10.1- 10.2
Corporate Governance ensures that company leaders are held accountable for their actions and decisions, particularly those affecting shareholder and stake holder
Ensures Accountability
When one party delegates decision-making responsibility to a second party for compensation
Agency Relationship
Base Salary, Bonus and stock options
Compensation
Managers might take excessive take risks that benefit them personally, even if it puts shareholders' investments at risk.
Excessive Risk
The distribution of ownership stakes within a company
Ownership Concentration
One cause of poor corporate governance
Corruption, Fraud, Unqualified Board Members, Weak Board of Directors, Unethical Leadership
Known as Decision-makers
Managers (agents)
Financial incentives and rewards provided to top executives
Executive Compensation
One effect of poor corporate governance
Financial Loss, Loss of employment, Reputation Damage, Regulatory action
Is based on the efficient separation of ownership and managerial control
Modern Public Corporation
Elects the Board of Directors
Shareholders
Awarded based on specific performance criteria, such as revenue growth, profitability, or total shareholder return
Performance Shares
The systems of rules, practice and processes by which a company is directed and controlled. It involves balancing the interest of a company's many stakeholder
Corporate Governance
This Company had Cyber-Security issues as well as internal management problems.
General Electric
Allow top-level managers to defer a portion of their earnings, which is typically invested and paid out at a later date. This encourages a focus on long-term financial stability and retirement planning.
Deferred Compensation