1. What is the primary goal of corporate governance?
To create a balance of power-sharing among shareholders, directors, and
management to enhance
... [Show More] shareholder value and protect the interests of other
stakeholders.
2. What is the primary mission of a public company?
To create sustainable and enduring shareholder value.
3. What is the role of a corporate governance gatekeeper?
To align management’s interests with those of long-term shareholders and to
protect investors from misleading financial information published in public
filings.
4. Corporate governance reforms and best practices require the establishment of
what four key gatekeepers to deal with the perceived agency problems of
asymmetric information between management and investors and to improve the
quality of public financial information?
(1) Independent and competent board of directors; (2) independent and competent
external auditor; (3) objective and competent legal counsel; and (4) objective and
competent financial advisors and investment bankers.
5. How does an effective corporate governance structure improve investor
confidence?
It ensures corporate accountability, enhances the reliability and quality of public
financial information, and enhances the integrity and efficiency of the capital
market.
6. What is the primary intent of corporate governance reforms?
To improve:
· The reliability, integrity, transparency, and quality of financial reports.
· The effectiveness of internal controls over financial reporting and related risk
management assessment.
· The credibility of the external audit function.
· The independence and objectivity of other gatekeepers such as legal counsel
and financial analysts.
· Shareholder monitoring and democracy.
7. What benefits are obtained by the proper implementation of SOX?
· Improved corporate governance.
· Enhanced quality, reliability, and transparency of financial information.
· Improved audit objectivity and effectiveness in lending credibility to
published financial statements.
8. How can the board of directors influence the corporate culture?
· Set an appropriate “tone at the top,” promoting personal integrity and
professional accountability.
· Reward high-quality and ethical performance.
· Discipline poor performance and unethical behavior.
· Maintain the company’s high reputation and stature in the industry and the
business community.
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9. What is the intention of organizational codes of business ethics and conduct?
Codes of business ethics and conduct are intended to govern behavior, but they
cannot substitute for moral principles, culture, and character.
10. Corporate governance depends on what three practices to be effective?
· Compliance with state and federal statutes.
· Compliance with listing standards.
· Implementation of best practices suggested by investor activists and
professional organizations.
11. Why is there no universal definition of corporate governance?
The scope covers a vast array of distinct economic phenomena and it is often
described from a shareholder’s view.
12. How have SOX provisions, SEC-related rules, and listing standards influenced
the corporate governance structure?
· Auditors, analysts, and legal counsel who were not traditionally considered
components of corporate governance are now brought into the realm of
internal governance as gatekeepers.
· The legal status and fiduciary duty of company directors and officers have
been more clearly defined and significantly enhanced.
· Certain aspects of state corporate law were preempted and federalized.
13. What business entities are currently affected by SOX?
SOX applies equally to and is intended to benefit all publicly traded companies,
although many provisions are also relevant to private and not-for-profit
organizations.
14. What is the difference between a shareholder and a stakeholder?
Shareholders are individuals or groups who are traditionally the primary users of
the company’s financial reports, which reflect the company’s financial condition
and the results of operations. They also have greater rights of involvement with
decisions and monitoring of a company. Stakeholders are individuals or groups,
including shareholders, creditors, customers, employees, suppliers, competitors,
governmental entities, environmental agencies, and social activists, who affect the
company’s strategic decisions, operations, and performance.
15. What are the primary differences between financial reporting and corporate
accountability reporting?
Financial Reporting Corporate Accountability Reporting
· Legal requirement. · Not a legal requirement.
· Prepared based on a set of generally
accepted accounting principles and
standards.
· No single set of standards which are
widely agreed upon.
· Audit is required. · No mandatory assurance report.
· Guidelines specify the type and
level of assurance.
· No guidelines specify the type and
level of assurance.
· Prepared primarily for shareholders. · Provided to a broad range of
stakeholders with different and
often competing interests. [Show Less]