{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 10 - Chapter 10 Corporate Governance Corporate...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 10 Corporate Governance Corporate Governance Almost all of the largest businesses in the U.S. are organized as corporations Corporate entities are responsible for their own debts, meaning that shareholders are not personally liable for the debts of the corporation Corporations allow for the separation or ownership and management functions Investors are able to diversify their holdings by owning interests in several different firms at the same time Corporate governance involves constraining and controlling these managerial misincentives so that the corporation is governed in the best interest of its owners, the shareholders. Transfer of shares is facilitated by limited liability, which allows buyers to purchase shares without incurring more risk than the potential loss of the purchase price. Growth of the Corporate Form of Business First general incorporation laws passed by Connecticut legislature in 1837 Two most important factors motivating the growth of the corporate form of organization were the invention of the steam engine and its application to a new technology, the railroad. As the efficient sixe of factories increased, there was need for capital to outfit those factories. By the end of the 19 th century the corporation had become the dominant form of business Corporate Entity Organized under the general incorporation law of a state, which grants the organization a corporate charter once it has complied with simple filing procedures and paid any required fees Firm incorporated in one state may operate in any other state, and the law of the chartering state governs the internal relations regardless of where the physical firm operates. Many major corporations are incorporated in Delaware and thus governed by its laws although most are headquartered elsewhere and do business elsewhere. Rights of Shareholders Two most important rights of shareholders are the right to vote in the election of directors and to file derivative lawsuits against management in the name of the corporation. o Shareholding Voting and Proxy Regulation
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Elections take place at shareholder meetings (typically once per year) A proxy is a written authorization by the shareholder designating an agent to vote on the shareholders behalf at the shareholders meeting. Proxy solicitation is regulated by federal securities law. Proxy Solicitation o Securities exchange act of 1934 regulates the manner in which proxies are solicited. o ’34 act requires the disclosure of specified information in the form of a proxy statement, which contain information about the nominees when an election of the board is scheduled. o Proxy contests – means for outsiders to take control of the corporation by convincing shareholders to vote for their slate of directors.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern