Flashcards in Corporate Governance Deck (18):
To monitor management behavior.
Oversees the board
Responsible for hiring new CEO
The audit committee appoints and oversees the external auditor.
The compensation committee handles the CEO's compensation package.
They require the board to be independent.
The package should ensure that the goals of management should match those of the shareholders.
Executive compensation should create an incentive for management to govern in a shareholder-friendly way that doesn't sacrifice the long-term success of the enterprise for short-term gain.
They range from internal (Board of Directors- Audit Committee- Internal Control) to external (Creditors- SEC- IRS)
These influences should not be tainted by undue influence from management or have financial ties to management such as compensation-related duties
When management doesn't act in the best interest of shareholders.
It can be alleviated by tying compensation to stock performance or company profit.
Management must submit a report on the effectiveness of Internal Control in the 10K.
Management must disclose significant Internal Control deficiencies.
CEO/CFO must certify that the financial statements comply with securities laws and fairly present the financial condition of the company.
Reliable financial reporting
Effective and efficient operations
Integrity & Ethics
The Board of Directors & Audit Committee
Management's Operating Style
Authority & Roles of Responsibilities
A component of Internal Control that includes actions being taken to promote the control environment.
Information and Communication
Management must have access to relevant and timely information to make good decisions.
Internal Control activities must be constantly monitored and evaluated for effectiveness.
Identifies Risk Factors
Promotes Risk Response Decisions
Compares Management Risk vs. Shareholder Goals
Aids in evaluating opportunities
Promotes Quicker Capital movement
Does NOT eliminate all risk