what was sox passed in response to
enron scandl
what did dodd frank do?
- say on pay: shareholders have advisory vote for exec pay
dual mandate of baord explained
advisory: provide feedback on strategy, connect with networks, approve key hires
monitor: evaluate business model, idenitfy kpi, fire bad ceos, desing exec comp
types of boards
phantom
rubber stamp
minimal review
nominal
active
catalyst
what do active baords do
challenge management and active in strategy, trigger changes
n Delaware, duty to act in the best interests of
the corporation means acting in the best
interests of shareholders
FIDUCIARY DUTY IN CANADA: act in best interests OF CORPORATION!! *shareholder and may also stakheolder
fidicuary duty in delaware: act in best interests of SHAREHOLDERS
who is board made up of
insiders: corp execs
outsiders: non corp execs
affiliated: banks, investors
employees:
pros and cons of active ceos in board
pro: expereicned, connected, connect with ceo
cons: busy, bossy, higher ceo pay prob
pros and cons of professional directors
pro: more time, networ, expereicne
cons: dependant on board role for income/presitge, may serve on many boards
how are directors chosen in uncontested election
nominated for election by existing bod; nominating committee
sharehoders vote- yes or no
if no: the seat may remain open, or someone asked to resign
-> board can accept or reject resignation
sharehodlers influence depends on corp bylaws
what is proxy access and which ocmpany allows
shareholders nominating a board director
apple does this, its not mandatory, depends on corp bylaws
if there is a proxy challenge for a nominated bod director
election is contested
voting shares will vote or withold; most votes = gets seat
why might a proxy challenge happen?
- hostile takeover attempt: a hostile bidder makes an offer for the company which also includes proposing a new Board of Directors
- activist management: active investor may be dissatisfied with performance
how can boards prevent hostile takeover
have a staggered board! only 1/3 of seats up for elections annually so longer to get to majority
audit committee roles
monitor accounting pricniples
hire oversee external audit and internal audit
oversee risk and complicance
min 3 directors
comp committee
100% independant in usa, recommended in canade
set ceo and direcot comp
hirre comp consultants
set performance goals for ceo
nominating committee
100% independant in usa, recommended in canade
identify eval and nim directors
hire consultants t o indetify nmonieees
manage ceo and dierectors evaluation process
may be responsible for ceo successon planning
deifne corp gov
rules practices and processes by which a company is managed.
key principles accountability, fairness, transparency, independance
why is corp gov important
better access to external finance
lower cap cost
improved performance of company
less risk of scandals
chairman of board
leads board
makes agenda and work plan
works with committees
ensurace active contribution of board
