Question

Explain how each of the following affects corporate governance and whether the impact is positive or negative.

1. Block ownership

2. Greenmail

3. Stock options as part of compensation

4. High level of debt

5. Board of Directors comprised by majority of outsiders and compensation based in part on performance of company.

Answer 1

corporate governance and whether the impact is positive or negative.

Block ownership
Positive Impact because the block owners hold a huge chunk of company shares. They are active investors (like Warren Buffett) who from time to time highlight the opportunities and issues to the company. Hence improving the overall governance of the company. Block owners are there to make huge profits from companies ownership. Hence they act in favour of the company.

Greenmail
Negative impact. Greenmail is like blackmail. A green mailer by buying a huge chunk of Company shares blackmails the company owners and Management to buy it at a premium or else he blackmails a hostile take over.
It's banned by many countries regulatory authority due to its negative impact.

Stock options as part of a compensation
Positive Impact: As the employees feel themselves of owners and work with extra motivation.

High level of debt.
Negative impact. When not paid in time due to cash flow issues can cause a lot of trouble for the company and its Management.

Board of Directors comprised of the majority of outsiders and compensation based in part on the performance of the company.

Positive Impact. As their compensation based in part on the performance of the company, they work with extra caution and motivation. There is no related party fraud also. The business is also run in a true and fair manner.