Governance mechanisms are considered to be effective if they meet the needs of all stakeholders, including shareholders. As an investor, how much weight, if any, do you place on a firm’s corporate governance? If you currently own any stocks, select a firm that you have invested in. If you do not own any stocks, select a publicly traded company that you consider an attractive potential investment. Working individually, complete the following research on your target firm:

• Find a copy of the company’s most recent proxy statement. Proxy statements are mailed to shareholders prior to each year’s annual meeting and contain detailed information about the company’s governance and present issues on which a shareholder vote might be held. Proxy statements are typically available from a firm’s Web site (look for an “Investors” submenu). You can also access proxy statements and other government filings such as the 10-K from the SEC’s EDGAR database (http://www.sec.gov/edgar.shtml).

• Conduct a search for news articles that address the governance of your target company. Using different keywords (e.g., governance, directors, or board of directors) in combination with the company name may be helpful.

Some of the topics that you should examine include:

• Compensation plans (for both the CEO and board members)

• Board composition (e.g., board size, insiders and outsiders)

• Committees

• Stock ownership by officers and directors

• Whether the CEO holds both CEO and board chairperson positions

• Is there a lead director who is not an officer of the company?

• Board seats held by blockholders or institutional investors

• Activities by activist shareholders regarding corporate governance issues of concern

Prepare a one-page single-spaced memo that summarizes the results of your findings. Your memo should include the following topics:

• Summarize what you consider to be the key aspects of the firm’s governance mechanisms.

• Based on your review of the firm’s governance, did you change your opinion of the firm’s desirability as an investment? Why or why not?