Simulation of the written exam

“Corporate Governance”

(17th September 2015)

Prof. Emiliano Di Carlo

Surname:_______________ Name:______________ Matriculation number____________

Your project work:_______________

Score:_____________ Max 32 (means 30 cum laude) Min 18 (to pass the written exam)

Please write legibly (otherwise 2 points less) and use just the available lines! You have 1:30 to complete the exam and 10 minutes to withdraw.

It is strictly forbidden to look at any notes, mobile phone, class material, or external materials.

PART I - Put the theory into practice (business group)

Davide Campari is the listed parent company of Davide Campari group. Please, analyse the legal entities map and answer the following questions:

______1. Suppose that Alicros is owned (100%) by the Ministry of Economy, thus the ultimate controlling party of Sella & Mosca is:

¨ The management of “Alicros”

¨ The Ministry of Economy

¨ The Minister of Economy

¨ The management of “Sella & Mosca”

Motivate your response (2 points):_________________________________________________________________

_______________________________________________________________________________________________

______2. The cash flow rights that “Alicros” has in International Marques V.o.f. (Olanda) are equal to:

¨ 51%*100%*33,3%

¨ 100%*33,3%*100%

¨ 100%+51%+33,3%

¨ None of the above answers is correct

Motivate your response (2 points):_________________________________________________________________

_______________________________________________________________________________________________

______3. You are an external investor and you know that Davide Campari has ordered to International Marques V.o.f. (Olanda) to sell goods to Campari France at a price that is higher than the market price. How do you interpret such transaction?:

¨ It is propping

¨ It is propping only if Campari France is in financial distress

¨ It is tunnelling

¨ It is not tunnelling nor propping

Motivate your response (2 points):_________________________________________________________________

_______________________________________________________________________________________________

______4. You are an external investor and you know that Davide Campari has ordered to International Marques V.o.f. (Olanda) to purchase legal services from Campari France. The price paid by International Marques V.o.f. (Olanda) is in line with the market conditions. How do you interpret such transaction?:

¨ It is always propping

¨ It is always tunnelling

¨ It depends on the motivations under such transaction

¨ It is a fair transaction, since it is in line with the market conditions

Motivate your response (3 points):_________________________________________________________________

_______________________________________________________________________________________________

PART II - Put the theory into practice (board composition and ownership structure)

The following figure shows the board composition and the shareholders of the listed company Marr SPA.

______5. Claudia Cremonini has the power to appoint the majority of board members of Cremonini SpA. How do you evaluate the board under the stewardship theory:

¨ Negatively because there are only three independent directors

¨ Negatively because there are too many executive directors in the board

¨ Positively because there is not a CEO duality

¨ Positively because there are only three independent directors

Motivate your response (2 points):_________________________________________________________________

_______________________________________________________________________________________________

______6. Is it possible to launch a friendly takeover on Marr?:

¨ No, because Cremonini SpA owns more than 50% of the shares

¨ Yes, but the controlling shareholder can reject the offer

¨ No

¨ None of the above answers is correct

Motivate your response (2 points):_________________________________________________________________

_______________________________________________________________________________________________

______7. What may be the reason why Vincenzo Cremonini is not considered independent under the Italian code of corporate governance?

¨ He is a family member of the controlling party

¨ He is the legal advisor of Marr

¨ He is appointed by the minority shareholders

¨ His tenure in the board is 3 years

Motivate your response (2 points):_________________________________________________________________

_______________________________________________________________________________________________

______8. Are there relevant shareholders in the ownership structure of Marr?

¨ Yes, they are four

¨ Yes, they are three

¨ It is not possible to answer since it is not indicated if they are interested in the governance of Marr

¨ No there are only non qualified minority shareholders

Motivate your response (2 points):_________________________________________________________________

_______________________________________________________________________________________________

PART III – Theory (multiple choice)

______9. In a business group the control is separated from management when (the article is “Pyramids and the separation between direction and control of non-financial Italian family companies”):

¨ the parent company delegates the exercise of the decision-making power to the boards of its subsidiaries;

¨ the group has a pyramidal structure;

¨ the parent company delegates the power of control to external parties (e.g. banks), loosing the possibility to govern the business group;

¨ the subsidiary board delegates the decision making power to its management

Motivate your response (3 points):_________________________________________________________________

_______________________________________________________________________________________________

______10. The legal entities in distress that operate for the economic efficiency of the group (The article is “Related party transactions and separation between control and direction in business groups: the Italian case”)

¨ are dismissed because they destroy value within the group

¨ are kept alive because they create value offering opportunities or benefits to other entities within the group

¨ are kept alive because they allow to the ultimate controlling party to extract private benefits of control

¨ are dismissed just in case of hostile takeover, otherwise the ultimate controlling party has a private interest to maintain those legal entities

Motivate your response (2 points):_________________________________________________________________

_______________________________________________________________________________________________

PART IV - YouTube Videos

Summarize in brief the YouTube Video: Shareholder Theory: Greed (Milton Friedman) (min 00:02:23)

______11. (2 points)