Corporate Governance Board of Directors & Committees

Question 1

What is the primary fiduciary duty of a corporate board of directors?

Accepted Answer

To act in the best interests of shareholders

Answer

To maximize executive compensation

Answer

To reduce the company's tax burden

Answer

To expand the company's market share

Question 2

Which committee is primarily responsible for overseeing financial reporting and internal controls?

Accepted Answer

Audit Committee

Answer

Compensation Committee

Answer

Nominating Committee

Answer

Executive Committee

Question 3

Under the Sarbanes-Oxley Act, how many members of the audit committee must be 'financial experts'?

Accepted Answer

At least one

Answer

All members

Answer

At least two

Answer

A majority

Question 4

What is a 'staggered board' in corporate governance?

Accepted Answer

A board where only a fraction of directors are elected each year

Answer

A board with an equal number of inside and outside directors

Answer

A board that meets on alternating quarters

Answer

A board where the CEO also serves as chair

Question 5

Which NYSE listing standard requires that a majority of board members be independent directors?

Accepted Answer

NYSE Rule 303A.01

Answer

NYSE Rule 402.05

Answer

NYSE Rule 312.03

Answer

NYSE Rule 501.01

Question 6

What does the 'business judgment rule' protect in US corporate law?

Accepted Answer

Directors from personal liability when making informed, good-faith business decisions

Answer

Shareholders from dilution during secondary offerings

Answer

Auditors from liability for undetected fraud

Answer

Executives from clawback provisions