Upgrade to remove ads
Only $2.99/month

CH. 12 Corporate Governance

Terms in this set (14)

Shareholder Capitalism
Shareholders- the providers of the necessary risk capital and the legal owners of public companies - have the most legitimate claim on profits.
Shared Value Creation Framework
A model proposing that managers have a dual focus on shareholder value creation and value creation for society.
Corporate Governance
A system of mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.
Agency Theory
A theory that views the firm as a nexus of legal contracts.
Adverse Selection
A situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives.
Moral Hazard
A situation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party.
Board of Directors
The centerpiece of corporate governance, composed of inside and outside directors who are elected by shareholders.
Inside Directors
Board members who are generally part of the company's snore management team; appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.
Outside Directors
Board members who are not employees of the firm, but who are frequently senior executives from other firms of full time professionals.
CEO/Chairperson Duality
Situation where the CEO of a publicly traded company is also the chairperson of the board of directors.
Stock Options
An incentive mechanism to align the interests of shareholders and managers, by giving the recipient the right (but not the obligation) to buy a company's stock at a predetermined price sometime in the future.
Leveraged Buyout (LBO)
A single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private.
Poison Pill
Defensive provisions to deter hostile takeovers by making the target firm less attractive.
Business Ethics
An agreed-upon code of conduct in business, based on societal norms.
YOU MIGHT ALSO LIKE...