LESSON 3 - - CORPORATE GOVERNANCE Flashcards
the system of rules, practices, and processes by which a company is directed and controlled, balancing the interests of stakeholders such as shareholders, management, customers, and the community.
corporate governance
What are the main elements involved in corporate governance?
action plans, internal controls, performance measurement, and corporate disclosure.
What impact can bad corporate governance have on a company?
Bad corporate governance can cast doubt on a company’s reliability, integrity, and transparency, potentially harming its financial health.
What does governance specifically refer to?
the set of rules, controls, policies, and resolutions put in place to dictate corporate behavior.
How do proxy advisors and shareholders relate to corporate governance?
Proxy advisors and shareholders are stakeholders who indirectly affect governance but are not part of the governance system itself.
Why is corporate governance important to investors?
Corporate governance shows a company’s direction and business integrity, helping to build trust with investors and the community, thus promoting financial viability.
What is an example of how companies communicate their corporate governance?
Companies like Apple Inc. communicate their corporate governance on their investor relations site, outlining their executive team, board of directors, and governance documents like bylaws and articles of incorporation.
What are the expectations of shareholders regarding corporate governance?
Shareholders expect companies to not only be profitable but also demonstrate good corporate citizenship through environmental awareness, ethical behavior, and sound corporate governance practices.
How does good corporate governance benefit companies?
Good corporate governance creates a transparent set of rules and controls, aligning incentives among shareholders, directors, and officers, and promoting long-term financial health
- Has the vital role of overseeing the company’s management and business strategies to achieve long-term value creation. Monitoring and evaluating the CEO’s performance, and overseeing the CEO succession planning process are some of the most important functions of the board.
BOARD OF DIRECTORS
Effective directors are ________, but not managers, of business operations. They exercise vigorous and diligent oversight of a company’s affairs, including key areas such as strategy and risk, but they do not manage or micromanage — the company’s business by performing or duplicating the tasks of the CEO and senior management team
DILIGENT MONITORS
TRUE OR FALSE: in some areas (such as the relationship with the outside auditor and executive compensation), the board has a direct role instead of an oversight role.
TRUE
Led by the CEO, is responsible for setting, managing and executing the strategies of the
company, including but not limited to running the operations of the company
MANAGEMENT
Management’s responsibilities
strategic planning, risk management
and financial reporting
TRUE OR FALSE: effective management focuses more on quick profits rather than long-term goals
FALSE
Invest in a corporation by buying its stock and receive economic benefits in return.
SHAREHOLDERS
TRUE OR FALSE: Shareholders are not involved in the day to-day management of business operations,
but they have the right to elect representatives (directors) and to receive information
material to investment and voting decisions.
TRUE
TRUE OR FALSE: Shareholders should expect corporate boards and managers to act as temporary stewards of their investment in the corporation
FALSE
who selects the CEO
board of directors
TRUE OR FALSE: shareholders should can use the public companies in which they
invest as platforms for the advancement of their personal agendas or for the promotion
of general political or social causes.
FALSE
Responsibilities of BOARD OF DIRECTORS (10)
SSA SFA RRNO
- Selecting the CEO
- Setting the “tone at the top.”
- Approving corporate strategy and monitoring the implementation of strategic plans
- Setting the company’s risk appetite, reviewing and understanding the major risks, and
overseeing the risk management processes - Focusing on the integrity and clarity of the company’s financial reporting and other
disclosures about corporate performance. - Allocating capital
- Reviewing, understanding, and overseeing annual operating plans and budgets.
- Reviewing the company’s plans for business resiliency.
- Nominating directors and committee members, and overseeing effective corporate governance
- Overseeing the compliance program.
