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25 Cards in this Set
- Front
- Back
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Accounting Reform and Investor Protection Act of 2002
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A law known as Sarbanes-Oxley Act (SOX). It amends the securities laws to provide better protection for investors in public companies by improving the financial reporting of companies.
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Agency Problems
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Develops when the interests of the shareholders were not aligned with the interests of the manager, and the manager (who is imply a hired agent with the responsibility of representing the owners' best interest) began to pursue self-interest instead of the owners' best interest.
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Audit Committee
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A committee who are responsible for assessing the adequacy of internal control systems and the integrity of financial statements
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Backdating
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Occurs when the recipient is given the option of buying stock at yesterday's price, resulting in an immediate and guaranteed wealth increase.
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Board of Directors
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An elect group of individuals who are to govern and oversee the management of the business
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Bullet-dodging
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The delaying of a stock option grant until right after bad news.
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Business Judgement Rule
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Holds that courts should not challenge board members who act in good faith, making informed decisions that reflect the company's best interests instaed of their own self-interest. Arguement for: Board members should be free to take risks without fear of liability.
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Charter
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A document issued by the state, giving the corporation the right to exist and stipulating the basic terms of its existence.
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Classified Boards
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Boards where the members are elected in staggered terms. Example: A board of 12--4 members are elected yearly and serve for 3 years.
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Clawback Provisions
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Compensation recovery mechanisms that enable a company to recoup compensation funds, typically in the event of a financial restatement or executive's misbehavior.
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Compensation Committee
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A group that has the responsibiltiy of evaluating execituve performance and recommending terms and conditions of employment
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Corporate Gadflies
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Activist shareholder who are credible, powerful, and a force with which to be reckoned.
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Coporate Governance
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Refers to the method by which a firm is being governed, directed, administered, or controlled and to the goals for which it is being governed
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Employees
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Those who are hired by the company to perform the actual operational work.
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Full Disclosure
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Also Known as Transparency. Disclosure is made at regular and frequent intervals and should contain information that might affect the investment decisions of shareholders
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Golden Parachute
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A contract in which a coporation agrees to make payments to key officers in the evnet of a change in the control of the corporation
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Inside Directors
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Board members who has ties of some sort to the firm
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Insider Trading
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A practice of obtaining critcial information from inside a company and then using that information of one's own personal financial gain
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Legitimacy
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Talcott Parson's definition: A condition where the companies activities are congruent with the goals and values of the social systme within which they function
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Legitimation
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A dynamic process by which a business sekks to perpetuate its accpetance.
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Majority Vote
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The requirement that board members must be elected by a majority of votes cast.
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Management
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A group of individuals hired by the board to run the company and manage it on a daily basis
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Nominating Committee
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A group of "Outside" directors, who have the responsilbity of ensuring that competent, objective board members are selected
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Ordinary Business Decisions
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Daily decisions that must be made by managers. Example: Hiring.
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Outside Directors
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Board members who are independent from the firm and its top managers
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