Principles of Finance · free preview
Shareholders, Management, and the Board
Shareholders own the company through common or preferred stock while stakeholders are broader parties who depend on the firm, management runs operations, and an elected board of directors oversees management as a fiduciary for shareholders, supported by committees such as the audit committee.
1. Owners, and everyone else with a stake
Owners, and everyone else with a stake
2. The board of directors
The board of directors
3. The audit committee and independence
The audit committee and independence
4. How the pieces fit together
How the pieces fit together
5. Shareholder versus stakeholder
Which statement correctly distinguishes a shareholder from a stakeholder?
6. Common versus preferred shares
Which statement accurately compares common and preferred shareholders?
7. The board's legal standing
Which statement about the board of directors is accurate for a public company?
8. Internal versus external directors
Why do governance guidelines favor including external directors on the board?
9. The audit committee's core duties
Which list belongs to the audit committee's stated functions?
10. Why independence matters in audits
Why must audit committee members be independent of the company?
11. The board's duty
What ten-letter term describes the legal duty the board owes to shareholders, requiring loyalty and care in acting on their behalf? Write the term in lowercase.
12. The preferred dividend priority
What two-word term names the annual fixed payment that preferred shareholders receive before common shareholders are paid anything? Write the term in lowercase.
13. The oversight subcommittee
What two-word term names the separately chartered board subcommittee that reviews audits and verifies internal controls? Write the term in lowercase.
14. The elected representative
What two-word term names the person elected by shareholders to represent them in overseeing the company? Write the term in lowercase.
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