Ch. 5 BOD committe

Question 1

How are directors Chosen

Answer 1

-Nominated for election by BOD
-Voted on by shareholders at the Annual Shareholder’s meeting
-Influence shareholders have over which directors are elected is dependent on the corp. bylaws.

Question 2

Typical Voting

Answer 2

-Board nominates Directors for election by recommendation of nominating committee
-Shareholders vote in uncontested election
-If director gets more no than yes- asked to resign
-Board can accept or reject that resignation

Question 3

Proxy Challenge, election becomes uncontested

Answer 3

False, becomes contested. Each voting share votes its share for each director- called regular voting. Highest votes is the director.

Question 4

Why might a proxy challenge happen?

Answer 4

-Hostile Takeover Attempt: to block hostile takeover board issues takeover defences.
-Activist Management: an activist investor dissatisfied can put forward (nominate) a short slate of directors through which they can participate in the mgt of the firm.

Question 5

How firms avoid hostile takeover via proxy battle

Answer 5

Staggered Board: provided in the bylaws.
Each yr only 1/3 are up for election
eg 9 seats - 2yrs to get a majority position

Question 6

Audit

Answer 6

100% independent
money, hire and oversee internal audit. All must be financially literate. one must be a fin expert minimum 3 directors

Question 7

Compensation

Answer 7

100% independent for US not really in Canada
Advise CEO on pay, Hire compensation consultants

Question 8

Nominating

Answer 8

100% independent in US, choice in Canada
Hire, manage and responsible for CEO succession planning