Description
Explaining about the model of corporate governance including factors like executive compensation, board structure, board duties, models of board of directors etc.
Corporate Governance
Executive Compensation
(1)Increase the proportion of cash that is used in overall compensation and reduce the proportion of equity, while linking all compensation to performance. (2) Prohibit the use of “retention payments”. (3)Maximum severance payment to any employee absent a shareholder vole ($ 10m for CEO; $ 5m for any other employee). (4)Annual compensation should not exceed $ 15m, without shareholder approval. (5)Prohibit granting of stock options for five years following emergence from bankruptcy and until shareholder vote to restore their use.
(6)At least 75% of all equity awards must be retained until at least 6 months following termination of employment. (7) compensation consultants must be independent and retained by compensation committee. (8) compensation should be performance based. (9) all stock options and all other forms of equity-based pay shall be expensed on the profit-and-loss statement.
Shareholder Involvement:
(1)The article of incorporation could not be modified without shareholder consent. (2) shareholder have opportunity to add nominees to the proxy ballot (ad hoc group of five largest shareholders or 15% shareholders) (3) electronic “town meeting” for shareholders owing more than 10% of voting power entitled to place resolutions on the websites for consideration of all shareholders. If proposal received a majority vote of shareholders, it would go on the following year’s proxy card. (4) audit committee meet with shareholders at least once per year and invite comment on quality of the company’s disclosure program. (5) executive compensation over $ 15m for CEO requires shareholder approval; severance over $ 10m for CEO requires shareholders approval.
Board structure and process
(1) target number of directors is 10; all non-executive directors must be independent. (2) term limit for 10 years; once new board member per year. (3) role of chairman and CEO should be split. (4) at least 8 meetings per year. (5) chairman responsible for agenda, committee coordination and annual review of board effectiveness. (6) chairman’s performance reviewed each year by the board… term limit of 6 years.
(7) a retainer of not less than $ 35,000 for governance committee members and $ 50,000 for the chairman should be distributed.
(8) Mandatory purchases of common stock equal to 25% cash compensation; directors required to hold all mandatory holding of stocks until at least 6 months after leaving the board. (9)All stock sales by directors must be disclosed to the market at leas t2 days in advance.
Board committees
(10) Audit: at least 3 independent directors, all with financial expertise; at least 8 meetings per year; meet with General counsel 2 times per year; rotate chairman's every 3 years; review performance of CFO annually.
(11) Governance: 3 members with expertise in governance issues or substantial leadership experience; at least 4 meetings per year; responsible for board nominations, board compensation, amendments to by-laws or committee charters; establish shareholder “town meeting”; establish disclosure committee. (12) compensation: 3 members with expertise in compensation and HR; at least 4 meetings per year; review performance of HR director. (13) risk management: 3 members with experience in risk and telecom issues; at least 6 meetings per year; review risk disclosures.
The passive Board
Five Possible Models Of Board of Directors
• Functions at the discretion of the CEO. • Limits its activities and participation; limits its accountability. • Ratifies managements preferences.
The Certifying • Certifies to shareholders that the CEO is doing Board what the board expects and the management will take corrective action when needed. • Emphasizes the need for independent dierctors and meets without the CEO. • Stays informed about current performance and designates external board members to evaluate the CEO. • Establish an orderly succession process. • Is willing to change management to be credible to shareholders.
Five Possible Models Of Board of Directors
The Engaging Board • Provides insight, advice, and support to the CEO and management team. • Recognizes the ultimate responsibility to oversee CEO and company performance; guides and judges the CEO. • conducts useful, two-way discussions about key decisions facing the company. • seeks out sufficient industry and financial expertise to add value to decisions. • takes time to define the roles and behaviors required by the board and the boundaries of CEO and board responsibilities.
• Becomes intensely involved in decision making around key issues. • convenes frequent and intense meetings. • makes key decisions that management then implements. • Fills gaps in management experience.
The Intervening Board The operating Board
The Board’s role Under Law
“ All corporate powers shall be exercised by or under the authority of the board of directors of the corporation, and the business and affairs of the corporation shall be managed by or under the direction, and subject to the oversight, of its board of directors…”
The Board’s role in Practice: Basic Duties
• Approving the company’s philosophy and mission • selecting, monitoring, advising, evaluating, compensating and, if necessary, replacing the CEO and other senior executives • ensuring orderly management succession • reviewing and approving management’s strategic and business plan; financial plans and objectives, including significant capital allocations; and material transactions not in the ordinary course of business • monitoring company performance against strategic goals and objectives • ensuring compliance with applicable standards of ethics, law and regulation, auditing and accounting principles, and the company’s own governing documents. • assessing its own effectiveness in carrying out its responsibilities.
• performing such other functions as are prescribed by law or assigned to the board in the company’s governing documents.
The Board’s Fiduciary Duties
• Duty of care: diligence in making decisions, taking action, exercising oversight for the benefit of the corporation and its shareholders. • Duty of loyalty: forbearance from pursuing personal interests at the expense of the corporation or its shareholders. • Duty of candor: accurate and timely disclosure of material information relevant to the affairs of the corporation and its shareholders.
doc_993470703.ppt
Explaining about the model of corporate governance including factors like executive compensation, board structure, board duties, models of board of directors etc.
Corporate Governance
Executive Compensation
(1)Increase the proportion of cash that is used in overall compensation and reduce the proportion of equity, while linking all compensation to performance. (2) Prohibit the use of “retention payments”. (3)Maximum severance payment to any employee absent a shareholder vole ($ 10m for CEO; $ 5m for any other employee). (4)Annual compensation should not exceed $ 15m, without shareholder approval. (5)Prohibit granting of stock options for five years following emergence from bankruptcy and until shareholder vote to restore their use.
(6)At least 75% of all equity awards must be retained until at least 6 months following termination of employment. (7) compensation consultants must be independent and retained by compensation committee. (8) compensation should be performance based. (9) all stock options and all other forms of equity-based pay shall be expensed on the profit-and-loss statement.
Shareholder Involvement:
(1)The article of incorporation could not be modified without shareholder consent. (2) shareholder have opportunity to add nominees to the proxy ballot (ad hoc group of five largest shareholders or 15% shareholders) (3) electronic “town meeting” for shareholders owing more than 10% of voting power entitled to place resolutions on the websites for consideration of all shareholders. If proposal received a majority vote of shareholders, it would go on the following year’s proxy card. (4) audit committee meet with shareholders at least once per year and invite comment on quality of the company’s disclosure program. (5) executive compensation over $ 15m for CEO requires shareholder approval; severance over $ 10m for CEO requires shareholders approval.
Board structure and process
(1) target number of directors is 10; all non-executive directors must be independent. (2) term limit for 10 years; once new board member per year. (3) role of chairman and CEO should be split. (4) at least 8 meetings per year. (5) chairman responsible for agenda, committee coordination and annual review of board effectiveness. (6) chairman’s performance reviewed each year by the board… term limit of 6 years.
(7) a retainer of not less than $ 35,000 for governance committee members and $ 50,000 for the chairman should be distributed.
(8) Mandatory purchases of common stock equal to 25% cash compensation; directors required to hold all mandatory holding of stocks until at least 6 months after leaving the board. (9)All stock sales by directors must be disclosed to the market at leas t2 days in advance.
Board committees
(10) Audit: at least 3 independent directors, all with financial expertise; at least 8 meetings per year; meet with General counsel 2 times per year; rotate chairman's every 3 years; review performance of CFO annually.
(11) Governance: 3 members with expertise in governance issues or substantial leadership experience; at least 4 meetings per year; responsible for board nominations, board compensation, amendments to by-laws or committee charters; establish shareholder “town meeting”; establish disclosure committee. (12) compensation: 3 members with expertise in compensation and HR; at least 4 meetings per year; review performance of HR director. (13) risk management: 3 members with experience in risk and telecom issues; at least 6 meetings per year; review risk disclosures.
The passive Board
Five Possible Models Of Board of Directors
• Functions at the discretion of the CEO. • Limits its activities and participation; limits its accountability. • Ratifies managements preferences.
The Certifying • Certifies to shareholders that the CEO is doing Board what the board expects and the management will take corrective action when needed. • Emphasizes the need for independent dierctors and meets without the CEO. • Stays informed about current performance and designates external board members to evaluate the CEO. • Establish an orderly succession process. • Is willing to change management to be credible to shareholders.
Five Possible Models Of Board of Directors
The Engaging Board • Provides insight, advice, and support to the CEO and management team. • Recognizes the ultimate responsibility to oversee CEO and company performance; guides and judges the CEO. • conducts useful, two-way discussions about key decisions facing the company. • seeks out sufficient industry and financial expertise to add value to decisions. • takes time to define the roles and behaviors required by the board and the boundaries of CEO and board responsibilities.
• Becomes intensely involved in decision making around key issues. • convenes frequent and intense meetings. • makes key decisions that management then implements. • Fills gaps in management experience.
The Intervening Board The operating Board
The Board’s role Under Law
“ All corporate powers shall be exercised by or under the authority of the board of directors of the corporation, and the business and affairs of the corporation shall be managed by or under the direction, and subject to the oversight, of its board of directors…”
The Board’s role in Practice: Basic Duties
• Approving the company’s philosophy and mission • selecting, monitoring, advising, evaluating, compensating and, if necessary, replacing the CEO and other senior executives • ensuring orderly management succession • reviewing and approving management’s strategic and business plan; financial plans and objectives, including significant capital allocations; and material transactions not in the ordinary course of business • monitoring company performance against strategic goals and objectives • ensuring compliance with applicable standards of ethics, law and regulation, auditing and accounting principles, and the company’s own governing documents. • assessing its own effectiveness in carrying out its responsibilities.
• performing such other functions as are prescribed by law or assigned to the board in the company’s governing documents.
The Board’s Fiduciary Duties
• Duty of care: diligence in making decisions, taking action, exercising oversight for the benefit of the corporation and its shareholders. • Duty of loyalty: forbearance from pursuing personal interests at the expense of the corporation or its shareholders. • Duty of candor: accurate and timely disclosure of material information relevant to the affairs of the corporation and its shareholders.
doc_993470703.ppt