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13 Cards in this Set
- Front
- Back
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What is corporate governance? |
The controls put in place that ensure a corporation acts in a legal, ethical, and transparent manner in the best interests of its shareholders |
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What purpose does a board of directors serve in relation to its shareholders? |
A board of directors is appointed to oversee the executive level of management in a corporation. Their primary purpose is to ensure that management is acting in the shareholders' best interest. |
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Generally define the principle-agent problem |
Represents the conflict of interest between the principle and agent |
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Generally define what the principle is in an organization |
A person or entity that ranks the most important on level of ownership |
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Generally define what an agent is in relation to business |
A person or entity which represents the interests of another party |
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What control purpose does the market of executive employment serve? |
Naturally gives executives an incentive to act in the best interest of the shareholders to maintain their own desirability in the external job market |
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Generally define the market of capital control |
The purchase of an underperforming firm by another to improve its strategic competitiveness |
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List some external control/monitoring mechanisms |
-Market of executive employment -market of capital control -government oversight and regulation |
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List some internal control/monitoring mechanisms |
Board of directors, incentive-based executive compensation, shareholder activism |
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What's a way to fix the principle-agent problem? |
Incentive-based executive compensation |
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Generally describe the potential weakness of the board of directors model |
Voting shareholders not having the insight to decide on a director candidate end up rubber stamping their approval to managements recommendation |
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Generally describe the humanistic argument for environmental responsibility |
We should ensure the future wellbeing of humanity by cultivating a healthy environment. When businesses pollute natural environments human health is negatively impacted. |
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Generally describe the Naturalistic Argument for environmental responsibility |
Animals are sentient beings with feelings and interests which should be taken into consideration by businesses |
