Corporate Governance Board of Directors & Committees 2 — Questions and Answers
Question 1: What is the role of the Nominating and Governance Committee?
- Managing executive pay packages
- Identifying and recommending director candidates and overseeing governance practices (Correct answer)
- Approving annual financial statements
- Setting dividend policy
Correct answer: Identifying and recommending director candidates and overseeing governance practices
The Nominating and Governance Committee identifies qualified director candidates and develops corporate governance guidelines.
Question 2: Which corporate governance model separates the roles of CEO and Board Chair?
- Unitary board model
- Two-tier board model
- Lead director model
- Split leadership model (Correct answer)
Correct answer: Split leadership model
The split leadership model separates the CEO and Board Chair roles to provide independent oversight of management.
Question 3: What is a 'lead independent director'?
- A director appointed by the largest institutional shareholder
- An independent director who coordinates and leads non-management board sessions (Correct answer)
- The chair of the audit committee
- A director hired for specialized industry expertise
Correct answer: An independent director who coordinates and leads non-management board sessions
A lead independent director presides over executive sessions of independent directors and serves as a liaison between independent directors and the CEO.
Question 4: Under Dodd-Frank, publicly traded companies must hold shareholder votes on executive compensation how frequently?
- Every year
- At least every three years (Correct answer)
- Every five years
- Only upon a merger
Correct answer: At least every three years
Dodd-Frank's 'say on pay' provisions require shareholder advisory votes on executive compensation at least every three years.
Question 5: Which governance concept refers to a director sitting on multiple boards simultaneously?
- Board diversity
- Director interlocking
- Board overboarding (Correct answer)
- Director shadowing
Correct answer: Board overboarding
Overboarding occurs when a director serves on so many boards that their time and attention may be insufficient for each company.
Question 6: What is the purpose of an executive session of the board?
- To allow non-management directors to meet without management present (Correct answer)
- To approve management's strategic plan
- To interview external auditors jointly with management
- To set the annual budget with the CFO
Correct answer: To allow non-management directors to meet without management present
Executive sessions allow independent or non-management directors to discuss issues candidly without the presence of executives.
Corporate Governance Board of Directors & Committees 2
What is the role of the Nominating and Governance Committee?