You have decided to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors, the following questions.

1. What is corporate governance? List five corporate governance provisions that are internal to a firm and under its control.

2. What four characteristics of the board of directors usually lead to effective corporate governance?

3. List three provisions in the corporate charter that affect takeovers.

4. Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation?

5. What is block ownership? How does it affect corporate governance?

6. Briefly explain how regulatory agencies and legal systems affect corporate governance.