Copy of MGMT 211 chp 10 and 11

Copy of MGMT 211 chp 10 and 11 - Chapter 11 Corporate...

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Unformatted text preview: Chapter 11 Corporate Governance o Trying to keep some control over corporations that own millions and billions of dollars o Many corporations are stealing from shareholders o Corporations are highly educated o Board of directors run corporations; that are elected by shareholders; shareholders own corporations o First major corporation East India Company o First incorporation law came in CONNECTICUT o The most favorable incorporation laws are in DELAWARE o Development of railroads motivated the growth of corporations o Corporate law is STATE LAW o Corporate governance is state federal or common law o Shareholders own o Rights of Shareholders: Elect board of directors Question directors at annual meetings Proxy Solicitation Derivative Action Shareholder Proposals o Shareholders elect board of directors o Inside Directors: the managers who are officers on the board of directors o Outside Directors : not executives of the corporation o Some corporation do cumulative voting You can take all your votes and put them towards one director instead of spreading them out o A proxy is a written authorization for an agent to vote in place of another shareholder o Proxy solicitation says what director tells shareholders what he wants to do to get someone into office The difference between politics is that he has to do what he says Highly regulated Rarely successful o Proxy Contests: allow for outsiders not connected with the company to take control o Shareholder proposal Go to shareholders meeting to bring something to corporation to change something Any shareholder can make proposal There is a weed out process Rarely successful o Derivative action To sue in the name of corporation Many times you must get a proxy solicitation first Post a bond before you can bring a lawsuit If you win the money you collect goes to the corporation not you o None of the above work to control board o Agency law Shareholder is the principle Board of director is the agent Officer or managers are the subagents As long as a board of director makes a correct decision at the TIME, not necessarily the correct decision, he or she is okay Agency Problem: How ensure that Agent will always put the interest of Principal first? Agents owes the principle: 1)Duty of loyalty 2)Act in best interest of principle 3)Fiduciary responsibility 4)When acting within scope can bind principal in contract and tort Agency law isnt the solution Proxy solicitation can force board to act properly, but mostly board does what it wants Shareholders want to maximize stock now, directors are looking at long run The interests of each can counter the goals of others involved...
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Copy of MGMT 211 chp 10 and 11 - Chapter 11 Corporate...

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