Corporate Governance
Kyle Ashcraft, CPA · 2019 CPA Exam Scores · 95 FAR · 98 BEC · 91 REG · 90 AUD
Corporate governance comes down to three groups checking each other's power: shareholders, the board of directors, and executive management.
What is the shareholders' role?
Shareholders own the company — they hold its stock. Owning shares means having a vote on the company's future, including the power to elect or remove members of the board of directors.
What is the board of directors' role?
The board of directors is a group elected by shareholders to represent their interests. The board:
- Hires or fires executive management
- Sets executive compensation
- Decides when to issue a dividend
- Oversees internal controls
What is executive management's role?
Executive management — the CEO, CFO, and similar roles — runs the company's daily operations and has the authority to hire or fire everyone who reports to them.
Each group keeps the one above it in check. Shareholders can vote out the board. The board can fire executive management. Executive management runs operations but answers to the board, and the board answers to the shareholders it represents.
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Kyle Ashcraft, CPA scored 90 or above on every section of the CPA exam in 2019, including a 98 on BEC. He is the founder and sole instructor of Maxwell CPA Review, a complete CPA review course covering all six sections, where he creates every lecture, textbook and study outline himself.