Corporate Governance

Question 1

What do articles of incorporation include?

Answer 1

Name of company
Address of company
Company purpose
Name of registered agent of corporation
Name and address of each incorporator
Number of authorized shares of stock
Types of stock

Question 2

What are duties of board of directors?

Answer 2

Fiduciary duty to act loyally, with a duty of care, and due diligence
Amend bylaws
Strategic planning
Selection and oversight of chief executive
Secure financial resources
Budget approval
Account to stakeholders
Provide advice to management
Establish dividend policies
Reacquire treasury stock

Question 3

What does it mean to “act loyally”?

Answer 3

Act in the best interest of corporation and shareholders which includes not putting their interests above the company’s and acting without personal economic conflict

Question 4

What does it mean to “act with a duty of care”?

Answer 4

Act with care and be diligent when making company decisions

Question 5

What does it mean to “act with due diligence”?

Answer 5

Use reasonable care when entering into agreements or transactions with another party

Question 6

What are NYSE and NASDAQ requirements for board of directors for listed companies?

Answer 6

Majority of directors are required to be independent
A director is not independent if were recently an employee of company
Non-management directors required to meet on regularly scheduled basis
Must adopt and publish code of conduct
Must maintain an independent audit committee
Must identify relationships that indicate that director is not independent

Question 7

What are the three required committees for a publicly held company?

Answer 7

Nominating and Corporate Governance
Audit
Compensation

Question 8

What is a financial expert of audit committee?

Answer 8

Understands GAAP and financial statements
Has experience with preparing F/S
Has experience with internal accounting controls
Understands the functions of audit committee

Question 9

What are the four provisions of the Dodd-Frank Act?

Answer 9

Say on executive pay by stockholders
Committee members required to be independent
Enhanced disclosure such as relationship of median employee compensation to CEO compensation
Can recoup compensation if restate F/S - Clawback provision