Governance and Management
Core concepts
This domain blends corporate governance with management theory. On governance, know the principles of accountability, transparency, fairness, and responsibility; the roles of the board, audit committee, and external auditor; and the separation of ownership from control (agency problem). Understand codes of best practice, board composition, independence, and the control environment. On management, know the functions of planning, organising, leading, and controlling; motivation theories; leadership styles; and organisational structures. Recognise the distinction between strategic, tactical, and operational levels of management.
Common traps
Questions often conflate the roles of the board and management - the board sets strategy and oversees, while management executes. Another trap is confusing the audit committee (a board sub-committee of independent non-executives) with the internal audit function (an independent assurance activity reporting to the audit committee). Watch for questions that present a leader who consults before deciding - that is democratic, not laissez-faire.
Worked example / rule of thumb
When analysing a governance scenario, apply the four principles in sequence: Is there accountability (who answers for the decision)? Is it transparent (is information disclosed)? Is it fair (are minority shareholders treated equally)? Is it responsible (does it consider stakeholders)? Rule of thumb: if a decision cannot be explained publicly, it likely breaches transparency.
Exam technique
Use the principle names explicitly; examiners look for them.