Presentation Chapter 10

Presentation Chapter 10 - Chapter X Stakeholders Roles and...

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Click to edit Master subtitle style Stakeholders’ Roles and Responsibilities Chapter X
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Corporations’ Role in Society 22 Shareho lders Cred itors Custo mers Sup plier s Govern ment Emplo yees Int ere st Loan Capital Residual Rights Equity Capital C a s h Goods and Servic es Compens ation S k il l s Public Goals T a x es Goods and Services C a s h 1. Oversight Function 2. Managerial Function 3. Compliance Function 4. Internal Audit Function 5. Legal/Financial Advisory Function 6. External Audit Function 7. Monitoring Function Corporate Governance Functions
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Click to edit Master subtitle style Chapter Objectives: • Discuss shareholder responsibilities in monitoring the effectiveness and validity of corporate governance. • Provide insight for strengthening shareholder rights. • Discuss the role institutional investors play in ensuring effective and responsible corporate governance. • Provide methods employees can use to participate in the monitoring of corporate governance. • Examine activities by investor activists to strengthen corporate governance reforms. VIDEO (VIDEO)
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Click to edit Master subtitle style Key Terms Blockholding Employee class actions Free-rider problem Institutional shareholder Intercorporate networks Property rights Security class actions Shareholder democracy
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Click to edit Master subtitle style Shareholders Shareholders and other stakeholders, including employees, customers, creditors, suppliers, and society, by being attentive and engaged, play an important role in corporate governance. Recent corporate governance reforms have raised investor expectations for corporate governance, and any attempt to relax or roll back these reforms would be disappointing to investors and adversely affect their confidence in public financial reports and the capital markets. The two biggest corporate bankruptcies in U.S. history, Enron and WorldCom, and the failures of other high-profile companies primarily caused by fraud, which cost investors and pensioners more than $500 billion, made investors take notice and demand corporate accountability.
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Click to edit Master subtitle style Shareholder monitoring The effectiveness of the monitoring and control function by investors is determined based on the interrelation factors of: (1) Property rights established by law or contractual agreement that define the relations between a company’s investors and its management, as well as the existence of such relations between different types of investors; (2) financial systems facilitating the supply of finances between households, financial intermediaries, and corporations; (3) networks of intercorporate competition and cooperation establishing relations between corporations in the marketplace.
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Click to edit Master subtitle style Shareholders’ Proxy Process In July 2007, the SEC approved two proposals addressing the shareholder proxy process.
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