Corporate Governance Board of Directors & Committees 3

Question 1

What is 'board refreshment' in corporate governance?

Accepted Answer

The process of adding new directors to bring in fresh perspectives and skills

Answer

Board refreshment refers to intentional efforts to add new directors with relevant skills and diverse perspectives to improve board effectiveness.

Question 2

Which law requires that public company audit committees be directly responsible for hiring the external auditor?

Accepted Answer

Sarbanes-Oxley Act

Answer

SOX Section 301 mandates that the audit committee be directly responsible for the appointment, compensation, and oversight of the external auditor.

Question 3

What is a 'poison pill' (shareholder rights plan) designed to do?

Accepted Answer

Deter hostile takeovers by diluting an acquirer's stake

Answer

A poison pill allows existing shareholders to buy additional shares at a discount when a hostile bidder acquires a triggering stake, diluting the acquirer.

Question 4

What does 'director independence' primarily mean in US corporate governance?

Accepted Answer

The director has no material relationship with the company that could impair objectivity

Answer

Independence requires that a director have no material relationship with the company — financial, familial, or otherwise — that could compromise their judgment.

Question 5

Which governance practice involves a periodic review of the board's own performance?

Accepted Answer

Board self-assessment

Answer

Board self-assessment is a regular evaluation process where the board, its committees, and individual directors review their own effectiveness.

Corporate Governance Practice Test

Corporate Governance Practice Test

Corporate Governance Board of Directors & Committees 3