Intro To Corporate Governance And Other ESG Considerations Flashcards
Define corporate governance
The system of internal controls and procedures in which a firm is managed. It provides right, roles and responsibilities of varies groups in an organization. Used to help decrease the conflict between insiders and external shareholders.
Employee board representative may be a significant portion of what type of directors.
Non executive directors
Differentiate between a standard board and a staggered board of directors and what’s its function in protecting the managers of a firm.
With standard elections the whole board is replaced in a single year. Whereas with a staggered board some members are elected every year, staggered board protects and makes hostile takeover more costly. Staggered boards are less used.
Identify the board of directors responsibilities
They are not responsible for the day to day activities
Selecting, firing and identifying the compensation for senior managers
Setting the strategic direction for the company
Approving capital structure changes
Reviewing company performance
Monitoring the first internal controls
Ensuring the quality of the firms financial reporting
What is the only committee that all firms must have and what is the other committee needed by financial firms
All firms must have an audit committee and financial firms must have both and audit and risk committee
What are the most used techniques in a hostile takeover
Tender offer and proxy fight
Factors relevant to the analysis of corporate governance and stakeholder management
Company ownership and voting structure Composition of a company’s board Management incentives and remuneration Composition of shareholders Relative strength of shareholders rights Management of long term risks
When does using ESG factors not violate the managers fiduciary responsibilities
Determining the risk and expected return of securities and choosing between two investments with similar financial characteristics.
Identify the relative/best in class approach
Identify the best companies within each industry with the best ESG practices
What is the full integration technique in ESG investment
Including ESG factors in fundamental analysis such as estimating the wacc and cash flows
The relationship between shareholders and managers is known as
The agency relationship or the principal agent relationship
Which stakeholder group benefits the most from excellence in the financial performance
Governments
Who should be most concerned about their legal liabilities among stakeholders
Directors
Could corporate governance be solely focused on the interest of its shareholders
Yes through the shareholder theory of corporate governance
What are stranded assists and can they result from inadequate internal controls or ESG factors
Stranded assets are unused or devalued assets that are no longer in use due to changes in the economy, no
