Reading 32: Corporate Governance-LOS d 习题精选 class, 2011, should, center, investment

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

LOS d: Describe the responsibilities of the board of directors and explain the qualifications and core competencies that an investment analyst should look for in the board of directors.

 

 

Which of the following statements concerning the audit committee of the board of directors is least accurate? The audit committee:

A) should directly oversee the internal audit staff of the company.

B) should not have any dialogue with management in order to ensure that the committee’s actions are independent of management activities.

C) should consist entirely of independent board members.

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The audit committee should have full access to and the cooperation of management in order to perform their duties.

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Ashley Jones is considering joining the board of directors of Dusseau Investment Management (DIM). Before joining the board, Jones wants to make sure she fully understands what her responsibilities would be as a board member. Kenley Walker, administrative assistant to DIM’s CEO prepares a memo to Jones detailing responsibilities of board members.

Responsibility 1:	Establish corporate values and governance structures to ensure that business is conducted in an ethical, fair, and professional manner.
Responsibility 2:	Determine which proxy issues that have received a majority of shareholder votes should be addressed or ignored.
Responsibility 3:	Hire the company’s chief executive officer (CEO), and determine the CEO’s compensation package.

Which of the responsibilities listed by Walker are CORRECT?

A) Responsibility 1 only.

B) Responsibilities 1, 2, and 3.

C) Responsibilities 1 and 3 only.

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Directors should always address all proxy issues that have received a majority of shareholder votes. Responsibilities of directors include hiring the firm’s CEO and determining the CEO’s compensation, and establishing corporate values and governance structures to ensure that business is conducted in an ethical, fair, and professional manner.

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Sunil Reddy is an analyst for Worldwide Financial Services. Reddy thinks that Worldwide’s procedures for analyzing companies for inclusion in client portfolios would be more robust if it included a review of the company’s board of directors. Reddy prepares a list of five items concerning the board of directors that analysts should assess:

Item 1:	Frequency of separate sessions for independent directors.
Item 2:	Use of independent legal counsel as opposed to company in-house counsel.
Item 3:	Composition of the nominating committee.
Item 4:	Composition of the compensation committee.
Item 5:	Whether the board has staggered or annual elections.

Which of the items on Reddy’s list are attributes of a board of directors that are important for an analyst to assess?

A) Items 1, 3, and 5 only.

B) All five items.

C) Items 2, 3, and 4 only.

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All five of the items on Reddy’s list are important factors that an analyst should review when assessing a board of directors.

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All of the following are responsibilities of the board of directors for a corporation EXCEPT:

A) ensure new board members are adequately trained to perform board functions.

B) make disclosures regarding company operations, risk, and financial position that are accurate and transparent.

C) ensure that management has supplied the board with sufficient information to be fully informed and make appropriate decisions.

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Actually making disclosures about company operations is the responsibility of management. It is the responsibility of the board to make sure management is acting in the best interests of shareholders, which may entail appointing/serving on the audit committee to review those disclosures. Both remaining choices listed are all board responsibilities.