Exam 10: Corporate Governance

Well-designed stock option-based compensation plans should have the option strike prices substantially lower than the current stock prices.

The three internal corporate governance mechanisms are ownership concentration, Board of Directors, and the market for corporate control.

As a rule, shareholders prefer more product diversification than do managers because shareholders wish to reduce risk and maximize wealth.

In Japan, the principal source of the active monitoring of large companies comes from:

A virtually exclusive reliance on financial controls may occur when outsider-dominated Boards exist. This may lead to all of the following EXCEPT:

Attitudes toward corporate governance in Japan are affected by the concepts of obligation, family, and consensus.

As globalization grows, adequate corporate governance is becoming an important requirement for doing business with a foreign firms and in foreign countries.

Institutional owners, despite their size, are usually unable to discipline ineffective top managers and cannot influence a firm's choice of strategies and overall strategic direction.

Which of the following is TRUE of trends in Japan's corporate governance structure?

All of the following are areas covered by the Dodd-Frank Wall Street Reform and Consumer Protection Act EXCEPT:

Hedge funds, as part of the market for corporate control, identifies a firm that is underperforming and then invests in it with the goal of improving that firm's performance.

Large-block shareholders typically own at least 5 percent of a corporation's issued shares.

Agency costs reflect all of the following EXCEPT ____ costs.

A Board composed primarily of outside directors will have better insights as to the firms intended strategic initiatives, the reasons for the initiatives, and the outcomes expected from them than will inside directors.

The Board of Directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. Consequently, the Board is:

The increased use of the market for corporate control has decreased the sophistication and variety of managerial defense tactics that are used in takeovers.

The top management of RavenCrest, Inc. have significant stock options in RavenCrest. They are therefore more likely to gain in making an agreement to be acquired, especially if they have golden parachutes.

Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation?

Ownership concentration is determined by both:

Discuss the difficulties in establishing performance-based compensation plans for executives.