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36 terms

Business Ethics Now-Ch. 5

De. Adrew Ghillyer
STUDY
PLAY
Corporate Governance
The system by which business corporations are directed and controlled.
Board of Directors
A group of individuals who oversee governance of an organization. Elected by vote of the shareholders at the annual general meeting (AGM) the true power of the board can vary from institution to institution from a powerful unit that closely monitors the management of the organization to a body that merely rubber-stamps the decisions of the chief executive officer (CEO) and executive team.
Audit Committee
An operating committee staffed by members of the board of directors plus indedpendent or outside directors. The committee is responsible for monitoring the financial policies and procedures of the organization-specifically the accounting policies, internal controls, and the hiring of external auditors.
Compensation Committee
An operating committee staffed by members of the board of directors plus independent or outside directors. The committee is responsiblle for setting the compensation for the CEO and other senior executives. Typically, this compensation will consist of a base salary, performance bonus, stock options, and other perks.
Outside members
Where as inside members hold management positions in the company, _____ _____ do not.
Corporate governance committee
Committee (staffed by board members and specialists) that monitors the ethical performance of the corporation and oversees compliance with the company's internal code of ethics as well as any federal and state regulations on corporate conduct.
Comply or explain
A set of guidelines that reqire companies to abide by a set of operating standards or explain why they choose not to.
Compy or else
A set of guidelines that require companies to abide by a set of operating standards or face stiff financial penalties.
True
The King II report stated that successful governance requires and "inclusive" rather than an "exclusive" approach. (true/false)
True
The first step in a policy of disregarding the corporate governance model is the decision to merge the roles of CEO and chairperson of the board into one individual. (true/false)
Six steps to effective corporate governance
Create a climate of trust and candor; Foster a culture of open dissent; Mix up roles; Ensure individual accountability; and Let the board assess leadership talent.
Good Corporate governance examples
Seperate roles of chairman and CEO; Company maintenance of a roster of independent directors with flawless resumes; and maintenance of an audit committee consisting exclusively of nonexecutives.
True
A fiduciary responsibility is ultimately basesd on trust.
Three major oversight committees
Audit committee, Compensation committee, and corporate governance committee.
King I
Published in 1994, Mervyn King's report changed the emphasis on corporate governance from internal governance of corporate operations to practices that looked beyong the corporation itself and included its impact on the community at large.
King II
Released in 2004, formally recognized the need to incorporate all stakeholders and consider a triple bottom-line approach to corporate perfromance and profitability.
Comply or explain
The cadbury report argued for a guideline of ______.
Both the owner's and the public's interests
Managers carry accountability to ________.
False
Oversight of the board of directors remains in tact even when the roles of chief executive officer and chairman of the board merge. (true/false)
False
Mangers only are accountable to their owners. (true/false)
Large corporations
Before the development of ______, managers and owners of organizations were the same people.
True
Corporate governance is the system that directs and controls business corporations. (true/false)
True
The key safeguards to defend against fraud or incompetence are properly constituted boards, separation of the functions of chairman and the chief executive, audit committees, vigilant shareholders, and financial reporting and auditing systems that provide full and times disclosure. (true/false)
False
The development of separate corporate entity limited organizations to raising funds from indivudual shareholders in order to grow their operation. (true/false)
False
To be truly effective, a board of director can foster a culture of "no dissent." (true/false)
True
A fiduciary responsibility is ultimately based on trust. (true/false)
b) Foster a culture of "rubber stamping"
Which of the follwoing is NOT a step in being a truly effective board.
a) Create a climate of trust and candor
b) Foster a culture of "rubber stamping"
c) Let the board assess leadership talent.
d) Ensure individual accountability.
False
Walter salmon developed a 50-question checklist to ssess the quality of an organization's board. (true/false)
False
Simply having the mechanisms in place will, in itself, guarantee good governance. (true/false)
b) the government
The owners of a corporation are typically a fragmented group consisting of all of the following, except:
a) individual public shareholders
b) the government
c) employees
d) other companies
False
The primary responsibility of the compensation committee is to oversee compensation packages for corporation employees. (true/false)
True
The sarbanes-Osley Act of 2002 incorporates the "comply or else" approach. (true/false)
a) Merge the roles of chief executive officer (CEO) and chairman of the board into one individual.
Which of the following describes the first step in a policy of disregarding the corporate governance model?
a) Merge the roles of chief executive officer (CEO) and chairman of the board into one individual.
b) Seperate the roles of the CEO and chairman of the board into different individuals.
c) Hire outside individuals to sit on the board of directors.
d) Assign the senior management team of the firm to serve on the board of directors.
False
The board of directors runs the organization on a day-to-day basis. (true/false)
true
One question in Salman's 22-question checklist includes: Is there a way for outside directors to alter the meeting agenda set by your CEO? (true/false)
Audit committee
The ______ is responsible for overseeing the financial reporting process of an organization.