09 BUS 444 Chap 9

9 35 thenew rulesfor directors 9 36

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Unformatted text preview: s, or shareholders, of a corporation and that acts as an intermediary between the shareholders and management. 9-35 The New Rules for Directors 9-36 Governance Mechanisms • Shareholder activism actions by large shareholders, both institutions and individuals, to protect their interests when they feel that managerial actions diverge from shareholder value maximization. 9-37 TIAA‐CREF’s Principles on the Role of Stock in Executive Compensation 9-38 External Governance Control Mechanisms • External governance control mechanisms methods that ensure that managerial actions lead to shareholder value maximization and do not harm other stakeholder groups and that are outside the control of the corporate governance system. 9-39 External Governance Control Mechanisms • Market for corporate control • Auditors • Banks and analysts • Regulatory bodies • Media and public activists 9-40 Sarbanes‐Oxley Act • Auditors Barred from certain types of non-audit work Not allowed to destroy records for five years Lead partners auditing a firm should be changed at least every five years 9-41 Sarbanes‐Oxley Act • CEOs and CFOs Must fully reveal off-balance sheet finances Vouch for the accuracy of information revealed • Executives Must promptly reveal the sale of shares in firms they manage Are not allowed to sell shares when other employees cannot 9-42...
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