Corporate Governance Exam
What is corporate governance in a general definition? - answer the set of controls,
processes, and procedures by which firms are managed (defines the appropriate rights,
roles, and responsibilities of management, board of directors, and shareholders)
what does good corporate governance ensure? - answer1. the board of directors
protects shareholder interests
2. the firm acts lawfully and ethically in dealings with shareholders
3. the rights of shareholders are protected and shareholders have a voice in
governance
4. the board acts independently from management
5. proper procedures and controls cover management's day-to-day operations
6. the firm's financial, operating, and governance activities are reported to shareholders
in a fair, accurate, and timely manner
while reviewing firm policy regarding election of the board, investors should consider
what factors? - answer1. whether there are annual elections or staggered multiple-year
terms (a classified board)
2. whether the board filled a vacant position for a remaining term without shareholder
approval
3. whether shareholders can remove a board member
4. whether the board is the proper size for the specific facts and circumstances of the
firm
what is a classified board when taking about the board of directors? - answeracts as a
takeover defense, a structure for a board of directors in which a portion of the directors
serve for different term lengths, depending on their particular classification
what makes a board independent? - answerif their decisions are not controlled or
biased by management of the firm
in order to remain unbiased, the board of directors must not have any relationship with
what entities? - answer1. the firm and its subsidiaries, including former employees,
executives, and their families
2. individuals or groups, such as a shareholder with a controlling interest, which can
influence the firm's management
3. executive management and their families
4. the firm's advisors, auditors, and their families
5. any entity which has a cross directorship with the firm
What is corporate governance in a general definition? - answer the set of controls,
processes, and procedures by which firms are managed (defines the appropriate rights,
roles, and responsibilities of management, board of directors, and shareholders)
what does good corporate governance ensure? - answer1. the board of directors
protects shareholder interests
2. the firm acts lawfully and ethically in dealings with shareholders
3. the rights of shareholders are protected and shareholders have a voice in
governance
4. the board acts independently from management
5. proper procedures and controls cover management's day-to-day operations
6. the firm's financial, operating, and governance activities are reported to shareholders
in a fair, accurate, and timely manner
while reviewing firm policy regarding election of the board, investors should consider
what factors? - answer1. whether there are annual elections or staggered multiple-year
terms (a classified board)
2. whether the board filled a vacant position for a remaining term without shareholder
approval
3. whether shareholders can remove a board member
4. whether the board is the proper size for the specific facts and circumstances of the
firm
what is a classified board when taking about the board of directors? - answeracts as a
takeover defense, a structure for a board of directors in which a portion of the directors
serve for different term lengths, depending on their particular classification
what makes a board independent? - answerif their decisions are not controlled or
biased by management of the firm
in order to remain unbiased, the board of directors must not have any relationship with
what entities? - answer1. the firm and its subsidiaries, including former employees,
executives, and their families
2. individuals or groups, such as a shareholder with a controlling interest, which can
influence the firm's management
3. executive management and their families
4. the firm's advisors, auditors, and their families
5. any entity which has a cross directorship with the firm
