CFO Corporate Governance & Compliance Flashcards

What is 'piercing the corporate veil' and why does it matter for CFO governance decisions?

Answer: A legal doctrine holding shareholders or officers personally liable when corporate formalities are ignored

Piercing the corporate veil occurs when courts disregard the separate legal identity of a corporation, exposing owners or officers to personal liability for corporate debts.

Which SEC form must company insiders (officers, directors, 10%+ shareholders) file to report changes in their ownership of company stock?

Answer: Form 4

Form 4 must be filed within two business days whenever an insider buys, sells, or otherwise changes their beneficial ownership of the company's securities.

What is a 'clawback policy' in executive compensation governance?

Answer: A provision requiring executives to return previously paid incentive compensation if financial results are later restated

Clawback policies allow companies to recover incentive pay from executives if a financial restatement reveals that the performance targets were not actually met.

What is the purpose of an independent directors requirement on a public company's board?

Answer: To provide objective oversight of management without conflicts of interest

Independent directors are not affiliated with management and provide unbiased oversight, strengthening governance and protecting shareholder interests.

What does 'dual-class share structure' mean in corporate governance?

Answer: A capital structure with multiple share classes carrying different voting rights, often giving founders disproportionate control

Dual-class structures create share classes with unequal voting rights, typically allowing founders to retain voting control even as public shareholders hold economic ownership.

Which of the following is a primary responsibility of the CFO in ensuring compliance with the Bank Secrecy Act (BSA) / Anti-Money Laundering (AML) regulations?

Answer: Ensuring the company has an AML compliance program and reports suspicious transactions where applicable

CFOs at financial institutions and certain other regulated entities must oversee AML programs, including customer due diligence and suspicious activity reporting (SARs).