Chapter 2: Corporate Governance Requirements

Question 1

Agency problem

Answer 1

A situation in which agents do not represent the interests of principals. Also called agency theory and agency-principal problem.

Question 2

Lead director

Answer 2

This is the leader of the board’s independent directors. This position is often created when the CEO and the chair roles
are combined.

Question 3

Major Federal Standards

Answer 3

● Securities Act of 1933
● Securities Exchange Act of 1934
● Investment Company Act of 1940

Question 4

Stock Exchange Listing Requirements

Answer 4

NYSE Listed Company Manual (Section 303A.00 Corporate Governance Standards)
● Nasdaq Listing Rules (Section 5600. Corporate Governance Requirements)

Question 5

State Standards

Answer 5

Model Business Corporation Act

Question 6

List of legal duties only performed by the board

Answer 6

Amending charters or bylaws
… Adopting merger or consolidation agreements
… Recommending to stockholders the sale, lease, or exchange of all or substantially all of the company’s assets
… Recommending to stockholders the dissolution of the corporation
… Declaring dividends or issuing stock (unless expressly permitted by charter, bylaws, or resolution)

Question 7

Standing Committee

Answer 7

Standing committees, which are named in governing documents, have permanent status.

Question 8

List standing committee for public company

Answer 8

audit
nominating and governance
compensation

Question 9

The goal is a boardroom culture where

Answer 9

1. directors are engaged
2. all voices get heard
3. important questions get asked
4. healthy debate is experienced
5. solutions are enhanced by the range of viewpoints represented