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

Q1. 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)   agree with both of Zehetmaier’s statements.

C)   disagree with both of Zehetmeier’s statements.

Q2. 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)   Provide access to internal management performance assessment reports.

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

Q3. 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)   All 4 items should be included.

B)   Item 1 only.

C)   Items 1 and 3 only.

[此贴子已经被作者于2009-3-3 15:05:40编辑过]

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Q1. 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)   agree with both of Zehetmaier’s statements.

C)   disagree with both of Zehetmeier’s statements.

Correct answer is B)

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.

Q2. 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)   Provide access to internal management performance assessment reports.

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

Correct answer is B)

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.

Q3. 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)   All 4 items should be included.

B)   Item 1 only.

C)   Items 1 and 3 only.

Correct answer is A)

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.