Chapter 13 Shareholder Rights and Corporate Governance

the rise of institutional investors

The CII is an organizaton that represents institutions and pension funds with investments collectively exceeding 3 trillion Private equit y firms- are managed pools of money invested by very wealthy individuals and institutions hedge funds are pools of high capital

objectives of stock ownership

individuals and institutions who own corporate stock to make money to achieve ethic and social goals investors may also buy stock to take over a company stocks typically have a higher return than bonds or money markets

insider trading

occurs when a person gains access to confidential information about a company's financial condition and then uses that information

executive compensation

one of the most important functions of the board of directors

Shareholders

or stockholders are an important market stakeholder of the firm

Individual shareholders

people who directly own shares of stock issued by companies

board of directors

plays a central role in corporate governance. the board of directors is an elected group of individuals who have a legal duty to establish corporate objectives develop broad policies and select top level personnel to carry out these objectives protects the stakeholder and shareholder's interest reviews management performances

securities and exchange commission

protecting shareholder through stock market

key features of effective boards

selects outside directors to fill most positions(no more than two-three members of the board should be current managers hold more open elections for members of the board appoint on independent lead director align director compensation with corporate performance evaluate the board own performance on a regular basis

social investment

sometimes called socially responsible investment this can be done two ways:through selecting stocks according to various social criteria and using corporate governance to raise issues

institution shareholders

such as pensions , mutual funds, insurance companies and university endowments also own stocks

corporate governance

the process by which the company is controlled or governed

stockholder lawsuits

to check many abuses including insider trading, company's stock buyout

Shareholders legal rights and safeguards

to recieve dividends to vote on members of board of directors major mergers and acquistions charter and bylaw changes propsals by stockholders to recieve annual reports on the company's financial condition to bring shareholders against the company and officer to sell their own shares of stocks to others

information transparency and disclosure

providing information to the shareholder about a company