Knight Transportation Case Notes

Knight Transportation Case Notes - Corporate Governance at...

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Corporate Governance at Knight Transportation, Inc. CASE ASSIGNMENT You are the owner of a small, but expanding, distribution company that is going public. A friend of yours, Kevin Knight, runs Knight Transportation, a trucking company that has received some recognition for its corporate governance policies and practices. Knight has offered to share some insights with you as you incorporate, establish compliance with the Sarbanes-Oxley Act, and implement corporate governance guidelines at your own company. You've just completed a thorough review of KTI's governance mechanisms and are preparing to outline an action plan for your business. This plan should include: 1. Statement of Your Goals 2. Fundamentals for By-Laws and Articles of Incorporation 3. Governance Mechanisms to Establish a. Ownership Concentration b. Board of Directors c. Executive Compensation 4. Guidelines for Selecting and Managing Board of Directors a. Criteria for the Board of Directors b. Corporate Governance Guidelines c. Board Composition d. Board of Directors' Responsibilities e. Charter for Board of Director Committees f. Key Executive Management Positions 5. Policies to Enhance Effectiveness Optional: Discuss the background, experience, and skills of KTI's independent directors (from Annexure II in the case) and evaluate if they meet KTI's criteria for its Board of Directors. 221
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Corporate Governance at Knight Transportation, Inc. STRATEGY IMPLEMENTATION: CORPORATE GOVERNANCE 1. Statement of Your Goals As firms grow larger, it is common to finance growth by selling the company to shareholders. This effectively separates ownership and managerial control, establishing an agency relationship between the principals of a business and the agents who become decision makers for the firm. This relationship requires oversight to minimize managerial opportunism and to prevent potential conflicts of interest and questionable business practices that may develop. In addition, regulatory requirements that are established to protect investors and maintain public confidence in the stock market must be met. The costs of shifting control of the business from founder-owners to professional managers include incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals because governance mechanisms cannot guarantee total compliance by the agent. Effective monitoring activities within the firm require a corporate governance strategy and new managerial mechanisms designed to ensure that agents make strategic decisions that best serve the interests of the organization's stakeholders. Your plan will establish how the future principals and agents manage the firm's resources, shape the foundation (vision/mission) of the organization, influence strategic leadership that determines the company's strategic direction, and guide strategic actions to yield strategic competitiveness and above-average returns. You intend to satisfy the requirements of the Sarbanes-Oxley Act and other regulatory
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This note was uploaded on 01/06/2012 for the course MGT 4027 taught by Professor Stein during the Winter '11 term at Southeaster Oklahoma State University.

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Knight Transportation Case Notes - Corporate Governance at...

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