Introduction To Corporare Governance Flashcards
What is the root of corporate governance problems?
Self interested executives
What is the agency problem?
Management takes self-interested actions that are not in the interest of shareholders?
What are the agency costs?
The cost of the malicious actions of the management that shareholders bear
What are some examples of agency costs?
Insufficient time and effort on building shareholder value
Inflanted compensation
Manipulating financial results
Excessive risk taking to increase short-term results
Failure to groom successors
Pursuing uneconomic acquisitions
Thwarting hostile takeover to protect job
What is moral salience?
Knowledge that certain actions are inherently wrong even if they are left unpunished.
What is corporate governance used for?
It is used for controlling self-interested executives
