Key Terms - Corporate Governance
Audit Committee: An
operating committee staffed by members of the board of directors plus
independent or outside directors. The committee is responsible for monitoring
the financial policies and procedures of the organization—specifically the
accounting policies, internal controls, and the hiring of external auditors.
Board of Directors: A
group of individuals hired to oversee governance of an organization. Elected by
vote of shareholders at the annual general meeting (AGM), the true power of the
board can vary from institution to institution from a powerful unit that
closely monitors the management of the organization, to a body that merely
rubber-stamps the decisions of the chief executive officer (CEO) and executive
team.
Compensation Committee:
An operating committee staffed by members of the board of directors plus
independent or outside directors. The committee is responsible for setting the
compensation for the CEO and other senior executives. Typically, this
compensation will consist of a base salary, performance bonus, stock options,
and other perks.
“Comply or Else”: A
set of guidelines that require companies to abide by a set of operating
standards or face stiff financial penalties.
“Comply or Explain”:
A set of guidelines that require companies to abide by a set of
operating standards or explain why they choose not to.
Corporate Governance:
The system by which business corporations are directed and controlled.
Source: Ghillyer_Business Ethics A Real World Approach 2e
