Page 5 - FINAL CFA I SLIDES JUNE 2019 DAY 10

Session Unit 10:
34. Corporate Governance and ESG: An Introduction

LOS 34.d: Describe stakeholder management.
LOS 34.e: Describe mechanisms to manage stakeholder relationships and mitigate associated risks., p4

Stakeholder Management –management of company relations with stakeholders, typically via:

• Legal infrastructure -laws and the legal recourse of stakeholders when their rights are violated.
• Contractual infrastructure –regulates company and stakeholder rights and responsibilities.
• Organizational infrastructure -governance procedures, systems and practices that addresses how
stakeholder relationships are managed (e.g. –AGM, EGM, SRs, proxy, majority & cumulative voting);
• Governmental infrastructure comprises the regulations to which companies are subject.
tanties
LOS 34.f: Describe functions and responsibilities of a company’s board of directors (BOD) and its committees., p.5
2 Types of BOD Structures

One-tier board structure -single BOD, includes: two-tier board structure, includes
• Internal (Executive Directors -EDs) and • a supervisory board -typically excludes EDs.
• External (Non-Executive Directors -NEDs) – • Management board -EXCO (made of EDs) -
• some called independent directors (ID) if operate independently.

they have no relationship with the company. • Typically led by the company’s CEO.
• Employee board representatives may be a
Elections are held at the same meeting and
significant portion of the NEDs.
• Chairman & CEO same person in USA but changing! each election to be for multiple years.

• lead ID can call meetings of the IDs, separate from
meetings of the full board. With a staggered board, elections for some
board positions are held each year.