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

Board members owe a fiduciary duty to act in the best interests of shareholders, including duties of care and loyalty.

Question 2

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

Accepted Answer

Audit Committee

Answer

The Audit Committee oversees financial reporting integrity, internal controls, and the independent auditor relationship.

Question 3

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

Accepted Answer

At least one

Answer

SOX Section 407 requires companies to disclose whether at least one audit committee member qualifies as a financial expert.

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 staggered (or classified) board divides directors into classes elected in different years, making hostile takeovers more difficult.

Question 5

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

Accepted Answer

NYSE Rule 303A.01

Answer

NYSE Listed Company Manual Rule 303A.01 requires that a majority of the board consist of independent directors.

Corporate Governance Practice Test