Topic 2 - Corporate Governance Flashcards

1
Q

What is corporate governance?

A

Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled.

Example sentence: The board of directors plays a crucial role in corporate governance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the main goal of corporate governance?

A

To ensure that a company acts in the best interests of its shareholders and stakeholders.

Additional information: Corporate governance aims to balance the interests of various stakeholders.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the role of the board of directors in corporate governance?

A

The board of directors oversees management and ensures the company is operating in the shareholders’ best interests.

Example sentence: The board of directors is responsible for approving major strategic decisions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the primary responsibility of shareholders in corporate governance?

A

Shareholders provide capital and have the right to vote on significant matters, such as electing board members.

Example sentence: Shareholders can exercise their voting rights at annual general meetings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is an independent director?

A

An independent director is a board member who does not have a material relationship with the company and can provide unbiased oversight.

Example sentence: Independent directors are essential for ensuring transparency and accountability.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the agency problem in corporate governance?

A

The agency problem arises when managers act in their own interests rather than in the interests of shareholders.

Example sentence: Addressing the agency problem requires aligning the incentives of managers with those of shareholders.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is executive compensation?

A

Executive compensation includes salary, bonuses, stock options, and other incentives given to top executives to align their interests with those of shareholders.

Example sentence: Executive compensation packages are designed to attract and retain top talent.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are fiduciary duties in corporate governance?

A

Fiduciary duties include the obligation of directors and officers to act in good faith, with care, and in the best interests of the company and its shareholders.

Example sentence: Breach of fiduciary duties can result in legal consequences for directors and officers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the purpose of a shareholder meeting?

A

A shareholder meeting allows shareholders to vote on key issues such as board elections, mergers, and executive compensation.

Example sentence: Shareholder meetings are an opportunity for investors to engage with company management.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a proxy vote?

A

A proxy vote is a vote cast by one person on behalf of a shareholder who is unable to attend the shareholder meeting.

Example sentence: Proxy votes are commonly used in large publicly traded companies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the key elements of good corporate governance?

A

Accountability, transparency, fairness, and responsibility.

Example sentence: Good corporate governance practices enhance trust and confidence among stakeholders.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is corporate social responsibility (CSR) in governance?

A

CSR refers to a company’s efforts to operate in a socially responsible manner, balancing profit with societal and environmental concerns.

Example sentence: CSR initiatives can contribute to long-term sustainable growth.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the role of audit committees in corporate governance?

A

Audit committees oversee financial reporting, ensure the integrity of financial statements, and liaise with external auditors.

Example sentence: Audit committees play a critical role in ensuring financial transparency and accuracy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the role of a risk management committee?

A

The risk management committee identifies, monitors, and mitigates risks that could affect the company’s performance or reputation.

Example sentence: Effective risk management is essential for safeguarding shareholder value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the role of a nomination committee?

A

The nomination committee is responsible for identifying and recommending candidates for the board of directors.

Example sentence: Nomination committees help ensure that the board comprises qualified individuals.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the role of a compensation committee?

A

The compensation committee oversees executive pay and ensures that compensation aligns with company performance and shareholder interests.

Example sentence: Compensation committees play a key role in linking pay to performance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is dual-class share structure?

A

A dual-class share structure gives different voting rights to different classes of shares, often allowing founders or insiders to retain control.

Example sentence: Dual-class share structures can raise concerns about unequal voting power.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a poison pill strategy?

A

A poison pill is a defensive strategy used by a company to thwart hostile takeovers by making the company less attractive to the acquirer.

Example sentence: Poison pills are designed to protect shareholder interests.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is shareholder activism?

A

Shareholder activism occurs when shareholders attempt to influence company management and decision-making, often to improve financial performance.

Example sentence: Shareholder activism can lead to changes in corporate strategy and governance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a hostile takeover?

A

A hostile takeover is an acquisition attempt by an external party that is opposed by the company’s management and board of directors.

Example sentence: Hostile takeovers can result in significant changes in company ownership and control.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is a stewardship code?

A

A stewardship code is a set of principles guiding institutional investors on how to engage with and hold companies accountable for good governance.

Example sentence: Stewardship codes promote responsible investment practices.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is a shareholder resolution?

A

A shareholder resolution is a proposal made by shareholders that is voted on at the company’s annual general meeting.

Example sentence: Shareholder resolutions can address various governance and strategic issues.

23
Q

What is the difference between shareholders and stakeholders?

A

Shareholders own shares in the company, while stakeholders are anyone affected by the company’s actions, including employees, customers, and the community.

Example sentence: Stakeholders have a broader interest in the company beyond financial returns.

24
Q

What is transparency in corporate governance?

A

Transparency refers to the availability of accurate and timely information to shareholders and stakeholders about the company’s operations and financial performance.

Example sentence: Transparency is essential for building trust and credibility with stakeholders.

25
Q

What is the separation of ownership and control?

A

The separation of ownership and control refers to the division between shareholders (owners) and managers (controllers) of a company.

Example sentence: The separation of ownership and control can lead to agency conflicts.

26
Q

What are internal controls in corporate governance?

A

Internal controls are procedures and policies put in place to ensure the accuracy of financial reporting and compliance with laws and regulations.

Example sentence: Strong internal controls help prevent fraud and errors in financial reporting.

27
Q

What is the role of external auditors in corporate governance?

A

External auditors independently review the company’s financial statements to ensure accuracy and compliance with accounting standards.

Example sentence: External auditors provide an independent assessment of a company’s financial health.

28
Q

What is corporate accountability?

A

Corporate accountability means that a company is responsible for its actions and must answer to its stakeholders.

Example sentence: Corporate accountability requires transparency and ethical behavior.

29
Q

What is ethical leadership in corporate governance?

A

Ethical leadership involves company leaders acting in a way that is consistent with moral values, integrity, and fairness.

Example sentence: Ethical leadership sets the tone for ethical behavior throughout the organization.

30
Q

What are minority shareholder rights?

A

Minority shareholder rights protect shareholders with a smaller ownership stake from unfair treatment by majority shareholders or management.

Example sentence: Minority shareholder rights ensure equitable treatment for all investors.

31
Q

What is the role of corporate governance codes?

A

Corporate governance codes provide guidelines for best practices in governance to ensure accountability, fairness, and transparency.

Example sentence: Corporate governance codes help companies establish effective governance structures.

32
Q

What is the role of institutional investors in corporate governance?

A

Institutional investors, such as pension funds and mutual funds, can influence corporate governance through voting and engagement with management.

Example sentence: Institutional investors play a key role in shaping corporate governance practices.

33
Q

What is a governance rating?

A

A governance rating assesses the quality of a company’s corporate governance practices, often used by investors to evaluate potential investments.

Example sentence: Governance ratings help investors assess the risk associated with a particular company.

34
Q

What is a corporate governance framework?

A

A corporate governance framework is the structure through which the company’s objectives are set, and the means of attaining those objectives are monitored.

Example sentence: A robust corporate governance framework is essential for ensuring effective oversight and management.

35
Q

What is board diversity in corporate governance?

A

Board diversity refers to having a range of backgrounds, perspectives, and experiences represented on the board of directors.

Example sentence: Board diversity enhances decision-making and governance effectiveness.

36
Q

What is a golden parachute?

A

A golden parachute is a large severance package provided to executives if they lose their job due to a

Example sentence: Golden parachutes are controversial due to their perceived excessive payouts.

37
Q

What is a corporate governance framework?

A

A corporate governance framework is the structure through which the company’s objectives are set, and the means of attaining those objectives are monitored.

Example sentence: The board of directors plays a key role in establishing and maintaining the corporate governance framework.

38
Q

What is board diversity in corporate governance?

A

Board diversity refers to having a range of backgrounds, perspectives, and experiences represented on the board of directors.

Additional information: Board diversity is seen as beneficial for decision-making and overall governance effectiveness.

39
Q

What is a golden parachute?

A

A golden parachute is a large severance package provided to executives if they lose their job due to a takeover or merger.

Example sentence: The CEO negotiated a generous golden parachute in his employment contract.

40
Q

What is Say on Pay?

A

Say on Pay is a policy that gives shareholders the right to vote on executive compensation packages.

Example sentence: Shareholders exercised their Say on Pay rights to express concerns about excessive executive salaries.

41
Q

What is the role of the CEO in corporate governance?

A

The CEO is responsible for managing the company’s operations and implementing board policies.

Additional information: The CEO is accountable to the board of directors and shareholders for the company’s performance.

42
Q

What is shareholder democracy?

A

Shareholder democracy refers to the rights of shareholders to vote on important corporate matters, influencing the company’s direction.

Example sentence: The annual meeting is a key opportunity for shareholder democracy to be exercised.

43
Q

What is a governance risk?

A

Governance risk is the potential for poor corporate governance practices to negatively impact a company’s performance and reputation.

Additional information: Governance risk can lead to legal issues and loss of investor confidence.

44
Q

What is a staggered board?

A

A staggered board is a structure in which only a portion of the board of directors is elected each year, making hostile takeovers more difficult.

Example sentence: The staggered board’s rotation schedule ensures continuity in leadership.

45
Q

What is insider trading?

A

Insider trading occurs when individuals with access to non-public information about a company trade its stock to gain a financial advantage.

Example sentence: The SEC investigates cases of suspected insider trading to maintain market integrity.

46
Q

What is the business judgment rule?

A

The business judgment rule protects directors from liability if they make decisions in good faith and in the best interests of the company.

Additional information: Courts typically defer to the business judgment rule when evaluating directorial decisions.

47
Q

What is cumulative voting?

A

Cumulative voting allows shareholders to allocate their votes to one or more candidates, helping minority shareholders influence board elections.

Example sentence: Cumulative voting can give smaller shareholders a stronger voice in the selection of directors.

48
Q

What is the role of corporate bylaws?

A

Corporate bylaws define the rules governing the internal management of a company, including the roles of directors and officers.

Example sentence: The board approved amendments to the corporate bylaws to enhance governance practices.

49
Q

What is an ESG score?

A

An ESG score measures a company’s performance in environmental, social, and governance aspects, used by investors to assess sustainability.

Additional information: ESG scores are becoming increasingly important for socially responsible investing.

50
Q

What is a clawback provision?

A

A clawback provision allows a company to reclaim executive compensation if it was based on incorrect financial information or misconduct.

Example sentence: The board invoked the clawback provision due to the CEO’s involvement in a financial scandal.

51
Q

What is the role of whistleblower policies in governance?

A

Whistleblower policies protect individuals who report unethical or illegal activities within the company from retaliation.

Example sentence: The company’s strong whistleblower policies encourage employees to speak up about misconduct.

52
Q

What is a shareholder derivative suit?

A

A shareholder derivative suit is a legal action brought by shareholders on behalf of the company against insiders, such as directors or executives, for breach of fiduciary duty.

Additional information: Shareholder derivative suits aim to hold company insiders accountable for actions that harm the company and shareholders.

53
Q

What is a governance audit?

A

A governance audit evaluates a company’s governance practices to ensure they align with legal requirements and best practices.

Example sentence: The external auditor conducted a thorough governance audit to identify areas for improvement.