*** F1 December 2012 Exam *** Instant Poll and comments***

not bad for first exam

kinda ok exam, i found the second half of the paper to be the easiest

Are we allowed to discuss the exact questions? I can remember a lot of them and like all Multiple choice exams a lot of them came down to two very close options. Starting off –

There was a question early on about fraud. I felt that two options were marginal deception, and one was theft (removal of assets). I think the answer was Deng who was moving money from pirated CDs to an offshore account. What does everyone else think?

Hope you did well all those who wrote F1, more stuff is waiting here up the ladder….keep on going!

very interesting indeed. the questions were really think and answer type. really good and powerful….. b boy

Okay so next question. There was one about corporate governance & ethics. Mary is a Finance Director in company A and Non-exec director in company B. She sits on risk & rumeneration committees in Company B. Johnny is CEO of company B and Non-exec director at company A, he sits on remuneration committee in Company A.

The options were: (A)Mary shouldn’t be on a risk committee, (B)Neither should be on two committees, (C)Johnny shouldn’t be CEO of one company and Non-Exec on another at all, or (D)that at least one of them should step down from the rumenartion committee.

My thinking was – The first two are just wrong as finance Non-Execs should be on risk committees, and You want non-execs on more than one committee to make use of them. The third one is trickier as it is a potential conflict of interest, but the option in the question was universal not case specific. It said a CEO should never be Non-exec elsewhere. Well it is common practice in USA, rare in OZ and about 20-30% in UK. So my thinking was that that was wrong. That leaves the final option being the only one left and also the only one that dealt directly with the objectivity problem of them judging each other’s pay. So my answer was – At least one should step down from the rumenertion committee.

What does everyone else think?

I am not sure that is true. Here is the FRC’s UK Corporate Governance Code:

https://www.frc.org.uk/getattachment/a7f0aa3a-57dd-4341-b3e8-ffa99899e154/UK-Corporate-Governance-Code-September-2012.aspx

I searched it and I see no mention of CEOs being excluded from being members of other boards. It does say:

B.3.3. The board should not agree to a full time executive director taking on more than one non-executive directorship in a FTSE 100 company nor the chairmanship of such a company.

The question didn’t mention anything about FTSE 100 company being involved and didn’t say he was a member of more than two boards. Aslo here is an article from a Australian web forum for CEO’s which indicates it si quite common:

https://www.ceoforum.com.au/article-detail.cfm?cid=9013&t=/Chris-Thomas–Egon-Zehnder-International/The-place-of-a-serving-CEO-on-another-board/

And the question about the serious conflict between trade union and the company sacking one of the employee, who should resolve the confict? i chose board of directors. Second question on the group of rowdy teenages causing disturbance to other patrons esp those with family so the owner disallowed teenagers patronising there. I chose deontological, the other options are egoist utilitaranian and pluralist. Third question… The one asking to explain the definition of fidiciary. I think i chose A… Someone who has trust and able to…… So can share your answers with me?

On the self threat issue I also opted for Intimidation. I didn’t see any actual intimidation but I suppose there was a possibility it could come. The main reason was that the others didn’t seem to fit for me. There could be no self review as they offered no other services, there wasn’t advocacy as they didn’t say they represented the client in the negotiation, and there was no implication of friendliness or over familiarity.

As for trade union one I also chose directors to settle it as you can’t expect either party (CEO or Union) to be responsible for sorting their own mess and to be honest I thought it was above the heads of the HR department as they had already failed.

For the rowdy teenagers I thought Utilitarianism, as the owner didn’t have an absolute rule to implement but did what was best for the greatest number of people (there are more families than teenagers). More people end up happy than unhappy.

I think I got fiduciary wrong I don’t remember trust being an option. I chose the option – “to take reasonable care and diligence”. It is part of it for sure, but I think maybe it is also such a low level that maybe that it is regraded as basic and slightly below fiduciary.

I found it a really tough exam and was not expecting the long questions. None of the practice tests had so many long interpretive questions, they were mostly short and factual. Could anyone else give their opinions on the questions and our answers. I would be grateful and I suspect Cheesecake would be too.

There was one about controls on a call centre that was suffering identity theft. They asked what was the best preventative method. There was a spot check option, a detailed check option, a threat of sacking, and an option to check references carefully. The sacking option was irrelevant because the thieves all left after 3 months anyway and I felt the other two were detect controls not prevent controls. Therefore I said the best PREVENT control would be to check references carefully. This was not the most useful control but it was the most useful prevent control mentioned. What do other people say?

As for the exclusion clause question – I also chose the producer. After all that is exactly what they are for in real life. When have you ever seen an exclusion clause written by a supplier for the benefit of the customer? However looking it up online I think I was wrong. Technically it is a clause to protect one of the parties from breach of contract action. So in truth it could be either of them, but I can’t remember any option to say either were protected. Did anyone choose anything else?

This paper really tough.. I didnt have adequate time to do. Though i done with all the questions but some of the answers were chosen out of impulsiveness. I think i got many questions wrong. I only pray hard i can pass this paper.

The director one with a wife was really tricky. There were two serious options. They guy either steps down from the board until negotiations are over, or he declares his interest and continues but just doesn’t take part in the contract negotiations. I really think either is a realistic option and could actually happen but I felt leaving board altogether was a bit extreme. So I also opted for declaring and avoiding vote. I found this on a website about boardroom disputes (but they don’t quote sources so I am not sure how definitive it is):

“Directors are legally obliged to declare any potential conflict of interest, and must not use their position to make private profits at the company’s expense. Suitable policies – requiring directors to declare conflicts and to abstain from votes where they may have a conflict – should be strictly enforced and recorded.”

As for Kolb, I got it wrong I said reflection stage. But Cheesecake got it right, I checked the book afterwards.

What did people choose for a company acting in public interest? One option was care for all stakeholders it serves, one satisfy all stakeholders all the time without detriment to any of them, and another was implement environmentally friendly policies? I figures first choice was actually the opposite as the stakeholders IT SERVES means the shareholders and not the public. I figured the second option is valid but just too extreme – you can never satisfy everyone’s needs ALL the time. So I choose to implement environmental policies. It seemed too easy, sticking out like a sore thumb so I was wondering, did I miss something? Did anyone see something else in this question?