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Bus&Soc CH4

Bus&Soc 8th ed

TermDefinition
agency problems a condition resulting from separation of ownership from control, in which the interest of the manager (the "agent" with the responsibility of representing the owners' best interests) are not aligned with the interests of the shareholders
audit committee a board committee responsible for assessing the adequacy of internal control systems and the integrity of financial statements
backdating (of stock options) a stock option benefit, in which an individual may purchase stock at an earlier date's price, resulting in an immediate and guaranteed wealth increase
board of directors a small group of shareholders elected to govern and oversee the management of the business
bullet-dodging the delaying of a stock option grant until right after bad news, when the stock's value will be low
business judgement rule legal rule that holds that courts should not challenge board members who act in good faith, making informed decisions that reflect their companies' best interests instead of their own self-interests
charter the document issued by the state that gives the corporation the right to exist and stipulates the basic terms of its existence
classified boards boards that elect their members in staggered terms
clawback provisions mechanisms that enable a company to recoup compensation funds, typically in the even of a financial restatement or executive misbehavior
compensation committee a board committee, ideally composed of outside directors, responsible for evaluating executive performance and recommending the terms and conditions of employment
Private Securities Litigation Reform Act of 1995 act intended to rein in excessive levels of private securities litigation
Sarbanes-Oxley Act also known as SOX, Sarbox, of the Accounting Reform and Investor Protection Act of 2002, an act that amends the securities laws to provide better protection to investors in public companies by improving the financial reporting of companies
separation of ownership from control a condition of widely dispersed ownership of shares, in which ownership of the company is separated from control of the company
shareholder activism phenomenon of public shareholders organizing and defending their interests against company management
Created by: maclu24