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BEC 40
Corporate Governance, IC, ERM
| Question | Answer |
|---|---|
| articles of incorporation | 1) proposed name of the corporation and address 2.) purpose 3) powers 4.) registered agent 5.)name and address of incoporators 6.) no. authorized shares of stock |
| shareholders | elect board of directors, vote to amend articles of corporations, mergers, acquisitions, receive dividends, subscribe to stock, inspect the books, sue on behalf of the corporation |
| board of directors | 1) determine mission 2) select/ remove CEO 3)amend bylaws4)determine mgmt compensation 5) declare & pay dividends 6) acquisitions and capital structure 7)advise mgmt 8) governance 9) accurate financial reporting 10) risk management |
| business judgment rule | director not liable for errors in judgment providing the director acted in good faith, loyalty, due care |
| duty of loyalty | must but interest of the corporations before there personal interest |
| executive compensation | 1)base salary +bonuses 2) stock option 3) stock grants |
| base salary+ bonus | compensated based on performance ( accounting profit) ; can be manipulated or managed, too much focus on short term profits instead of maximizing the long term growth for SH |
| stock options | incentive to increase the stock price in the short term at the expense of long term value; may encourage mgmt. to take on too much risk |
| Stock grants | 1) Restricted stock- cannot be sold for a specific period 2) performance shares- stock if certain level of performance is met. |
| Balanced scorecard | compensation based on a variety of performance measures |
| Monitoring | 1) Board oversight- independence 2) Dodd- Frank requires disclosure of why/why not chairmain of the board is also a director 3) nominating/corporate governance committee; compensation committee, audit committee |
| Aduit committee | oversight of the external auditor; have a financial expert, certification by the CE/FO that they reviewed the financial reports filed with the SEC and responsible for internal controls ( SOX) ; must be independent for the NASDAQ and NYSE, SOX |
| COSO objectives | 1) reliability of reporting 2)efficiency and effectiveness of operations (3)compliance with applicable laws and regulations |
| COSO components | 1) control environment2) risk assessment3) control activites4) information and communication5) monitoring activities |
| Control environment | commitment to integrity, BOD independence from mgmt., reporting lines and appropriate authorities, competent individuals, accountability for internal control responsibilities |
| Risk assessment | mgmt’s process for identifying, analyzing, and responding to risk |
| Control activities | authrizations and approvals, verifications, physical controls, reconciliations, supervisory controls |
| Information & communication | |
| Monitoring | asesses whether each of the five components are present and functioning. 1) control baseline 2) change identification 3)change management 4) control revalidation/update |
| Internal control systems fail because | 1) not designed properly or implemented properly 2) environmental changes make the controls ineffective 3) the way the controls operate had changed making them ineffective |
| Classifications of internal controls | 1) preventative controls 2) detective controls 3) corrective controls 4) feedback controls 5) feed- forward controls |
| Enterprise Risk Management ( ERM) | 1) identification by mgmt. of events that have negative, positive, or both 2)identifying, assessing, prioritizing risk, determining risk responses, and monitoring risks |
| Components of ERM | 1) internal environment 2) objective setting3) event identification4) risk assessment 5) risk response 6) control activities 7) information and communication 8) monitoring |
Created by:
tsp7c
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