Presentation Chapter 4

Presentation Chapter 4 - Board of Directors Roles and...

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Click to edit Master subtitle style Board of Directors Roles and Responsibilities Chapter IV
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Click to edit Master subtitle style Chapter Objectives: • Identify the difference between decision management a nd decision control. Understand the role of the board of directors. • Understand that the board of directors is ultimately responsible for the business and its affairs. • Provide an overview of what the oversight function entails. • Identify and explain the fiduciary duties of the board of directors. • Gain awareness of the variety of board models. • Identify the board attributes that affect the quality of monitoring and oversight. • Illustrate the importance of an independent board of directors. • Become familiar with the best practices of determining directors’ compensation. • Identify and describe the determinants of an effective board of directors. • Become familiar with board accountability, evaluation, and the legal obligations and liabilities facing outside directors of public companies. Video ( Video)
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Click to edit Master subtitle style Key Terms Audit committee financial expert Business judgment rule CEO duality D&O insurance Duty of care Duty of fair disclosures Duty of loyalty Duty of obedience Fiduciary duty Independent director Lead director National Association of Corporate Directors (NACD) One-tier board model Staggered board Two-tier board model
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Elect Board of Directors Hires Internal Auditors Management Hires Financial Statements (GAAP) Prepares Examine (GAAS) Corporate Structure Owners Corporation Create Independent Auditors Hires Audit Committee Accountants
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Click to edit Master subtitle style Role of the Board of Directors The board of directors is ultimately responsible for the company’s business affairs and governance as stated in its governing documents, including the articles of incorporation, the by laws, and shareholder agreements. Many state laws require a corporation to form a board of directors to represent shareholders and make decisions on their behalf. The success of the board of directors depends on the composition, structure, resources, diligence, and authority of the entire board, as well as their working relationships with other participants of corporate governance, including management, external auditors, internal auditors, legal counsel, professional advisors, regulators, standard-setting bodies, and investors.
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Board of Directors Pre-SOX Framework Personal ties to company management Economic ties to the corporation (consulting fees, generous ownership pensions) Avoid impairing oversight function of directors Improve their working relationships with management Post-SOX Framework The majority of directors should be independent Separate the roles of chairman of the board and CEO Develop the knowledge and expertise to provide effective board oversight Have resources to hire advisors and independent staff support Set a “tone at the top” and a corporate culture that promotes ethical conduct Periodic evaluation of the performance of the board of directors 66
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This note was uploaded on 02/24/2011 for the course ACCT 7050 taught by Professor Razai during the Spring '11 term at U. Memphis.

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Presentation Chapter 4 - Board of Directors Roles and...

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