Essentials of Corporate Governance

Appendix . Glossary

agency loss

The amount of money that a principal loses in deferring operations to an agent. In terms of corporate structure, agency loss refers to the difference between the amount that shareholders would make if they ran operations versus assigning the task to corporate management.

agency theory

A theory regarding the relationship between principals and agents. In Corporate Governance terms, the principals are the shareholders and the agents are the managers.

American Depositary Receipts (ADRs)

Shares of foreign companies that are sold on the U.S. markets through an intermediary, usually a bank.

association

A collective of members that is, in theory, run by those members.

audit committee

Subdivision of the board of directors that monitors the corporation’s compliance with Securities and Exchange Commission and Public Company Accounting Oversight Board regulations.

auditor

An independent assessor who conducts a systematic check or assessment. In the case of Corporate Governance, it is an assessment of internal controls of publicly traded companies.

berle, adolf

Coauthor of The Modern Corporation and Private Property, his theories detail the differences between corporate management and shareholder owners.

board of directors

The governing body of a corporation responsible for providing direction and guidance for the working of the organization.

business judgment rule

Establishes the legal obligations of the board of directors, while limiting its liability to those circumstances ...