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10 Cards in this Set
- Front
- Back
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Corporate Governance |
The set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations |
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Agency Relationship |
Exists when one party delegates decision-making responsibility to a second party for compensation. |
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Managerial Opportunism |
The seeking of self-interest with guile |
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Agency Costs |
Are the sum of incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals because governance mechanisms cannot guarantee total compliance by the agent. |
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Ownership Concentration |
The number of large-blocked shareholders and the total percentage of the firm's shares they own |
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Large-block Shareholders |
Typically own at least 5 percent of a company's issued shares. |
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Institutional Owners |
Financial institutions such as mutual funds and pensions funds that control large-blocked shareholder positions |
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Board of Directors |
Group of elected individuals whose primary responsibility is to act in the owners' best interests by formally monitoring and controlling the firm's top-level managers. |
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Executive Compensation |
Governance mechanism that seeks to align the interests of managers and owners through salaries, bounces, and long-term incentives such as stock awards and options |
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Market for Corporate Control |
A external governance mechanism that is active when a firm's internal governance mechanisms fail. |
