Corporate Governance Corporate Governance 4

Question 1

Which of the following best describes 'proxy access' as a shareholder right?

Accepted Answer

The right to nominate director candidates on the company's proxy ballot

Answer

Proxy access allows qualifying shareholders to include their own director nominees in the company's proxy materials, reducing the cost of contested director elections.

Question 2

A 'staggered board' (also called a classified board) is considered an anti-takeover mechanism because it:

Accepted Answer

Prevents a hostile acquirer from replacing the entire board in a single election cycle

Answer

A staggered board divides directors into classes with multi-year overlapping terms, making it impossible to replace all directors at once and slowing hostile takeover attempts.

Question 3

Under the Sarbanes-Oxley Act (SOX) Section 404, management and external auditors must assess and report on:

Accepted Answer

The effectiveness of internal controls over financial reporting

Answer

SOX Section 404 requires management to assess internal controls over financial reporting and external auditors to attest to that assessment.

Question 4

The 'Caremark standard' established that directors can be held liable for failing to:

Accepted Answer

Implement and oversee a system of internal controls and compliance monitoring

Answer

The Caremark decision established that directors have a duty to implement and oversee compliance and reporting systems, and can face liability for complete failure to do so.

Question 5

When a company adopts a 'shareholder engagement' program, the primary purpose is to:

Accepted Answer

Build ongoing dialogue between the board/management and institutional investors on governance issues

Answer

Shareholder engagement programs allow boards and management to communicate directly with institutional investors on governance, compensation, and strategy outside the formal proxy process.

Corporate Governance Practice Test

Corporate Governance Practice Test

Corporate Governance Corporate Governance 4