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Flashcards in Corporate Governance Deck (18)
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1
Q
What is the primary duty of the board of directors?
A
To monitor management behavior.
2
Q
What is the responsibility of the Nominating or Corporate Governance Committee of the board of directors?
A
Oversees the board

Responsible for hiring new CEO
3
Q
What is the responsibility of the audit committee of the board of directors?
A
The audit committee appoints and oversees the external auditor.
4
Q
What is the duty of the compensation committee of the board of directors?
A
The compensation committee handles the CEO's compensation package.
5
Q
What does the NYSE and NASDAQ require of the board of directors?
A
They require the board to be independent.
6
Q
What is the main goal in an executive compensation package?
A
The package should ensure that the goals of management should match those of the shareholders.
7
Q
How can an executive compensation package ensure that goals of management align with those of shareholders?
A
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.
8
Q
Which influences help mold the direction that management takes?
A
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
9
Q
What is shirking?
A
When management doesn't act in the best interest of shareholders.

It can be alleviated by tying compensation to stock performance or company profit.
10
Q
What requirements are imposed on a public company under Sarbanes-Oxley?
A
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.
11
Q
What characteristics are promoted by the COSO framework on Internal Control?
A
Reliable financial reporting

Effective and efficient operations

Compliance
12
Q
What are the elements of the control environment?
A
Integrity & Ethics
Competence
The Board of Directors & Audit Committee
Management's Operating Style
Organizational Structure
Authority & Roles of Responsibilities
HR Policies
13
Q
What are control activities?
A
A component of Internal Control that includes actions being taken to promote the control environment.
14
Q
What are the basic elements of Internal Control?
A
Control Environment
Risk Assessment
Control Activities
Information and Communication
Monitoring
15
Q
What is the significance of the Information and Communication aspect of Internal Control?
A
Management must have access to relevant and timely information to make good decisions.
16
Q
How does Monitoring affect Internal Control?
A
Internal Control activities must be constantly monitored and evaluated for effectiveness.
17
Q
What activities does the COSO framework for enterprise risk management include?
A
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
18
Q
What are possible responses to risk under the COSO framework for enterprise risk management?
A
Avoid or Reduce

Share or Accept