Term
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Definition
| refers to the relationship among the board of directors, top management and shareholders in determining the direction and performance of the corporation |
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Term
| Corporate Governance consists of...(3) |
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Definition
-who makes decisions for corporation and how these people are selected
-how corporate officials are held accountable for their actions and required to behave
-seeks to align efficiency with other goals so managaement has proper incentives to produce best results for firm |
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Term
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Definition
| -corporations governed by state not federal law |
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Term
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Definition
| those who purchase stock in a companu |
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Term
| manager-stockholder relationship |
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Definition
| manager strategizes while shareholders bear risk |
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Term
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Definition
| agency relationship exists when shareholders hire managers |
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Term
| Board of Directors elected by... |
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Definition
| shareholders and are to represent their best interests |
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Term
| 5 reforms for board of directors |
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Definition
-more stringent definition of independent director
-term limits (no contract with company, cannot be on board of benefitting non profit, no more than 3 memberships. none interlock)
-chairman is outside director
-eliminate pensions and stock options for directors
-outside directors meet without management present |
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Term
| Mangers more concerned about _____ over _____ |
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Definition
| size and market over income |
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Term
| employee voice in corporate governance |
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Definition
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Term
| mutual funds, insurance companies, pension funds, and banks now own ___% of all corporation stock |
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Definition
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Term
| most effective watchdogs of corporate behavior |
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Definition
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Term
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Definition
CEOs+CFOs verify accuracy of reports
disclose material changes in company financial condition in plain english
CEOs give up gains based on false reporting
Executives who lie face fines and prison
executives must disclose stock sales within two days
executives cannot receive loans from their companies
companies myst allow employees to diversify pension plans after three years
shareholders must approve stock option plans
IBs cannot retaliate against analysts who criticize clients
Outside Auditors cannot serve as consultants and audits subject to new oversight board who can discipline
lead partners rotate every 5 years |
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Term
| Sarbanes Oxley-Board of Directors |
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Definition
Majority of directors must be independent
Audit committee must be outside directors and approve auditors, audit plans, and control pension plans |
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Term
| 4 Types of governance systems |
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Definition
market-based-USA, UK
corporate-Germany, Italy
state-guidedJapan, France
crony based-Russia, Ukraine |
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Term
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Definition
| government aviods intervention, prefers low taxation. Strong capital markets |
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Term
| Corporate Governance system |
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Definition
government prepared to intervene, but banks own much of corporate capital
social objectives import
financial markets are secondary |
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Term
| State-Guided Governance system |
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Definition
| strong state intervenes systematically, with tendency to trade protection or mercantalist practives. Possibility of large state owned sector |
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Term
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Definition
| close business-governance links with tendency to monopolize and high income differentials |
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Term
| Corporate Governance in Germany |
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Definition
public firms have dominant share holder, often a bank
medium-large firm are two tiered |
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Term
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Definition
| monitors and controls managerial decisions |
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Term
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Definition
chooses Vorstand
Aufsichtsrat is chosen by employees, union members, and shareholders |
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Term
| Corporate Governance in Japan |
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Definition
| powerful government intervention and passive shareholders. absence of external market for corporate control |
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Term
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Definition
| most shares held by pension funds, and banks do not own shares. big companies are limited. Hostile takeovers limited |
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Term
| Advantages/Disadvantages of UK Governance |
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Definition
Advan-transparent and responsive
Disadvan-encourages short-termisma nd mergers do not always work |
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Term
| Corporate Public Affairs Program has 4 elements |
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Definition
1. issue management-identify issues, evaulate impact, and formulate response
2. government relations-maintains representatives in Washington and states capitals to explain views on pending proposals
3. public communications-provides informationa bout the firm and its views to the public, external groups
4. community affairs-charitable support, employee invovlement |
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Term
| 4 levels of social responsibility |
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Definition
economic
legal
ethical
philanthropic |
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Term
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Definition
| carefully though out reuls of conduct that guide decision making |
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Term
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Definition
Degree that social resonsibility is met through
1. sustained economic performance
2. rigorous complaince
3. Ethical actions behind elgal requirements
4. voluntary contributions that advance reputation |
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