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Glossary of Terms - USA Context (Source: The Corporate Library ) 
TERM DEFINITION
A  
abnormal returns  The difference between the return on a reputation portfolio and the return on the market index. 
accountability  The liability of a board of directors to shareholders and stakeholders for corporate performance and actions of the corporation. 
acquisition  Acquiring control of a corporation by stock purchase or exchange, either hostile or friendly. 
ADR  A special, negotiable certificate issued by a US depository bank which represents a specific number of shares of stock issued in a foreign country and traded on a US stock exchange. 
AFL-CIO  Voluntary federation of America's labor unions formed in 1955 by the merger of the American Federation of Labor and the Congress of Industrial Organizations to give America's working class a voice and power in bringing about economic and social reforms. 
AGM  A company gathering, usually held at the end of each fiscal year, at which shareholders and management discuss the previous year and the outlook for the future, directors are elected and other shareholder concerns are addressed. 
american depository receipt  A special, negotiable certificate issued by a US depository bank which represents a specific number of shares of stock issued in a foreign country and traded on a US stock exchange. 
American Federation of Labor - Congress of Industrial Organizations (US)  Voluntary federation of America's labor unions formed in 1955 by the merger of the American Federation of Labor and the Congress of Industrial Organizations to give America's working class a voice and power in bringing about economic and social reforms. 
American Stock Exchange  The second-largest stock exchange in the U.S., after the NYSE. 
AMEX  The second-largest stock exchange in the U.S., after the NYSE. 
annual (general) meeting  A company gathering, usually held at the end of each fiscal year, at which shareholders and management discuss the previous year and the outlook for the future, directors are elected and other shareholder concerns are addressed. 
annual report  An audited document issued annually by all publicly listed corporations to their shareholders in accordance with SEC regulation. Contains information on financial results and overall performance of the previous fiscal year and comments on future outlook 
antidilution provision  Agreement that protects an investor from a reduction in fractional ownership in a company in the event of a stock split, issuance of additional stock or other such measure. 
antitakeover defense  A device designed to prevent a hostile takeover by increasing the takeover cost usually through the issuance of new preferred shares that carry severe redemption provisions. 
articles of dissolution  An official document filed with the Secretary of State of the state of incorporation prior to dissolution of a partnership or corporation outling the provisions for the distribution of assets. 
articles of incorporation  An official document filed with the Secretary of State of the state of incorporation outlining a corporation's purpose, powers under state law, authorized classes of securities to be issued and the rights and liabilities of shareholders and directors. 
audit report  Statement of the accounting firm's assessment of the validity and accuracy of a company's financial information and conformity with accepted accounting practices. 
 
 
B 
benchmarking  A company's use of information about other firms in the same industry used for comparisons and to set standards and goals. 
beneficial owner  The individual who benefits from ownership of a security, property or mutual fund regardless of who holds title. 
beta  The measurement of a stock's volatility relative to the overall market. Statistically, it is defined as the covariance of the returns on the stock with the market return divided by the variance of the market return. 
Black-Scholes equation  An equation used to determine the value of option securities prices based on the relationship between six variables -- the current underlying asset price (S), the option strike price (K), the option time-to-expiration (t), the riskless return (r), the underlying asset payout return (d), and the underlying asset volatility (s) -- work together to determine the value of a standard option. 
board of directors  The collective group of individuals elected by the shareholders of a corporation to oversee the management of the corporation. 
board of trustees  A group of people responsible for the oversight of a non-profit organization 
book value  The value of an asset, calculated as actual cost minus accumulated depreciation. 
broker non-votes  Proxies received from brokers or nominees holding shares for a beneficial owner indicating that the broker or nominee is not voting on a particular proposal because the broker or nominee has not received instructions from the beneficial owner(s) and does not have discretionary voting power with respect to that item. 
business judgement rule  Rule granting directors of publicly listed companies’ immunity from liability if their actions were executed in good faith, using sound business judgment and exercised with reasonable care. 
bylaws  A document stating the rules of internal governance for a corporation as adopted by its board of directors. 
 
C
California Public Employees' Retirement System  CalPERS is the nation's largest public pension system and the world's third largest pension system with more than $140 billion in assets invested in domestic and international markets. 
CalPERS  CalPERS is the nation's largest public pension system and the world's third largest pension system with more than $140 billion in assets invested in domestic and international markets. 
CAR  The differences between the expected return on a stock and the actual return. 
cash balance pension plan  A defined benefit plan that maintains individual employee accounts like a defined contribution plan. 
CBOE  Founded in 1973, the CBOE was established for the trading of call options on listed stock. Today it is the second largest securities exchange in the country and the largest options exchange in the world. 
CBOT  Formed in 1948 as a central marketplace for the midwestern grain trade, the CBOT is now the oldest and largest futures exchange in the world. 
Central Index Key  A unique code used by the US Securities and Exchange Commission (SEC) to identify corporations and individual people who have filed disclosure with the SEC. 
CEO  The chief executive officer or CEO is the highest ranking officer of the company, and is often Chairman of the Board as well. 
CFO  The corporate executive responsible for the financial planning and record-keeping of a company 
Chairman of the Board  Highest-ranking director in a corporation's board of directors. 
change-in-control arrangements  An executive employment contract that provides the executive with a lucrative severance package in the event of their termination. May include a continuation of salary, bonus and/or certain benefits and perquisites, as well as accelerated vesting of stock incentives and/or certain retirement benefits. 
Chicago Board of Trade  Formed in 1948 as a central marketplace for the midwestern grain trade, the CBOT is now the oldest and largest futures exchange in the world 
Chicago Board Options Exchange  Founded in 1973, the CBOE was established for the trading of call options on listed stock. Today it is the second largest securities exchange in the country and the largest options exchange in the world. 
chief executive officer  The chief executive officer or CEO is the highest ranking officer of the company, and is often Chairman of the Board as well. 
chief financial officer  The corporate executive responsible for the financial planning and record-keeping of a company. 
chief information officer  The corporate executive responsible for corporate communications. 
chief operating officer  The corporate executive responsible for the day-to-day management of a company. 
CII  Founded in 1985, the Council of Institutional Investors (CII) is "an organization of large public, Taft-Hartley and corporate pension funds formed to address investment issues that affect the size or security of plan assets." 
CIK  A unique code used by the US Securities and Exchange Commission (SEC) to identify corporations and individual people who have filed disclosure with the SEC. 
CIO  The corporate executive responsible for corporate communications. 
class action lawsuit  A lawsuit filed by one or more persons on behalf of a group of individuals all having the same grievance. 
class of shares  Multiple shares issued by the same company of varying rights or powers. 
classified board  A corporate board structure where only a portion of the board of directors is elected each year, usually to discourage takeover attempts. 
code of best practice  Guiding principles for ensuring good corporate governance to which all publicly listed companies should aim. 
codetermination  Term used to describe labor representation (employees and union represenatives) on corporate boards. 
collar(s)  Combinations of put options and call options that can limit, but not eliminate, the downside risk of a stock holding. 
Committee on Uniform Securities Identification Procedures  A number consisting of nine characters (including letters and numbers) used to uniquely identify a company or issuer and the type of security. The CUSIP system—owned by the American Bankers Association and operated by Standard & Poor’s—facilitates the clearing and settlement process of securities. A similar system is used to identify foreign securities (CUSIP International Numbering System). 
common stock  Equity securities representing ownership in a corporation and provides the holder with voting rights and the right to a share of the company's residual earnings through dividends and/or capital appreciation. 
common-law voting  A voting system that allows shareholders to cast all of their votes for a single candidate nominated for a seat on the board of directors as opposed to voting for a different candidate for each available seat. 
conglomerate  A corporation that has diversified operations by acquiring enterprises in various industries. 
COO  The corporate executive responsible for the day-to-day management of a company. 
corporate charter  An official document filed with the Secretary of State of the state of incorporation outlining a corporation's purpose, powers under state law, authorized classes of securities to be issued and the rights and liabilities of shareholders and directors. 
corporate governance  The relationship between the shareholders, directors and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law. 
corporation  An entity chartered by a state to act as a single enterprise with certain legal rights whose owners remain separate and assume limited liability. 
Council of Institutional Investors  Founded in 1985, the Council of Institutional Investors (CII) is "an organization of large public, Taft-Hartley and corporate pension funds formed to address investment issues that affect the size or security of plan assets." 
cross-shareholding  The holding of shares between two or more publicly listed companies that give each company involved an equity stake in the other. Often employed as a means of preventing unsolicited takeovers. 
cumulative abnormal return  The differences between the expected return on a stock and the actual return. 
cumulative voting  A method of stock voting that permits shareholders to cast all votes for one candidate. A voting system that gives minority shareholders more power, by allowing them to cast all of their board of director votes for a single candidate, as opposed to regular or statutory voting, in which shareholders must vote for a different candidate for each available seat. 
CUSIP  A number consisting of nine characters (including letters and numbers) used to uniquely identify a company or issuer and the type of security. The CUSIP system—owned by the American Bankers Association and operated by Standard & Poor’s—facilitates the clearing and settlement process of securities. A similar system is used to identify foreign securities (CUSIP International Numbering System). 
D
dead-hand poison pill  An antitakeover device designed to prevent the acquisition of a company even if a majority of shareholders favor the acquistion. Dead hand poison pills can only be removed by incumbent directors or their chosen successors. 
DEF 14A  A document sent by publicly listed corporations to their shareholders providing material information on corporate matters subject to vote at the annual meeting. 
defined benefits plan  A company retirement plan in which a retired employee receives a specific monetary allotment based on salary history and years of service, and in which the employer bears the investment risk. Contributions may be made by the employee, the employer, or both. 
defined contribution plan  A company retirement plan, such as a 401(k) or 403(b), in which the employee chooses to defer some amount of his/her salary into the plan and bears the investment risk. 
Delaware Court of Chancery  The Delaware Court of Chancery is the forum for the resolution of disputes involving the internal affairs of corporations chartered in the state of Delaware. 
Department of Labor  The US Department of Labor was created by federal law in 1913 to "foster, promote, and develop the welfare of the wage earners of the United States, to improve their working conditions, and to advance their opportunities for profitable employment." The DOL is responsible for the administration and enforcement of over 180 federal statutes concerning the protection of workers' rights, wages and health and safety. 
dilution  The change in earnings per share or book value per share resulting from the exercising of warrants and stock options and the conversion of convertible securities. 
dilution of ownership  A reduction in the fractional ownership of a shareholder's stock as a result of the the issuance of additional shares of common stock and/or the conversion of convertible securities. 
director  A person elected by shareholders to serve on the corporation's board of directors. 
directors and officers liability insurance (D&O)  Professional liability coverage for legal expenses and liability to shareholders, bondholders, creditors or others due to actions or omissions by a director or officer of a corporation or nonprofit organization. 
disclosure  The public dissemination of material, market-influencing information. 
dissident; dissenting shareholder  A shareholder who objects to a proposed corporate action or position. 
DOL  The US Department of Labor was created by federal law in 1913 to "foster, promote, and develop the welfare of the wage earners of the United States, to improve their working conditions, and to advance their opportunities for profitable employment." The DOL is responsible for the administration and enforcement of over 180 federal statutes concerning the protection of workers' rights, wages and health and safety. 
E 
economic value added  A financial performance measure developed by Stern Stewart & Co. used to evaluate a company's true profit, defined by Stern Stewart as "the amount by which earnings exceed or fall short of the required minimum rate of return that shareholders and lenders could get by investing in other securities of comparable risk."  
EDGAR  The SEC's Electronic Data Gathering, Analysis, and Retrieval system used by all public companies to electronically transmit required filings and ongoing disclosure obligations. 
Electronic Data Gathering, Analysis, and Retrieval system  The SEC's Electronic Data Gathering, Analysis, and Retrieval system used by all public companies to electronically transmit required filings and ongoing disclosure obligations. 
empirical  quantifiable, as in an 'empirical study', where the data and results are both subject to mathematical analysis 
employee benefit plan  A plan created or maintained by an employer or employee organization, providing benefits to employees. The two main types are employee pension plans and employee welfare plans. 
Employee Retirement Income Security Act  Federal legislation (U.S. Code Title 29, Chapter 18, associated Internal Revenue Code and miscellaneous provisions) adopted in 1974 that established legal guidelines for private pension plan administration and investment practices including regulations relating to plan funding, participation, vesting, termination, disclosure, federal tax treatment and fiduciary responsibility of plan administrators.  
employee stock ownership plan  A trust established by a corporation for the allocation of stock to its employees as a form of employee benefit. 
ERISA  Federal legislation (U.S. Code Title 29, Chapter 18, associated Internal Revenue Code and miscellaneous provisions) adopted in 1974 that established legal guidelines for private pension plan administration and investment practices including regulations relating to plan funding, participation, vesting, termination, disclosure, federal tax treatment and fiduciary responsibility of plan administrators.  
ESOP  A trust established by a corporation for the allocation of stock to its employees as a form of employee benefit. 
EVA  A financial performance measure developed by Stern Stewart & Co. used to evaluate a company's true profit, defined by Stern Stewart as "the amount by which earnings exceed or fall short of the required minimum rate of return that shareholders and lenders could get by investing in other securities of comparable risk." 
event study  Empirical study of the prices of an asset prior to and directly following a specific event, like an announcement, merger, or dividend. 
executive director  A member of a company's board of directors who is also an employee of the company. 
externalization  The offsetting of costs onto society at large, as in the externalization of costs related to the health care impact of tobacco related products onto the public at large. Externalized costs do not appear on earnings statements or balance sheets, but nevertheless may impact the sustainability of the firms earnings. 
F 
fair disclosure  The release of all material, market-influencing information to the public at the same time. 
FASB  A professional standards board created by accountants to establish standards of financial accounting (Generally Accepted Accounting Principles (GAAP)) and reporting in the private sector. The FASB is officially recognized as authoritative by the Securities and Exchange Commission. 
FDI  Investment of foreign assets directly into a domestic company's structures, equipment, and organizations. It does not include foreign investment into the stock markets. 
fiduciary  An individual, corporation or association entrusted with legal authority and duty to manage and invest assets for another party. 
fiduciary trust/responsibility  The power entrusted to a individual, corporation or association (fiduciary) to manage assets for another person (principal) beneficial to his/her interests. 
Financial Accounting Standards Board  A professional standards board created by accountants to establish standards of financial accounting (Generally Accepted Accounting Principles (GAAP)) and reporting in the private sector. The FASB is officially recognized as authoritative by the Securities and Exchange Commission. 
financial statement  A written report that quantitatively summarizes the financial status of an organization for a stated period of time. Includes an income statement and balance sheet describing the flow of resources, profit or loss, and the distribution or retention of profits. 
Focus List  The California Public Employees' Retirement System (CalPERS) annual list of underperforming companies whose poor long-term stock performance, corporate governance practices and economic value-added (EVA) evaluation provide the focus for the pension fund's corporate governance activism. 
foreign direct investment  Investment of foreign assets directly into a domestic company's structures, equipment, and organizations. It does not include foreign investment into the stock markets. 
Form 10K  An audited document issued annually by all publicly listed corporations to their shareholders in accordance with SEC regulation. Contains information on financial results and overall performance of the previous fiscal year and comments on future outlook. 
Form 10Q  A report filed quarterly in accordance with SEC regulations containing unaudited financial statements. 
Form 8K  Form filed by corporations with the SEC to report corporate changes or material events which are important to investors and not previously disclosed in any other form. 
forward looking statement  A statement made by an official representative of a corporation concerning future earnings potential or operations. 
friendly takeover  A takeover favored and supported by the management of the target company 
G 
GAAP  A set of uniform accounting rules for recording and reporting financial information as established by the Financial Accounting Standards Board. 
GASB  An accounting standards board formed in 1984 by the Financial Accounting Foundation (FAF) to develop accounting standards for state and local governmental entities. 
Generally Accepted Accounting Principles  A set of uniform accounting rules for recording and reporting financial information as established by the Financial Accounting Standards Board. 
GIGN  The GIGN is an informal network of international institutional investors who share a common interest in good corporate governance and improving long-term shareholder value. 
Glass-Steagall Act  Federal legislation passed in 1933 that separated investment and commercial banking firms and prohibited banks from owning corporate stock. 
Global Institutional Governance Network  The GIGN is an informal network of international institutional investors who share a common interest in good corporate governance and improving long-term shareholder value. 
golden bungee (cords)  A lucrative executive pay package that includes a severance agreement and cash, options, or other incentive to remain associated with the company. Usually included as a provision in an executives employment contract that is triggered as a result of a merger or buyout. The executive reaps the benefits of a farewell package but retains a position with the newly combined company. 
golden handshake  A clause in an executive employment contract that provides the executive with a lucrative severance package in the event of their termination. May include a continuation of salary, bonus and/or certain benefits and perquisites, as well as accelerated vesting of stock options. 
golden hello  A cash payment or other remuneration paid to a new executive as an incentive to join a company 
golden parachute  A clause in an executive employment contract that provides the executive with a lucrative severance package in the event of their termination. May include a continuation of salary, bonus and/or certain benefits and perquisites, as well as accelerated vesting of stock options. 
Government Accounting Standards Board  An accounting standards board formed in 1984 by the Financial Accounting Foundation (FAF) to develop accounting standards for state and local governmental entities. 
greenmail(ing)  The practice of taking a stake in a company subject to a hostile takeover, forcing the target company to buy back its own shares at a premium to prevent a takeover. 
H 
historical cost  An accounting principle requiring all financial statement items to be based on original cost. 
hostile takeover  An unsolicited takeover not supported by the management and board of directors of the target company. 
I 
IAS  Financial reporting standards created by the International Accounting Standards Committee in an effort to harmonize various practices across the globe 
IASC  An independent, accounting body formed in 1973 whose mission is to harmonize accounting principles used by private sector businesses and organizations around the world. 
ICGN  The International Corporate Governance Network (ICGN), founded in 1995, is a formal network of investors, companies, academics, and finance experts created to provide a forum for communicating ideas regarding the development of global corporate governance practices.  
ICI  Founded in 1940 as the national association of the American investment company industry, the Investment Company Institute (ICI) seeks to educate the public about the investment company business, guard the ethical integrity of the industry, and promote the interests of fund shareholders.  
independent director  A person elected by shareholders to a corporation's board of directors who is not affiliated with the company in any other capacity. 
individual investor  An individual who purchases generally small amounts of securities for his or her own account. Also known as a retail investor. 
individual retirement account  A retirement savings account that allows individuals to set aside up to $2,000 per year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later. 
initial public offering  The initial sale of stock by a company to members of the public. 
inside director  A member of a company's board of directors who is also an employee of the company. 
insider trading  Buying or selling corporate stock by an insider, or an insider's disclosure of insider information 
institutional investor  A large organization, such as a mutual fund, pension fund, bank, investment company, brokerage firm, endowment fund, university or insurance company, that invests its own assets or those held in trust either as its primary business or as an important secondary function. 
interlocking directorates  Two or more corporate boards of directors that share at least one director in common. 
internal audit  An ongoing evaluation of a company's financial health by by its own employees. 
Internal Revenue Service  The federal agency responsible for administering and enforcing the Treasury Department's revenue laws, through the assessment and collection of taxes, determination of pension plan qualification, and related activities. 
International Accounting Standards  Financial reporting standards created by the International Accounting Standards Committee in an effort to harmonize various practices across the globe. 
International Accounting Standards Committee  An independent, accounting body formed in 1973 whose mission is to harmonize accounting principles used by private sector businesses and organizations around the world. 
International Corporate Governance Network  The International Corporate Governance Network (ICGN), founded in 1995, is a formal network of investors, companies, academics, and finance experts created to provide a forum for communicating ideas regarding the development of global corporate governance practices.  
International Organization of Securities Commissioners  The International Organization of Securities Commissioners is a network of international securities commissions or similar organizations involved in the development and enforcement of securities regulation. The group was formed to help facilitate communication between securities regulators in an effort to harmonize international securities standards and to promote high standards of regulation and integrity in world securities and futures markets. Membership is strictly limited to government securities regulatory bodies. 
Intra vires  Relating to an action within the proper authority or power of a corporation or corporate officer as stated in the corporate charter. (Latin for "within the power.") 
Investment Company Act of 1940  Federal legislation passed to regulate investment companies including regulations relating to reporting requirements, securities pricing and fund allocation. 
Investment Company Institute  Founded in 1940 as the national association of the American investment company industry, the Investment Company Institute (ICI) seeks to educate the public about the investment company business, guard the ethical integrity of the industry, and promote the interests of fund shareholders.  
Investor relations  Process by which a corporation communicates with its shareholders and the investment community. 
Investor Responsibility Research Center  The Investor Responsibility Research Center (IRRC) is a not-for-profit institution whose mission is to provide impartial research on issues of corporate governance, shareholding, and other social issues worldwide. 
IOSCO  The International Organization of Securities Commissioners is a network of international securities commissions or similar organizations involved in the development and enforcement of securities regulation. The group was formed to help facilitate communication between securities regulators in an effort to harmonize international securities standards and to promote high standards of regulation and integrity in world securities and futures markets. Membership is strictly limited to government securities regulatory bodies. 
IPO  The initial sale of stock by a company to members of the public. 
IRA  A retirement savings account that allows individuals to set aside up to $2,000 per year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later. 
IRRC  The Investor Responsibility Research Center (IRRC) is a not-for-profit institution whose mission is to provide impartial research on issues of corporate governance, shareholding, and other social issues worldwide. 
IRS  The federal agency responsible for administering and enforcing the Treasury Department's revenue laws, through the assessment and collection of taxes, determination of pension plan qualification, and related activities 
J
Jensen index  An index that uses the capital asset pricing model to determine whether a money manager outperformed a market index. 
Jensen's alpha  A comparison of a given company's market performance to that of other company's experiencing similar market risks. 
K 
keiretsu  An alliance among suppliers, intermediaries, and other firms that operate vertically and horizontally and are centered around a financial entity. 
L 
LBO  Takeover of a company using a significant amount of borrowed money, usually 70% or more of the total purchase price. 
leveraged buyout  Takeover of a company using a significant amount of borrowed money, usually 70% or more of the total purchase price. 
lockup restrictions  Provisions included as part of the initial public offering process or included in executive stock or stock option based compensation schemes that restrict the terms for future sale of shares of a publicly listed company. 
London Stock Exchange  The London Stock Exchange is the UK's leading stock exchange and the most international of all stock exchanges worldwide with over 500 foreign (non-UK) companies listed. 
LSE  The London Stock Exchange is the UK's leading stock exchange and the most international of all stock exchanges worldwide with over 500 foreign (non-UK) companies listed. 
M 
Merger  The combination of two or more entities through a purchase acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created from a merger. 
Meta analysis  A statistical technique that allows researchers to correct for various statistical artifacts and to aggregate results across studies to obtain an estimate of the true relationship between two variables 
Minority shareholder  A shareholder whose total share ownership in a publicly listed company is less than 50%. 
Monetization trades  Strategies used by executives to limit the risk of holding a big position in a single stock by converting part of their holdings into cash without selling a single share. 
N 
NAIC  Non-profit organization created to assist investors in creating or joining investment clubs and educate the public about investing. 
NASD  A self-regulatory securities industry organization of broker/dealers in the over-the-counter securities industry. Responsible for the operation and regulation of the NASDAQ stock market and over-the-counter markets. 
NASDAQ  A computerized trading system established by the NASD for over-the-counter stocks. 
National Association of Investors Corporation  Non-profit organization created to assist investors in creating or joining investment clubs and educate the public about investing. 
National Association of Securities Dealers  A self-regulatory securities industry organization of broker/dealers in the over-the-counter securities industry. Responsible for the operation and regulation of the NASDAQ stock market and over-the-counter markets. 
National Association of Securities Dealers Automated Quotations system  A computerized trading system established by the NASD for over-the-counter stocks. 
New York City Employees' Retirement System  NYCERS is the public pension system for all New York City employees. 
New York Stock Exchange  The oldest and largest stock exchange in the U.S., located on Wall Street in New York City. 
no-action letter  An SEC letter sent in response to a written request for clarification of the legality of an activity saying that no civil or criminal action will be taken against an individual engaging in the specific activity questioned. 
non-executive director  A person elected by shareholders to a corporation's board of directors who is not affiliated with the company in any other capacity. 
non-voting common stock  Shares of common stock that do not provide the owner with the right to vote on corporate matters. 
NYCERS  NYCERS is the public pension system for all New York City employees. 
NYSE  The oldest and largest stock exchange in the U.S., located on Wall Street in New York City. 
O 
OLS  The standard linear regression procedure used to analyze associations between a continuous dependent varialbe and either categorical or continuous independent variables. 
Option  An agreement, or privilege, which conveys the right to buy or sell a specific security or property at a specified price, by a specific date. 
Ordinary least squares  The standard linear regression procedure used to analyze associations between a continuous dependent varialbe and either categorical or continuous independent variables. 
Outside director  A person elected by shareholders to a corporation's board of directors who is not affiliated with the company in any other capacity. 
P 
P/E Ratio  The relationship between a company's earnings and its share price, calculated by dividing the current share price of a stock by its earnings per share for a twelve month period. 
Pay-for-performance  Term used to describe compensation concept whereby one's pay is directly related to the company's performance. 
Pension fund  A fund consisting of money contributed by the employer and/or the employees, plus earnings to provide pension benefits to retired employees of a corporation, government entity, or to other organizations. 
Pension plan  A qualified benefit plan set up by a corporation, government, labor union, or other organization to pay retirement benefits to its employees. 
Pensions and Welfare Benefits Administration  Formerly known as the Pension and Welfare Benefits Program, the Pension and Welfare Benefits Administration (PWBA) is a sub-cabinet position under the Department of Labor. It is responsible for administering and enforcing the fiduciary, reporting and disclosure provisions of the Employee Retirement Income Security Act of 1974 (ERISA).  
Poison pill  A device designed to prevent a hostile takeover by increasing the takeover cost usually through the issuance of new preferred shares that carry severe redemption provisions. 
Pooling of interests  A merger accounting method where the balance sheets of the two merging companies are combined line by line without a tax impact. 
PRE 14A  A preliminary proxy statement officially notifying shareholders of matters to be voted upon at the company's annual shareholder meeting. 
Preferred stock  Equity securities representing ownership in a corporation with preferential rights over others in regard to the payment of dividends and distribution of assets upon liquidation. Preferred stock usually does not carry voting rights. 
Price-to-earnings ratio  The relationship between a company's earnings and its share price, calculated by dividing the current share price of a stock by its earnings per share for a twelve month period. 
principal shareholder  Shareholder owning 10% or more voting stock in a publicly listed company. 
private corporations  A company whose shares are not traded on the open market. 
private equity  Equity capital investments in privately held, non-quoted companies. 
Privatization  The repurchasing of some or all of a company's outstanding stock by employees or a private investor. 
Prospectus  A legal document published by a corporation in accordance with SEC regulations detailing the history, financial status, activities and future plans of the corporation with regard to specific securities offerings. 
Proxy  A ballot by which shareholders can submit their votes on proposed corporate actions without physically attending the annual meeting. 
Proxy battle  Strategy used by an acquiring company in a hostile takeover attempt whereby the acquirer challenges the target company's management and solicits support from the target company's shareholders for proposals that would effectively give the acquiring company control of the target without having to pay a premium. 
Proxy fight  Strategy used by an acquiring company in a hostile takeover attempt whereby the acquirer challenges the target company's management and solicits support from the target company's shareholders for proposals that would effectively give the acquiring company control of the target without having to pay a premium. 
Proxy statement  A document sent by publicly listed corporations to their shareholders providing material information on corporate matters subject to vote at the annual meeting. 
Prudent man rule  An investment standard that dictates the type of security, or specific securities, in which a fiduciary/trustee may invest money. Generally, it implies that a fiduciary/trustee may invest in a security only if it is one that a prudent man of discretion and intelligence would buy. 
Public corporations  A company which has issued securities through a public offering and whose shares are traded on the open market. 
PWBA  Formerly known as the Pension and Welfare Benefits Program, the Pension and Welfare Benefits Administration (PWBA) is a sub-cabinet position under the Department of Labor. It is responsible for administering and enforcing the fiduciary, reporting and disclosure provisions of the Employee Retirement Income Security Act of 1974 (ERISA).  
Q 
quarterly report  A report filed quarterly in accordance with SEC regulations containing unaudited financial statements. 
R 
Real Estate Investment Trust  An organization, similar to an investment company, which invests in real estate loans (mortgages and trust deeds) and/or has equity interests in real estate. 
red herring prospectus  Investment/finance industry jargon for a preliminary prospectus issued to gauge interest in a prospective security offering. 
regression analysis  A statistical technique used to find relationships between variables for the purpose of predicting future values. 
REIT  An organization, similar to an investment company, which invests in real estate loans (mortgages and trust deeds) and/or has equity interests in real estate. 
replacement costs  The amount it would cost to replace an asset at its current price. 
retail investor  An individual who purchases small amounts of securities for his or her own account. Also known as an individual investor 
return on assets  A measure of a company's profitability; equal to a fiscal year's earnings divided by its total assets, expressed as a percentage. 
return on equity  A financial ratio that measures of a firm's return on shareholder investment, equal to a fiscal year's after-tax income (after preferred stock dividends but before common stock dividends) divided by book value, expressed as a percentage. 
return on investment  A financial analysis ratio that measures an investor's return on investment, equal to a fiscal year's net income divided by common stock and preferred stock plus long-term debt. 
right to vote  The right of holders of common stock to vote on matters of corporate policy at a corporation's annual meeting. 
risk management  The process of analyzing a corporation's exposure to risk and determining how to best handle such exposure. 
ROA  A measure of a company's profitability; equal to a fiscal year's earnings divided by its total assets, expressed as a percentage. 
ROE  A financial ratio that measures of a firm's return on shareholder investment, equal to a fiscal year's after-tax income (after preferred stock dividends but before common stock dividends) divided by book value, expressed as a percentage. 
ROI  A financial analysis ratio that measures an investor's return on investment, equal to a fiscal year's net income divided by common stock and preferred stock plus long-term debt. 
S 
Schedule 13D  Report filed with the SEC disclosing beneficial ownership of certain registered securities 
Schedule 13G  Abbreviated form of schedule 13D limited to use by banks, insurance companies, broker/dealers 
SEC  Federal agency created under the Securities Exchange Act of 1934 to regulate the securities industry. The SEC enforces, among other acts, the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940 and the Investment Advisers Act.  
Securities Act of 1933  Federal legislation (U.S. Code Title 15, Chapter 2A) that requires companies making a public offering of securities to file registration statements with the Securities and Exchange Commission disclosing material business and financial information before offering securities to the public. 
Securities and Exchange Commission  Federal agency created under the Securities Exchange Act of 1934 to regulate the securities industry. The SEC enforces, among other acts, the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940 and the Investment Advisers Act.  
Securities Exchange Act of 1934  Federal legislation that created the Securities and Exchange Commission, outlawed manipulative and abusive practices in the issuance of securities, required registration of stock exchanges, brokers, dealers, and listed securities, and required disclosure certain financial information and insider trading. 
selective disclosure  The release of relevant, material, market influencing information to a select group of people. 
severance pay  Compensation given to a terminated employee. 
share repurchase plan  The buying back of previously issued shares by a corporation in the open market, typically indicating management belief that the stock price is undervalued. 
shareholder  A person or entity that owns shares of stock in a corporation or mutual fund. 
shareholder activism  The practice of taking action to effect change in publicly listed companies for the benefit of its shareholders.  
shareholder activist  A group or individual that takes action in an effort to influence management and effect change in the behavior of corporations to increase shareholder value. 
shareholder proposal  A recommendation or requirement, proposed by a shareholder holding at least $2,000 market value or 1% of the company's voting shares, that the company and/or its board of directors take action presented for a vote by other shareholders at the company's annual meeting.  
shareholder resolution  A recommendation or requirement, proposed by a shareholder holding at least $2,000 market value or 1% of the company's voting shares, that the company and/or its board of directors take action presented for a vote by other shareholders at the company's annual meeting.  
shareholder rights plan  A device designed to prevent a hostile takeover by increasing the takeover cost usually through the issuance of new preferred shares that carry severe redemption provisions. 
SIC Codes  Four-digit code used by the Securities and Exchange Commission to categorize and identify a company's type of business. 
socially responsible investing  An investment strategy that seeks to achieve social as well as a financial return, usually by investing companies that function ethically. 
SRI  An investment strategy that seeks to achieve social as well as a financial return, usually by investing companies that function ethically. 
staggered board  A corporate board structure where only a portion of the board of directors is elected each year, usually to discourage takeover attempts. 
stakeholder  Any group or individual that has an interest in a company. 
Standard Industrial Classification Codes  Four-digit code used by the Securities and Exchange Commission to categorize and identify a company's type of business. 
statutory voting  Method of shareholder voting in which shareholders cast all their votes either for or against each individual candidate nominated for the board of directors. 
stock  A certificate of ownership in a corporation granting equity interest and a claim on a proportionate share in the corporation's assets and profits. 
stock options  An agreement, or privilege, which conveys the right to buy or sell a specific security or property at a specified price, by a specific date. 
stock purchase plan  An employee benefit plan that provides for the allocation of some of a company's stock for purchase by its employees. 
stock split  An increase in the number of outstanding shares of a company's stock through a division, such that proportionate equity of each shareholder remains the same but with a proportionately lower market value per share. 
stockholder  A person or entity that owns shares of stock in a corporation or mutual fund. 
sustainability  The ability of a community or society to develop a strategy of economic growth and development that continues to function indefinitely within the limits set by ecology and is beneficial to all stakeholders and the environment. 
T 
Taft-Hartley Act  Federal legislation that amended the National Labor Relations Act of 1935 to include a definition of unfair labor practices, grant individual employees the right to sue union or company officials for unfair labor practices, restrict closed shops and prohibit secondary boycotts. 
Teachers Insurance and Annuity Association - College Retirement Equities Fund  TIAA-CREF is the premier pension system among education and research institutions in the U.S and is the largest portable pension system in the world with $232 billion in total assets under management. 
TIAA-CREF  TIAA-CREF is the premier pension system among education and research institutions in the U.S and is the largest portable pension system in the world with $232 billion in total assets under management. 
Ticker symbol  An abbreviation used to identify a security traded in the public marketplace. 
Tobin's Q  A measure of a firm's performance by dividing the current market value of assets by their replacement costs. 
Toxic securities  Convertible securities whose exercise price is tied to the market price of the underlying security at time of conversion. Referred to as “toxic” as it has the potential to cause excessive dilution of the value of common stock. 
Trades Union Congress  Founded in 1868, the Trades Union Congress is the formal representative body for the UK's labor force and includes 70 different unions in its membership. The TUC is the official representative for British workers in international bodies, such as the EU, and works to develop policies and influence government on workplace issues. 
Transparent market  A market in which there is open communication between stakeholders, investors and company officials and current trade and quote information is readily available to the public. 
TUC  Founded in 1868, the Trades Union Congress is the formal representative body for the UK's labor force and includes 70 different unions in its membership. The TUC is the official representative for British workers in international bodies, such as the EU, and works to develop policies and influence government on workplace issues. 
U 
Ultra vires  An action outside the proper authority or power of a corporation or corporate officer as established in the corporate charter. (Latin for "beyond the power.") 
V 
Variable reset convertibles  Convertible securities whose exercise price is tied to the market price of the underlying security at time of conversion. Referred to as “toxic” as it has the potential to cause excessive dilution of the value of common stock. 
Venture capital  Funds granted to startup firms and small businesses with exceptional growth potential in exchange for ownership or control of the business. 
Voting trust  A trust created by an agreement among shareholders to transfer legal title to their stock and voting rights to a trustee for a specific tiime period. 
W 
Welfare and Pension Plans Disclosure Act  Federal legislation passed in 1958 requiring pension plan administrators to file a plan description with the Labor Department for all plans covering 25 or more participants. 
 
 

© 2001 Academy of Corporate Governance