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Exam3 - FC1 - The flashcards are formatted for printing...

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Stock Ownership Stock Ownership
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The objective is to produce a return greater than they could receive from alternative investments. Includes the right to receive dividends, if declared, and to vote on members of board of directors, major mergers and acquisitions, charter and bylaw changes, and proposals by
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stockholders.
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Corporate Governance Stock Ownership
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Includes the right to receive annual reports on the company’s financial condition, to bring shareholder suits against the company and officers, and to sell their own shares of stock to others. Process by which a company is controlled, or governed.
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Board of Directors Board of Directors
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An elected group of individuals, who have a legal duty to establish corporate objectives, develop broad policies, and select top-level personnel to carry out these objectives and policies. When effective, key features include selecting outside directors to fill most positions, hold open elections for members, and evaluate their performance on a regular basis.
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Proponents of High Executive Pay Board of Directors
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When effective, key features include appointing an independent lead director, hold regular meetings without the CEO present, and align director compensation with corporate Arguments include well-paid managers are simply being rewarded for outstanding performance, high salaries provide an incentive for innovation and risk-taking, and not many individuals are
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performance. capable or running today’s large, complex organizations.
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Critics of High Executive Pay 1. Rise of institutional investors 2. Social investment 3. Social responsibility
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shareholder resolutions 4. Shareholder lawsuits
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Shareholder activism: Arguments include inflated executive pay hurts the ability of U.S. firms to compete with foreign rivals, multimillion dollar salaries cause resentment, which saps the commitment of hard working lower an midlevel employees, and
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extravagantly compensated executives preside over failure as often as success.
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Stockholders Security an Exchange Commission (SEC)
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Requires information transparency and disclosure and forbids insider trading.
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