Reading 32: Corporate Governance-LOS f 习题精选 elements, corporate, investment, 2011, class

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Session 9: Corporate Finance: Financing and Control Issues
Reading 32: Corporate Governance

LOS f: Describe the elements of a company’s statement of corporate governance policies that investment analysts should assess.

 

 

John Zehetmeier, an analyst for Folker Capital Management is helping his colleague, Chris Augustine, understand elements of a company’s statement of governance policies that would be helpful in analyzing a company. Zehetmeier makes the following statements:

Statement 1:	A corporate code of ethics that conveys the values, responsibilities, and ethical conduct of an organization should be included in a statement of governance policies.
Statement 2:	A statement of director oversight responsibilities would be the best place to find information about nomination and compensation award polices.

Augustine should:

A) agree with Statement 1, but disagree with Statement 2.

B) disagree with both of Zehetmeier’s statements.

C) agree with both of Zehetmaier’s statements.

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Augustine should agree with both statements. A corporate code of ethics should articulate the values, responsibilities, and ethical conduct of an organization and should be included in a statement of governance policies. Also, a statement of director’s oversight, monitoring, and review responsibilities should include information regarding internal controls, risk management, accounting disclosure, compliance, nominations, and compensation awards.

 

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Which of the following would be the most effective means for a manufacturing firm to communicate its corporate governance policies to shareholders?

A) Include a statement on the company website that the company is committed to global corporate governance best practices.

B) Adopt a statement of governance policies that is provided by the North American Association of Manufacturers.

C) Provide access to internal management performance assessment reports.

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Management performance assessments as well as reports of director’s oversight and review of management are an important element of a statement of governance policies that investors and analysts should assess. Note that a statement of governance practices should be company specific (not a boilerplate statement) and that it should be detailed – simply telling investors that the company is committed to best practices is insufficient.

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Jon Fisher is a junior analyst for Folker Capital Management. Jim Russell, Director of Research has asked Fisher to prepare a list of items that may be included in a company’s statement of governance practices that would help assess company governance policies concerning the operation of the board of directors. Fisher’s list includes the following items:

Item 1:	Board and committee self-assessment reports.
Item 2:	Statement of the responsibilities directors have to review and oversee management.
Item 3:	Reports of findings in directors’ oversight and review of management.
Item 4:	Statement detailing how directors are trained before they join the board.

Which items should analysts include in order to understand a company’s corporate governance practices as they relate to the board of directors?

A) Item 1 only.

B) Items 1 and 3 only.

C) All 4 items should be included.

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All of the items on the list are elements of a company’s statement of corporate governance policies that should be assessed by investors and analysts.