Chapter 13: Corporate Governance and Boards of Directors

Question 1

1. Safeguard the equity investors’ interests by ensuring that management seeks to maximize shareholder value
2. Protect the interests of other corporate stakeholders

Answer 1

BOD’s Two Main Control Responsibilities

Question 2

1. Duty of care
2. Duty of loyalty
3. Duty of good faith
4. Duty not to waste

Answer 2

Directors’ Duties

Question 3

To carry out their responsibilities, boards must ensure that they are independent and accountable to shareholders, and they must exert their authority for the continuity of executive leadership with proper vision and values

Answer 3

Board Independence

Question 4

1. Responsible for the selection and evaluation of CEO and must ensure the quality of senior management
2. Review and approve the corporation’s long-term strategy and important management decision

Answer 4

Board Competence

Question 5

1. Responsible for the selection and evaluation of CEO and must ensure the quality of senior management
2. Review and approve the corporation’s long-term strategy and important management decision

Answer 5

Board Competence

Question 6

Provide independent oversight over companies’ financial reporting processes, internal control, and independent auditors

Answer 6

Audit Committees

Question 7

1. The sets of mechanisms and processes that help ensure that companies are directed and managed to create value for their owners while concurrently fulfilling responsibilities to other stakeholders.
2. Deals with controlling the behaviours of top management

Answer 7

Corporate Governance

Question 8

1. Laws and regulations
2. Boards of directors
3. External auditors
4. Governance ratings

Answer 8

Various Forms of Corporate Governance