Chapter 3 Flashcards
what is corporate governance
the system by which organisation are directed and controlled
what does the CEO do
runs the business
what does the chairman do
runs the board
3 types of committees
audit (NED’s)
remuneration (NED’s)
nominations (ED’s and NED’s)
responsibilities of the board
monitoring CEO
overseeing strategy
monitoring risks
monitoring human capital
managing potential conflicts of interest
what is a unitary board
a board structure with only one board of directors
what is a multi-tier board structure
this could be two or three tiered and have a variety of representation
role of NED’s
strategy
risk
people
scrutiny
what is an insider system
occurs when most companies listed on the local stock exchange are owned by a small number of dominant investors
advs of insider system
less likely to have an agency problem
easy to influence management
disadvs of insider system
discrimination against minority SH’s
less formal governance structures
what is an outsider system
occurs when shareholding is widely dispersed by large number of shareholders
adv’s of outsider system
shareholders have voting rights
hostile takeovers are more achievable and therefore helps to discipline management
disadv’s of outsider system
more likely to have an agency problem
larger shareholders have short term priorities and they prefer to sell
how is success measured in the public or charity sector
value for money
three E’s , econony, efficiency, effectiveness
