bill Bassoon is the chair of Sax. Bill vacated the CEO position last year to become the chair of the board, and a new CEO has not yet been found. Bill is unsure if Sax needs more non-executive directors. There are currently six members on the board, which consists of four executive directors and two non-executive directors. He is considering appointing one of his brothers, who is a retired chief executive of a manufacturing company, as a non-executive director. Bill wants to ensure the board focuses on the strategic direction of Sax and not the day-to-day decision-making. To do this, he has reduced the number of board meetings.

The finance director, Jessie Oboe, is considering setting up an audit committee, but has not undertaken this task yet as she is very busy. A new board director was appointed nine months ago. He has yet to undertake his board training as this is normally provided by the chief executive and this role is still vacant.

There are many shareholders and therefore the directors believe that it is impractical and too costly to hold an annual general meeting of shareholders. Instead, the board has suggested sending out the financial statements and any voting resolutions by email; shareholders can then vote on the resolutions via email.

(a)

Which of the following are corporate governance weaknesses with Sax?

Bill Bassoon is now the chair; however, until last year he was the CEO.

The number of board meetings has been reduced.

The six-member board consists of two non-executive directors.

Bill is considering appointing his brother as a non-executive director.

Bill does not want the board to participate in the day-to-day operations of Sax.

Sax does not currently have an audit committee.

Sax is not planning to hold an annual general meeting.

Answer 1

The Corporate Governance weakness with sax co. are:

Their is no CEO present in the company which is one of the important designations in the company.

The structure is also not fixed in the company the general meetings are not held and the control is so distuributed (no.of shareholders are too high) .

The audit committe has not been sat up till now as the finance director is very busy.

Bill Basson who is now the chairman of the company wants to appoint his brother as the non director of the company even when there is no need of the board of directors in the company.

So, answer option DFG are correct options