4. Corporate governance: Methods for influencing management's decisions Corporate govemance refers to palicies and rules, regulations and laws, and activities that (1) infuence bath management's decisions and its company's operations, and (2) affect the relationships between a business's stakeholders. These stakeholders include the company's executives and managers, shareholders, creditors, current and former employees, competitors, and local and global communities. These goveming forces are both internal and extemal to the organization, and they can either align management's interests with those of their shareholders (a positive outcome) or further entrench the firm's management (a nat-so-positive outoome). An entrenched management is one that is less likely to be removed, all other things remaining equal. In simple terms, corporate govemance provisions can take two forms: carrots and sticks with the former generally taking the form of to reward management for benefitting the firm's stakeholders, and the latter resulting in their damaging dedsions or undertaking unacceptable activities. for making Intemal and extemal corporate govemance provisions and activities can take many farms, including a poison pill provision. Which of the following best describes this element in a firm's charter? O This provision and anti-takeover strategy attempts to increase, rather than reduce, the number of shares that O This provision allaws a target firm's shareholders to purchase additional shares of the target firm's common O This provision and takeover strategy allows the target firm's shareholders to sell a given percentage of their an acquiring firm must purchase to acquire its target. stock once a shareholder purchases a certain percentage of the firm's outstanding shares hares to an acquiring firm for a specified percentage premium over the market value of the target firm's common shares. If you were designing the composition and acceptable practices for the board of directors of a new corporation, which of the following practices would you suggest be implemented? Yes, recommend No, do not recommend implementation implementation Suggested Practice Members serving on the board's audit committee should be "independent. The company's charter should make hostile takeovers easier to accomplish. The board of directors shouild not monitor the decisions and behaviors of senior management Senior management's cash bonuses should be tied solely to the firm's short-term operating profit performance