Corporate governanceIn practice

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The key questions in corporate governance at public companies

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Who runs this company? Top management (CEO, CFO etc) Pathways to the top

Who monitors these managers? Board of Directors Regulatory Authorities/ Government Equity investors/ analysts Bondholders/Banks/ Lenders/ Ratings Agencies

What are the rules of the game? Is it rigged in favor of the incumbent managers? Are there inside stockholders who have more power than you

do?

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Start with the company’s own reports

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Annual Reports Information about board of directors Mission statement Corporate governance principles/ statement

Filings with regulatory authorities With US companies, SEC filing DEF14A should contain

information relevant to your search. With non-US companies, there may or may not be an

equivalent filing with the local regulatory authorities.

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Assessing the board

Board composition Age & Tenure (How old and how long on board) Background (Expertise in the business) Connections to company & CEO

Board operations Who chairs the board? How often does the board meet? How good is the attendance? Is there any evidence that the board operates as a check or

at least a monitor of top management?

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Investor/Analyst Activity

Buy Side Who are the “biggest” stockholders in the firm What is their history on corporate governance?

Sell side Who are the analysts that track the firm? What are their views on the stock?

Activist Are there any activist investors in the mix? How “activist” are they?

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Rules of the game

How is the voting structure set up? Multiple classes, with different voting rights? Golden shares? (or veto votes)

Corporate Charter Takeover clauses (anti takeover amendments etc.) Voting rules (Proxies, voting at meetings) Nominating rules (on directors)

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