Question

 

Stockholder Rights and Corporate Governance:

a. Identify and provide an example for each of the five major legal rights afforded to shareholders.

b. What are the key features of effective boards of directors?

c. Describe a current trend in corporate governance, providing a real example

d. Do you think U.S. executives are compensated too highly? Why or why not?

e. Why have U.S. institutions become more active as investors? How has this trend spread to other countries?

f. What is insider trading? Explain how the courts have defined this practice.

g. In your opinion, how is the relationship between modern corporations and their shareholders changing? Explain and justify your argument.

Answer 1

Answer: As in the above question asked some related questions about the Stockholder Rights and Corporate Governance I going to cover all one by one below-

a)five major legal rights afforded to shareholders: shareholder have the shares of the company that shares some right through this that all are discussing-

• Right to share profit: In the corporate sector, the shareholder equally share profit when a company declares profit shareholder of that company has the right to share profit according to or based on the shareholding value.
• Right to vote: If the organization going to decide something to change in the organization the shareholder has the right for a vote on that issue shareholder voting also need to make a decision equally as the managers of the organization.
• Right to buy new shares: shareholder has the right to buy more share of the existing company if they want to increase the share stock quantity or want to buy new shares they have to do this.
• Inspect Corporate Books and Records: shareholder has the right to inspect the corporative record of all the investment or profit share records.
• Right to Influence Management: shareholder has the right to influence the management through the election of the directors they have the vote & large share of shareholder make of them chairman also.

b)key features of effective boards of directors: key features or can say the characteristics for the effective or good boards of directors are-

• Strategic Planner is one of the key features for the good boards of the directors. the directors of the corporation have an effective strategy to make the goals meet.

• Leadership quality of the directors make them more efficient that must have the good officials.

• Professionalism the board of the directors play a very important role in the organization the effective boards must have the professional thinking & personality to make effective decision & plan the good action plans to make the company profitable.

c)The current trend in corporate governance: As the corporate governance is the mechanisms, processes, and relations by which corporations are controlled and directed director or professional adviser can be formally independent but have to follow the rule in the corporative that current trends are like that they must have to the Women on Corporate Boards, Social Media Governance should be follow, Corporate Compliance etc that all have in the trends must work on that & follow some.

d)U.S executives are compensated too highly: Yes, CEO pay continues to be very, very high and has grown far faster in recent decades than typical worker pays in the corporate its dramatic rise within the past three decades. why it is happening because of the CEOs need high pay to motivate them to exceptional performance. If CEOs were not paid so well, they would not work as hard that myth that happens in the all U.S corporative sector that makes the compensated too high also through the competition in the market.

e)U.S. institutions become more active as investors: yes U.S institutions doing this because of the profitability that means more they invest more return they get as this strategy is spreading. U.S. institution has followed the same policy like to make more investment to make a profit and seeks to get a better return on the capital they hold from several investors. so also the spread to the other country also like U.S. institution used to invest in other developing countries such as China, India, Indonesia etc. to get a better return on their investment that make the business more profitable & effective.

f)insider trading: It is an illegal practice in the corporate sector that has stated that sharing the confidential information to the outside personal or stock exchange for their own benefits. insider trading that buying or selling of a security by someone who has access to material nonpublic information about the security and court defines that practice by observing or make record properly that insider trading does not happen like disclose a transaction of company stock within two days of the purchase or sale.

g)relationship between modern corporations and their shareholders changing: The corporation benefits from stockholders' purchase of stocks that the corporate sale of the stocks give the company money to conduct its business but in the modern corporation is a business that is legally independent of its members that make a change in the sector in also affect the relation of the corporation and their shareholders that make change company in not bounds through the shareholder. shareholders share the profit based on their share in the purchase and make profit according to them that change the image as compare to the traditonal realtioship.