7. Corporate Issuers Flashcards
CI - Principal-Agent Relationships
Qui est Agent?
Qui est Principal?
Agent: Senior Manager
Principal: shareholder
CI - Board of directors
Qui inclut le
One tier board?
Two tier board?
One tier board: internal directors (senior managers)
Two tier board: external directors (called independent directors if they have no other relationship with company)
CI - Board of directors responsibilities
Quelles sont les 6 responsabilités?
Set strategic direction for company
Select and evaluate senior managers
Set management compensation and plan for succession
Approve large investments, acquisitions, and changes in capital structure
Establish and monitor internal controls
Ensure quality of financial reporting through internal and external auditors
CI - Board of directors committees
Rôles
Audit?
Governance?
Nominations?
Investment?
Compensation?
Risk?
Audit: Oversee financial reporting, internal controls, and internal audit; recommend external auditor to Board
Governance: Implement company code of ethics; monitor changes in laws and regulations and ensure company’s compliance
Nominations: Search for and propose candidates for Board; align Board compensation with company goals
Investment: Review proposed capital investment projects, acquisitions, and asset sales
Compensation: Recommend compensation levels and types for directors and senior managers; oversee employee benefit plans
Risk: Recommend appropriate risk policy and risk tolerance; oversee risk management processes
CI - Risk of poor management
Decrease in company value due to… (4)
Weak controls (audits, board oversight)
Poor or fraudulent accounting
Lax oversight of management: Sub-optimal risk levels, related-party transactions, or compensation not aligned with company goals
Legal and reputational effects
CI -Benefits of effective governance/stakeholder management
Decrease in company value due to… (3)
Operational efficency, higher profits
Alignment of interests
Reduced legal risks
CI - Business structure
Quels sont 4 types de business
Sole proprietorship
General partnership
Limited partnership
Corporation
Operators?
CI - Sole proprietorship
Control?
Liability?
Tax?
Access to capital?
Operators: 1
Control: Full
Liability: Personnaly liable for claims against business
Tax: Profit taxed as personal income
Access to capital: Limited
Operators?
CI - General partnership
Control?
Liability?
Tax?
Access to capital?
Operators: 2+
Control: Separate
Liability: Personnaly liable for claims against business
Tax: Profit taxed as personal income
Access to capital: Limited
Operators?
CI - Limited partnership
Control?
Liability?
Tax?
Access to capital?
Operators: 1+ general and 1+ limited
General
Control: Separate
Liability: Personnaly liable for claims against business
Tax: Profit taxed as personal income
Access to capital: Limited
Limited
Control: Separate
Liability: Amount they invest
Tax: Amount they invest
Access to capital: Limited
Operators?
CI - Corporation
Control?
Liability?
Tax?
Access to capital?
Operators: Legal identity separate
Control: Managers decide CEO for managing
Liability: Amount they invest
Tax: Profit taxed at corporate level/Double taxation (dividends)
Access to capital: Unlimited
