Corporate Governance Flashcards
Corporation Bylaws:
- What should they include? (5)?
- Who should have a copy?
- They should:
a. Set forth how directors/officers are elected
b. How meetings are conducted
c. Types/duties of officers
d. Required meetings
e. Process of bylaw amendment - Copy of bylaws should be provided to officers and directors.
What should be included in Articles of Incorporation? (6)
- Name/Address of Corporation
- Purpose of Corporation
- Powers of Corporation
- Name of registered agent
- Name/Address of Incorporator
- Number of authorized shares and type of stock
Business Judgment Rule
Provides that a corporation director may NOT be held liable for errors in judgment providing the director acted with good faith, loyalty, and due care.
Components of COSO
Mnemonic: CRIME
C - Control Activities R - Risk Assessment I - Information & Communication M - Monitoring E - Control Environment
Internal Control Objectives (3)
- Reliability of reporting
- Efficiency and effectiveness of operations
- Compliance with applicable laws and regulations
Control Environment - Basis Structure of Principles
Mnemonic: PHRASED
P - Philosophy & operating style of mgmt. H - Human resources R - Reporting competencies A - Authority and responsibility S - Structure (organization) E - Ethical values (and integrity) D - Directors
Enterprise Risk Management - Objectives
Mnemonic: SORC
S - Strategic (high level goals designed to achieve mission)
O - Operations (achievement obj through effective/efficient use of resources)
R - Reporting (achievement of reliable reporting)
C - Compliance (ensuring compliance with laws and regulations)
ERM Components
Mnemonic: IS EAR AIM
I - Internal environment S - Setting objectives E - Event identification A - Assessment of risk R - Risk response A - Control activities I - Info & Communication M - Monitoring
Risk Appetite (def)
Amount of risk an organization is willing to accept to achieve its goals
Risk Tolerance (def)
Relates to the organization’s objectives. The acceptable variation with respect to a particular objective.
Inherent risk (def)
Risk to the organization if management does nothing to alter its likelihood or impact
Residual risk (def)
The risk of the event after considering management’s response.
Balanced Scorecard: Critical Success Factors
Mnemonic: FECH
F - Financial
E - Business Processes - Measure Efficiency
C - Customer
H - Learning & Growth - HR capabilities
Risk Responses (4)
- Avoidance - exit activity causing risk
- Reduction - reduce risk likelihood or impact
- Sharing - transfer/share impact of risk (e.g. insurance)
- Acceptance - no action - risk is consistent with risk appetite of the org.
What kind of relationship does the board of directors have with the Company?
The board of directors relationship to the company is a fiduciary relationship.
A fiduciary relationship is a legal or ethical relationship of trust between two people, organizations, or other such parties.
