CFA Level 1 Exam- Corporate Issuers
Test || With All Accurate Solutions
stakeholder management - ANSWER-management of company relations with
stakeholders and is based on having a good understanding of stakeholder interests and
maintaining effective communication with stakeholders
legal infrastructure - ANSWER-identifies the laws relevant to and the legal recourse of
stakeholders when their rights are violated
contractual infrastructure - ANSWER-refers to the contracts between the company and
its stakeholders that spell out the rights and responsibilities of the company and the
stakeholders
organisational infrastructure - ANSWER-refers to a company's corporate governance
procedures, including its internal systems and practices that address how it manages its
stakeholder relationships
governmental infrastructure - ANSWER-comprises the regulations to which companies
are subject
annual general meeting - ANSWER-corporations holding AGM after the end of the firm's
fiscal year
proxy - ANSWER-shareholder can assign their right to vote to another who will attend
the meeting, often a director, member of management, or the shareholder's investment
advisor. a proxy may specify the shareholder's vote on specific issues or leave the vote
to the discretion of the person to whom the proxy is assigned
shareholder theory - ANSWER-primary focus of a system of corporate governance is
the interests of the firm's shareholders, which are taken to be the maximisation of the
market value of the firm's common equity
stakeholder theory - ANSWER-considers conflicts among several groups that have an
interest in the activities and performance of the firm
shareholders - ANSWER-have residual interest in the corporation in that they have
claim to the net assets of the corporation after all liabilities have been settled. also have
voting rights for the election of the board of directors and for other important corporate
matters, which gives them effective control of the firm and its management. they have
an interest in the ongoing profitability and growth of the firm, both of which can increase
the value of their ownership shares
, board of directors - ANSWER-have a responsibility to protect the interests of
shareholders; to hire fire and set the compensation of the firm's senior managers; to set
the strategic direction of the firm; and to monitor financial performance and other
aspects of the firm's ongoing activities
senior managers - ANSWER-typically receive compensation that is made up of a salary,
a bonus based on some measure of company performance, and perquisites. their
interests can be expected to include continued employment and maximising the total
value of their compensation. executive bonuses are typically tied to some measure of
firm performance, giving senior managers a strong interest in the financial success of
the firm
employees - ANSWER-also have an interest in the sustainability and success of the
firm. they have an interest in their rate of pay, opportunities for career advancement,
training and working conditions
creditors - ANSWER-supply debt capital to the firm and are primarily owners of the
firm's outstanding bonds and banks that have made loans to the firm
suppliers - ANSWER-have an interest preserving an ongoing relationship with the firm,
in the profitability of their trade with the firm, and in the growth and ongoing stability of
the firm. as they are typically short-term creditors of the firm, they also have an interest
in the firm's solvency and ongoing financial strength
principal-agent conflict - ANSWER-agent is hired to act in the interest of the principal,
but an agent's interests may not coincide exactly with those of the principal
special resolutions - ANSWER-require a supermajority vote for passage, typically two
thirds or three-fourths of the votes cast
extraordinary general meetings - ANSWER-can be called anytime there is a resolution
about a matter that requires a vote of the shareholders
majority voting - ANSWER-candidate with the most votes for each single board position
is elected
cumulative voting - ANSWER-shareholders can cast all their votes (shares times
number of board position elections) for a single board candidate or divide them among
board candidates
two-tier board structure - ANSWER-supervisory board that typically excludes executive
directors. the two boards operate independently. management board is typically led by
the company's CEO
lead independent director - ANSWER-has the ability to call meetings of the independent
directors, separate from meetings of the full board
Test || With All Accurate Solutions
stakeholder management - ANSWER-management of company relations with
stakeholders and is based on having a good understanding of stakeholder interests and
maintaining effective communication with stakeholders
legal infrastructure - ANSWER-identifies the laws relevant to and the legal recourse of
stakeholders when their rights are violated
contractual infrastructure - ANSWER-refers to the contracts between the company and
its stakeholders that spell out the rights and responsibilities of the company and the
stakeholders
organisational infrastructure - ANSWER-refers to a company's corporate governance
procedures, including its internal systems and practices that address how it manages its
stakeholder relationships
governmental infrastructure - ANSWER-comprises the regulations to which companies
are subject
annual general meeting - ANSWER-corporations holding AGM after the end of the firm's
fiscal year
proxy - ANSWER-shareholder can assign their right to vote to another who will attend
the meeting, often a director, member of management, or the shareholder's investment
advisor. a proxy may specify the shareholder's vote on specific issues or leave the vote
to the discretion of the person to whom the proxy is assigned
shareholder theory - ANSWER-primary focus of a system of corporate governance is
the interests of the firm's shareholders, which are taken to be the maximisation of the
market value of the firm's common equity
stakeholder theory - ANSWER-considers conflicts among several groups that have an
interest in the activities and performance of the firm
shareholders - ANSWER-have residual interest in the corporation in that they have
claim to the net assets of the corporation after all liabilities have been settled. also have
voting rights for the election of the board of directors and for other important corporate
matters, which gives them effective control of the firm and its management. they have
an interest in the ongoing profitability and growth of the firm, both of which can increase
the value of their ownership shares
, board of directors - ANSWER-have a responsibility to protect the interests of
shareholders; to hire fire and set the compensation of the firm's senior managers; to set
the strategic direction of the firm; and to monitor financial performance and other
aspects of the firm's ongoing activities
senior managers - ANSWER-typically receive compensation that is made up of a salary,
a bonus based on some measure of company performance, and perquisites. their
interests can be expected to include continued employment and maximising the total
value of their compensation. executive bonuses are typically tied to some measure of
firm performance, giving senior managers a strong interest in the financial success of
the firm
employees - ANSWER-also have an interest in the sustainability and success of the
firm. they have an interest in their rate of pay, opportunities for career advancement,
training and working conditions
creditors - ANSWER-supply debt capital to the firm and are primarily owners of the
firm's outstanding bonds and banks that have made loans to the firm
suppliers - ANSWER-have an interest preserving an ongoing relationship with the firm,
in the profitability of their trade with the firm, and in the growth and ongoing stability of
the firm. as they are typically short-term creditors of the firm, they also have an interest
in the firm's solvency and ongoing financial strength
principal-agent conflict - ANSWER-agent is hired to act in the interest of the principal,
but an agent's interests may not coincide exactly with those of the principal
special resolutions - ANSWER-require a supermajority vote for passage, typically two
thirds or three-fourths of the votes cast
extraordinary general meetings - ANSWER-can be called anytime there is a resolution
about a matter that requires a vote of the shareholders
majority voting - ANSWER-candidate with the most votes for each single board position
is elected
cumulative voting - ANSWER-shareholders can cast all their votes (shares times
number of board position elections) for a single board candidate or divide them among
board candidates
two-tier board structure - ANSWER-supervisory board that typically excludes executive
directors. the two boards operate independently. management board is typically led by
the company's CEO
lead independent director - ANSWER-has the ability to call meetings of the independent
directors, separate from meetings of the full board
