Board roles, agency problems, shareholder rights, executive pay and Sarbanes-Oxley.
40 cards · basic cards · AI-written, checked twice. Edit anything.
- What is the primary responsibility of the board chair?
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To lead board meetings, set the agenda, and oversee the effective functioning of the board.- Define an independent director.
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A board member with no material business or personal ties to the company or its management.- Distinguish inside directors from outside directors.
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Inside directors are company employees or executives; outside directors are external and typically hold no operational role.- What is the primary role of an audit committee?
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To oversee financial reporting accuracy, internal controls, and the work of external auditors.- What does a compensation committee do?
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Approves and oversees executive pay, benefits, and incentive plans for senior management.- What is the function of a nominating or governance committee?
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To recruit and recommend board candidates, oversee board performance, and guide corporate governance practices.- What does CEO duality refer to?
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When one person serves as both chief executive officer and board chair.- Define the agency problem.
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The conflict of interest arising when managers (agents) pursue their own interests rather than those of shareholders (principals).- What does separation of ownership and control mean?
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Shareholders own the company but do not manage it day-to-day; managers control operations but may not own significant equity.- What are agency costs?
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Expenses incurred to monitor and align management behavior with shareholder interests, plus losses from remaining conflicts.- What is executive entrenchment?
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When a manager accumulates power and implements takeover defenses that shield them from removal, prioritizing job security over shareholder value.- Name two board mechanisms that monitor management.
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Board committees, regular financial reporting, audits, and performance reviews of the CEO.- What voting right do common shareholders typically have?
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The right to vote on major matters such as board member elections, mergers, and charter amendments, usually on a one-share-one-vote basis.- What is cumulative voting?
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A voting method allowing shareholders to concentrate all votes on one or a few director candidates, increasing minority representation odds.- Define a proxy fight.
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An attempt by an investor or group to gain board control by soliciting shareholder proxies to vote their shares against incumbent directors.
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