ADM 1301 Lecture : Chapter12.docx

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silvermule339

21 Feb 2012

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Governing system: the process, structures, and relationships through which decisions are made. Corporate governance: the processes, structures and relationships through which the shareholders, as represented by a board of directors, oversees the activities of the business enterprise. The organisation for economic cooperation and development (oecd) Board of directors: a group of individuals elected by shareholders to govern or oversee the corporations affairs. Fiduciary duties: obligations owned by directors to shareholders that are prescribed by laws or regulations. Board membership y must be independent or unrelated director y cannot have bias y slowly intergrading women and minorities y (see pg250 for definition: independent director) Board structure y usually 10-15 members y common committees include: audit, hr, governance, finance, pension, strategic planning, compensation, nominating. Evaluating board and director performance y hard to implement y directors find it unnecessary y could expose weaknesses in the governance process and be embarrassing. Improved governance = more profitable y y good policies = good results.

Related Questions

Explain the relationships among corporate shareholders, boards of directors, and managers? Why has such a system of governance proven to be essential for efficiency?

1) There exists a universally agreed definition of Corporate Governance:

2) The two primary competing views of corporate governance are:

Shareholder vs Agent

Principle vs Agent

Shareholder vs Stakeholder

3) European companies tend to adopt the stakeholder view of governance, while Anglo-American companies tend to focus on the shareholder view

4) Shareholders appoint the management board

5) Corporate governance is best understood as a set of fiduciary and managerial responsibilities

6) Shareholders elect ______________, who appoint ______________, to run corporations

Directors, Mangers

Managers, Directors

Agents, Principles

Chairman, CEOâs

7) The principle/agent problem involves aligning management interests with those of the shareholders

8) Shareholders get their return on investment from the residual (profits) only after all other stakeholders have been paid:

9) Large shareholders (those owning more shares) have more influence over a company than smaller ones

10) The term âinstitutional investorâ includes:

Banks, trust funds, pension funds

Employee representatives, government representatives, unions

Company management and employees that own shares

11) According to the text, auditors, bankers, credit rating agencies and analysts are often referred to as:

Consultants

Gatekeepers

Advisors

None of the above

12) Agency theory:

Explains the relationship between management and employees

Explains the relationship between principles and agents

Explains how sports stars make huge amounts of money

13) The âGerman modelâ of governance in large companies includes:

A âtwo-tierâ governance/board structure

A âsingle-tierâ governance/board structure

A combined board consisting of management, shareholder representatives and other stakeholders

None of the above

14) In a two tiered board structure:

The management board appoints the supervisory board

The supervisory board appoints the management board

The CEO reports to shareholders

The Chairperson reports to the CEO

15) Japanese board structures are unique in that:

The boards consist of a large number of âinsidersâ such as management

Banks often have representatives sit on the boards of their customers

Both A and B

The owner- ship ratio has been altered to Simon holding 20% and Herb III 15% of shares in Owner. All shares of the Owner bear equal voting rights. The rest of shareholding is dispersed and held by multiple share- holders, none individually owning more than 5% of equity. Simon has a contractual right to appoint 2 out of 5 members of the Board of Directors of Owner and the Board approves the strategic operational and ï¬nancial decisions of the company. Discuss the nature of the relations of Simon and Herb III with Owner

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ADM 1301 Lecture : Chapter12.docx

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