Session 4 Essay Questions Instruction
Read the two articles on the guidance that former SEC Chairwoman Mary Jo White provided to the board of directors of public companies in a speech given at the Stanford University Rock Center for Corporate Governance, Twentieth Annual Stanford Directors’ College at Stanford, CA, on June 23, 2014. Use this word document to answer the following questions about her guidance and submit it through the upload feature of this assignment. Submit your answer to each question in the space immediately below the question. The point value for that question is shown at the end of each question.
Note: This is an individual assignment so you are not supposed to share your work with others. Your submission will be cross-checked with other classmates’ submissions for plagiarism. I will consider strong similarities in the submitted work across students to be a violation of our policy on academic integrity and the matter will be considered cheating.
Who in the SEC’s view are the typical “gatekeepers” of financial reporting that complies with all relevant standards? (8 points)
The SEC views directors as “gatekeepers.”
Who are the most important gatekeepers? (8 points)
The most important gatekeepers are auditors, lawyers, and others who have professional obligations to spot and prevent potential misconduct.
What all-important tasks do managers and senior management share in terms of good governance? (8 points)
The all-important tasks managers and senior managers share in terms of good governance are to select the right CEO for your company and to ensure that he or she “gets it” in terms of understanding the importance of tone at the top and solid corporate culture. Deficient corporate cultures are often the cause of the most egregious securities law violations, and directors, both directly and through the oversight of senior management, play a key role in shaping the prevailing attitude and behaviors within a company.
What is personnel decision among the most crucial board members’ responsibilities? (8 points)
The board members’ most crucial personnel choice is choosing the right CEO and senior management to guide the business to success.
Give a recent example of a Board of Directors’ critical personnel action (cite your source). (8 points)
A Board of Directors’ critical personnel action might be to hire a new CEO, fire a CEO, or approve a CEO’s compensation. A board of directors’ essential personnel action is the process by which a board of directors evaluates and decides on an employee’s hiring, firing, or promotion. This process is necessary because it ensures that the company’s board of directors makes the best decision and that the employees are treated fairly. They decide whom to hire, whom to promote, and whom to fire. They also decide on the salaries and benefits of the employees, as well as set executive compensation. The board of directors also oversees the organization’s management and ensures that the organization follows its strategic plan.
REFERENCES
https://www.diligent.com/insights/corporate-governance/the-role-of-the-board-of-directors-in-corporate-governance/
https://www.oecd.org/daf/ca/corporategovernanceprinciples/1857291.pdf
Name five elements about a company that directors should thoroughly understand. (8 points)
Directors are gatekeepers
Boards must establish a corporate culture
Directors must learn and be engaged to be effective
Directors should listen to shareholders
The potential for individual liability is small
While directors must listen to what senior managers say about the financial position of the company on whose board they serve, is it possible to hear things senior management is not saying? Why or why not? (8 points)
Yes, it is because managers need to know what’s happening in the industry and the market as a whole. They need to understand what the company’s competitors are doing and what the shareholders think.
In addition to competitors and shareholders, what additional outsider does Mary Shapiro urge directors to listen to? Is this realistic? Why or why not? (8 points)
You must pay attention to what senior managers say and listen to what they are not saying, which is realistic.
What unique insight do institutional shareholders offer to board members? Is there anything else? (8 points)
Competitive challenges, industry dynamics, macroeconomics, and listening to the shareholders’ views and voices.
What information should board members look at from other shareholders? (8 points)
Relevant financing expertise.
Industry track record and experience
Public company/corporate governance experience
Fully supportive of management
If a company has uncovered serious wrongdoing, it will need to decide whether, how and when to report the matter to the SEC. What is an immediate question it will have to answer? (8 points)
You will have to answer whether what has been discovered constitutes material information that requires public disclosure.
As regards whistleblowers, what specific elements of corporate culture should directors foster? (8 points)
Affirmatively encourages and empowers employees to report wrongs.
Finally, pick any large, well-known public company and find their Investor Relations section on the corporate website. Mary Jo White mentioned several times that board of director members should seek information beyond the company or companies on which they serve. List the information available on the investor relations or other section of a public company’s website that may be useful to directors of other companies in their search for useful information. (4 points)
Johnson & Johnson
• Announces $5 Billion share repurchase program on September 14, 2022