BEC - Corporate Governance Flashcards
BEC- Corporate Governance
What is the primary duty of the board of directors?
To monitor management behavior.
BEC- Corporate Governance
What is the responsibility of the Nominating or Corporate Governance Committee of the board of directors?
Oversees the board
Responsible for hiring new CEO
BEC- Corporate Governance
What is the responsibility of the audit committee of the board of directors?
The audit committee appoints and oversees the external auditor.
BEC- Corporate Governance
What is the duty of the compensation committee of the board of directors?
The compensation committee handles the CEO’s compensation package.
BEC- Corporate Governance
What does the NYSE and NASDAQ require of the board of directors?
They require the board to be independent.
BEC- Corporate Governance
What is the main goal in an executive compensation package?
The package should ensure that the goals of management should match those of the shareholders.
BEC- Corporate Governance
How can an executive compensation package ensure that goals of management align with those of shareholders?
Executive compensation should create an incentive for management to govern in a shareholder-friendly way that doesn’t sacrifice the long-term success of the enterprise for short-term gain.
BEC- Corporate Governance
Which influences help mold the direction that management takes?
They range from internal (Board of Directors- Audit Committee- Internal Control) to external (Creditors- SEC- IRS)
These influences should not be tainted by undue influence from management or have financial ties to management such as compensation-related duties
BEC- Corporate Governance
What is shirking?
When management doesn’t act in the best interest of shareholders.
It can be alleviated by tying compensation to stock performance or company profit.
BEC- Corporate Governance
What requirements are imposed on a public company under Sarbanes-Oxley?
Management must submit a report on the effectiveness of Internal Control in the 10K.
Management must disclose significant Internal Control deficiencies.
CEO/CFO must certify that the financial statements comply with securities laws and fairly present the financial condition of the company.
BEC- Corporate Governance
What characteristics are promoted by the COSO framework on Internal Control?
Reliable financial reporting
Effective and efficient operations
Compliance
BEC- Corporate Governance
What are the elements of the control environment?
Integrity & Ethics Competence The Board of Directors & Audit Committee Management's Operating Style Organizational Structure Authority & Roles of Responsibilities HR Policies
BEC- Corporate Governance
What are control activities?
A component of Internal Control that includes actions being taken to promote the control environment.
BEC- Corporate Governance
What are the basic elements of Internal Control?
Control Environment Risk Assessment Control Activities Information and Communication Monitoring
BEC- Corporate Governance
What is the significance of the Information and Communication aspect of Internal Control?
Management must have access to relevant and timely information to make good decisions.
