Corporate Governance Corporate Governance 2

Question 1

Which committee is primarily responsible for setting executive compensation in a publicly traded U.S. company?

Accepted Answer

Compensation Committee

Answer

The Compensation Committee of the board sets and oversees executive pay packages to align management incentives with shareholder interests.

Question 2

What does the 'say-on-pay' provision under Dodd-Frank require?

Accepted Answer

Shareholders vote on executive pay packages at least every three years

Answer

Dodd-Frank's say-on-pay provision gives shareholders a non-binding advisory vote on executive compensation at least once every three years.

Question 3

A 'poison pill' defense mechanism is formally known as a:

Accepted Answer

Shareholder rights plan

Answer

A shareholder rights plan (poison pill) dilutes an acquirer's stake by allowing existing shareholders to buy additional shares at a discount if a hostile takeover is attempted.

Question 4

Under the Business Judgment Rule, courts will generally defer to board decisions if directors acted:

Accepted Answer

On an informed basis, in good faith, and in the honest belief it served the corporation

Answer

The Business Judgment Rule protects directors who made decisions on an informed basis, in good faith, and with the honest belief the action was in the corporation's best interest.

Question 5

Which of the following best describes a 'dual-class share structure'?

Accepted Answer

A structure where some shares carry more votes per share than others

Answer

A dual-class share structure grants different voting rights to different share classes, often allowing founders to retain control despite holding a minority economic interest.

Corporate Governance Practice Test

Corporate Governance Practice Test

Corporate Governance Corporate Governance 2