Question 1

Board members act in the best interest of the firm:

Accepted Answer

A)  because they are required to by law. 
B)  when they do not own stock in the firm. 
C)  when they take an extremely cautious approach to ratifying decisions. 
D)  in part because they wish to maintain a good reputation in order to be offered other board positions. 
A)  because they are required to by law. 
B)  when they do not own stock in the firm. 
C)  when they take an extremely cautious approach to ratifying decisions. 
D)  in part because they wish to maintain a good reputation in order to be offered other board positions.

Question 2

Separation of ownership from control clearly expands the potential for principal/agent conflict. Why don't large corporations fail in large numbers because of this conflict?

Accepted Answer

The organizational architecture can real

Question 3

The large corporation generally has a separation of ownership from executive control. This can lead to:

Accepted Answer

A)  reorganization as a proprietorship. 
B)  principal/agent problems. 
C)  harmony between principals and agents. 
D)  a partnership of principals. 
A)  reorganization as a proprietorship. 
B)  principal/agent problems. 
C)  harmony between principals and agents. 
D)  a partnership of principals.

Question 4

Closely held corporations are characterized by:

Accepted Answer

A)  a small number of shareholders each holding on to lots of shares for a long time. 
B)  a large number of shareholders each holding on to a few shares for a long time. 
C)  stock that is freely traded only among a few shareholders. 
D)  stock that is not freely traded and often held by a few shareholders. 
A)  a small number of shareholders each holding on to lots of shares for a long time. 
B)  a large number of shareholders each holding on to a few shares for a long time. 
C)  stock that is freely traded only among a few shareholders. 
D)  stock that is not freely traded and often held by a few shareholders.

Question 5

Adolph Berle and Gardiner Means argued that widely held corporations will be run inefficiently by professional managers. Their argument is based on:

Accepted Answer

A)  inefficient product market structures 
B)  an inefficient market for CEOs 
C)  blockholders' control 
D)  incentive conflicts between shareholders and managers 
A)  inefficient product market structures 
B)  an inefficient market for CEOs 
C)  blockholders' control 
D)  incentive conflicts between shareholders and managers

Question 6

Provide an economic critique of the statement "U.S. corporate governance is overly focused on shareholders at the expense of employees and other corporate stakeholders".

Accepted Answer

Models that focus on satisfying multiple

Question 7

In 2003, Sony Corporation announced reform in its management structure. The reform included an increase in the number of outside directors on the Board of Directors, a requirement to separate the Chairman of the Board from the CEO, and greater inclusion of outside directors on the Nomination Committee. Analyze these changes from the perspective of separation of decision control from decision management.

Accepted Answer

Outside directors are only involved in d

Question 8

Explain how each of the following market forces helps reduce incentive conflicts between shareholders and management: a) the market for corporate control, b) the managerial labor market, and c) the product market.

Accepted Answer

The market for corporate control assures

Question 9

Incorporation occurs:

Accepted Answer

A)  initially at state and then at the federal level subject to state approval. 
B)  initially at federal and then at the state level subject to federal approval. 
C)  at the federal level only. 
D)  at the state level only. 
A)  initially at state and then at the federal level subject to state approval. 
B)  initially at federal and then at the state level subject to federal approval. 
C)  at the federal level only. 
D)  at the state level only.

Question 10

The business organization with the smallest amount of agency problems is the:

Accepted Answer

A)  proprietorship. 
B)  general partnership. 
C)  S corporation. 
D)  C corporation. 
A)  proprietorship. 
B)  general partnership. 
C)  S corporation. 
D)  C corporation.

Question 11

What are the shareholder incentives within a corporation?

Accepted Answer

Shareholders are divided into three type

Question 12

In the United States, the Board of Directors of corporations have a fiduciary responsibility to:

Accepted Answer

A)  price the products they produce. 
B)  raise investment capital in their spare time. 
C)  operate the company on a day-to-day basis. 
D)  represent the stockholders. 
A)  price the products they produce. 
B)  raise investment capital in their spare time. 
C)  operate the company on a day-to-day basis. 
D)  represent the stockholders.

Question 13

A closely held corporation is one that:

Accepted Answer

A)  has all of its stock trade on the New York Stock Exchange. 
B)  uses bonds to raise most of its capital. 
C)  is free of all federal taxes and regulations. 
D)  is owned by a small group of investors that has limited or no publicly traded stock. 
A)  has all of its stock trade on the New York Stock Exchange. 
B)  uses bonds to raise most of its capital. 
C)  is free of all federal taxes and regulations. 
D)  is owned by a small group of investors that has limited or no publicly traded stock.

Question 14

The specific structure of a U.S. corporation's charter and bylaws is constrained by:

Accepted Answer

A)  the union's fiduciary responsibilities. 
B)  preferred stock holders. 
C)  Securities Exchange Commission regulations. 
D)  the focal point for a set of contracts. 
A)  the union's fiduciary responsibilities. 
B)  preferred stock holders. 
C)  Securities Exchange Commission regulations. 
D)  the focal point for a set of contracts.

Question 15

For a large corporation, what does 'going private' mean? Why can't all corporations be privately held from a practical point of view?

Accepted Answer

When going private, the stock of the cor

Question 16

The business organization that is individually owned and where ownership is connected with unlimited liability is the:

Accepted Answer

A)  proprietorship. 
B)  limited liability partnership. 
C)  S corporation. 
D)  C corporation. 
A)  proprietorship. 
B)  limited liability partnership. 
C)  S corporation. 
D)  C corporation.

Question 17

One the important advantages of the nonprofit organization is:

Accepted Answer

A)  lower taxes. 
B)  ease of issuing new stock. 
C)  ability to pay top managers portions of the residual profit. 
D)  its universal use in the manufacturing sector. 
A)  lower taxes. 
B)  ease of issuing new stock. 
C)  ability to pay top managers portions of the residual profit. 
D)  its universal use in the manufacturing sector.

Question 18

"Corporate governance" refers to aspects of the corporation such as:

Accepted Answer

A)  the corporate tax rate. 
B)  CEO compensation. 
C)  decentralization of decision rights to union workers. 
D)  government regulation of corporate health and safety. 
A)  the corporate tax rate. 
B)  CEO compensation. 
C)  decentralization of decision rights to union workers. 
D)  government regulation of corporate health and safety.

Question 19

Advancement opportunities for high level executives through tournament-type processes ("horse races"):

Accepted Answer

A)  motivate greater executive effort. 
B)  encourage cooperation among executives. 
C)  provide benefits that outweigh their incentive costs. 
D)  thwart innovative activities. 
A)  motivate greater executive effort. 
B)  encourage cooperation among executives. 
C)  provide benefits that outweigh their incentive costs. 
D)  thwart innovative activities.

Exam 18: Corporate Governance

Board members act in the best interest of the firm:

Separation of ownership from control clearly expands the potential for principal/agent conflict. Why don't large corporations fail in large numbers because of this conflict?

The large corporation generally has a separation of ownership from executive control. This can lead to:

Closely held corporations are characterized by:

Adolph Berle and Gardiner Means argued that widely held corporations will be run inefficiently by professional managers. Their argument is based on:

Provide an economic critique of the statement "U.S. corporate governance is overly focused on shareholders at the expense of employees and other corporate stakeholders".

Explain how each of the following market forces helps reduce incentive conflicts between shareholders and management: a) the market for corporate control, b) the managerial labor market, and c) the product market.

Incorporation occurs:

The business organization with the smallest amount of agency problems is the:

What are the shareholder incentives within a corporation?

In the United States, the Board of Directors of corporations have a fiduciary responsibility to:

A closely held corporation is one that:

The specific structure of a U.S. corporation's charter and bylaws is constrained by:

For a large corporation, what does 'going private' mean? Why can't all corporations be privately held from a practical point of view?

The business organization that is individually owned and where ownership is connected with unlimited liability is the:

One the important advantages of the nonprofit organization is:

"Corporate governance" refers to aspects of the corporation such as:

Advancement opportunities for high level executives through tournament-type processes ("horse races"):

Introduction

Economists View of Behavior

Markets, Organizations, and the Role of Knowledge

Demand

Production and Cost

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: The Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters