Corporate Finance - Chp. 25: Corporate Governance

Question 1

Corporate governance objectives

Answer 1

• Eliminate or reduce conflicts of interest
• Use the company’s assets in a manner consistent with the best interests of investors and other stakeholders.

Question 2

Corporate Governance Core attributes

Answer 2

• Define the rights of shareholders and other important stakeholders.
• Define and communicate to stakeholders the oversight responsibilities of managers and directors.
• Provide for fair and equitable treatment in all dealings between managers, directors, and shareholders.
• Have complete transparency and accuracy in disclosures regarding operations, performance, risk, and financial position.

Question 3

• Board of directors responsibility

Answer 3

• Institute corporate values
• Complies with legal requirements
• Create long term strategic objective
• Determine mgmt. responsibility
• Evaluate CEO
• Require complete and accurate info
• Meet regularly
• Ensure board members adequately trained

Question 4

• Statement of corporate governance

Answer 4

• Code of ethics
• Directors oversight, monitoring, and review responsibilities
• Management responsibility to board
• Reports of directors oversight and mgmt. review
• Board self assessment
• Management performance assessments
• Director training

Question 5

• Effectiveness of board

Answer 5

• At least ¾ of board should be independent
• Independent chairman
• Qualifications of directors
• How the board is elected
• Board self assessment practices
• Separate sessions for directors
• Audit committee and audit oversight
• Nominating committee
• Compensation committee
• Use of independent legal council
• Statement of governance policies
• Disclosure and transparency
• Insider or related party transactions
• Responsiveness to shareholder proxy votes