Mini Case: 15 - 13 n. What characteristics of the board of directors usually lead to effective corporate governance? Answer: (1) The CEO is not also the chairman of the board and does not have undue influence over the nominating committee; (2) the board has a majority of true outsiders who bring some type of business expertise to the board (and he board is not an interlocked board); (3) the board is not too large; and (4) board members are compensated appropriately (not too high, and some compensation is linked to company’s performance). . o. List three provisions in the corporate charter that affect takeovers. Answer: These include targeted share repurchases (i.e., greenmail), shareholder rights provisions (i.e., poison pills), and restricted voting rights plans. p. Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation? Answer:
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