Question 1

The incentive problem within the modern corporation is that the:

Accepted Answer

A) decision makers have stronger incentives to use assets productively than in small business where there is big separation of ownership and control. 
B) decision makers have weaker incentives to use assets productively than in small business where there is a big separation of ownership and control. 
C) decision makers have stronger incentives to use assets productively than in small business where there is no separation of ownership and control. 
D) decision makers have weaker incentives to use assets productively than in small business where there is no separation of ownership and control. 
A) decision makers have stronger incentives to use assets productively than in small business where there is big separation of ownership and control. 
B) decision makers have weaker incentives to use assets productively than in small business where there is a big separation of ownership and control. 
C) decision makers have stronger incentives to use assets productively than in small business where there is no separation of ownership and control. 
D) decision makers have weaker incentives to use assets productively than in small business where there is no separation of ownership and control. D

Question 2

The principle of Economic Darwinism implies that:

Accepted Answer

A) publicly traded corporations have evolved unsuccessfully through the competitive process and are not here to stay and flourish. 
B) publicly traded corporations have evolved successfully through the competitive process but they are not here to stay and flourish. 
C) publicly traded corporations have evolved unsuccessfully through the competitive process but will be here to stay and flourish. 
D) publicly traded corporations have evolved successfully through the competitive process and are here to stay and flourish. 
A) publicly traded corporations have evolved unsuccessfully through the competitive process and are not here to stay and flourish. 
B) publicly traded corporations have evolved successfully through the competitive process but they are not here to stay and flourish. 
C) publicly traded corporations have evolved unsuccessfully through the competitive process but will be here to stay and flourish. 
D) publicly traded corporations have evolved successfully through the competitive process and are here to stay and flourish. D

Question 3

Based on a historical perspective,we can say that the architecture of publicly traded corporations:

Accepted Answer

A) will continue operating in their current state and become stagnant. 
B) will become highly vulnerable to fraud and scandals. 
C) will soon become too powerful and unmanageable. 
D) will continue to evolve and change over time. 
A) will continue operating in their current state and become stagnant. 
B) will become highly vulnerable to fraud and scandals. 
C) will soon become too powerful and unmanageable. 
D) will continue to evolve and change over time. D

Question 4

Which of these is true of blockholders?

Accepted Answer

A) They participate more than small shareholders in the governance process because they internalize more of the benefits. 
B) They add value to the corporation when they extract private benefits. 
C) They are superior to institutional investors in their ability to reduce agency costs. 
D) They should not be managers of the firm. 
A) They participate more than small shareholders in the governance process because they internalize more of the benefits. 
B) They add value to the corporation when they extract private benefits. 
C) They are superior to institutional investors in their ability to reduce agency costs. 
D) They should not be managers of the firm.

Question 5

Which of these results from the separation of ownership and management in large publicly traded corporations?

Accepted Answer

A) Corporate managers have stronger incentives to rather quickly transfer control of the firm to less informed management teams. 
B) Corporate managers have weaker incentives to transfer control of the firm to less informed management teams. 
C) Corporate managers have stronger incentives to rather quickly transfer control of the firm to more informed management teams. 
D) Corporate managers have weaker incentives to transfer control of the firm to more informed management teams. 
A) Corporate managers have stronger incentives to rather quickly transfer control of the firm to less informed management teams. 
B) Corporate managers have weaker incentives to transfer control of the firm to less informed management teams. 
C) Corporate managers have stronger incentives to rather quickly transfer control of the firm to more informed management teams. 
D) Corporate managers have weaker incentives to transfer control of the firm to more informed management teams.

Question 6

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 7

Board members act in the best interests of the firm:

Accepted Answer

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

Question 8

A widely held corporation is one in which:

Accepted Answer

A) none of the owners control more than 5% of the shares. 
B) the dominant blockholder controls 40% of the shares. 
C) each blockholder controls exactly 25% of the shares. 
D) none of the owners control more than 10% of the shares. 
A) none of the owners control more than 5% of the shares. 
B) the dominant blockholder controls 40% of the shares. 
C) each blockholder controls exactly 25% of the shares. 
D) none of the owners control more than 10% of the shares.

Question 9

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 10

Shareholder voting rights should:

Accepted Answer

A) not be granted to management because of the agency problem. 
B) be assigned only to small shareholders. 
C) not be assigned to a founder who values control. 
D) be assigned to those with residual-claim rights. 
A) not be granted to management because of the agency problem. 
B) be assigned only to small shareholders. 
C) not be assigned to a founder who values control. 
D) be assigned to those with residual-claim rights.

Question 11

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 12

"Corporate governance" refers to aspects of the corporation like:

Accepted Answer

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

Question 13

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 14

In the United States,incorporation occurs:

Accepted Answer

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

Question 15

Which one of the following is implicit in applying "Economic Darwinism"?

Accepted Answer

A) Because X has been here,X may be the worst,but it should not be replaced by something else. 
B) Because X has been here,X may be the best,but it should be replaced by something else. 
C) Because X has been here,X is the worst,and it should replaced by something else. 
D) Because X has been here,X is the best,else it would have been replaced by something else. 
A) Because X has been here,X may be the worst,but it should not be replaced by something else. 
B) Because X has been here,X may be the best,but it should be replaced by something else. 
C) Because X has been here,X is the worst,and it should replaced by something else. 
D) Because X has been here,X is the best,else it would have been replaced by something else.

Question 16

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 17

Adolph Berle and Gardiner Means argued that widely held corporations will be run inefficiently by professional managers.Yet large,publicly-traded corporations continue to produce the bulk of the free world's output.A widely held corporation survives because:

Accepted Answer

A) it can raise capital from diversified investors. 
B) ownership and control are separate. 
C) large corporations are given tax sops by the government. 
D) its size insulates it from market competition. 
A) it can raise capital from diversified investors. 
B) ownership and control are separate. 
C) large corporations are given tax sops by the government. 
D) its size insulates it from market competition.

Question 18

Which of these groups is an external monitor in a publicly traded company?

Accepted Answer

A) Board of directors 
B) Shareholders 
C) Independent auditors 
D) Top managers 
A) Board of directors 
B) Shareholders 
C) Independent auditors 
D) Top managers

Question 19

Bebchuk and Fried's managerial power theory states that:

Accepted Answer

A) the typical corporate board is not captured by managers. 
B) all firms have about the same quality of governance. 
C) product,labor,and takeover markets help limit executive pay but do not work perfectly. 
D) managers want performance-based pay but such a reward system is usually inefficient. 
A) the typical corporate board is not captured by managers. 
B) all firms have about the same quality of governance. 
C) product,labor,and takeover markets help limit executive pay but do not work perfectly. 
D) managers want performance-based pay but such a reward system is usually inefficient.

Question 20

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

The incentive problem within the modern corporation is that the:

The principle of Economic Darwinism implies that:

Based on a historical perspective,we can say that the architecture of publicly traded corporations:

Which of these is true of blockholders?

Which of these results from the separation of ownership and management in large publicly traded corporations?

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.

Board members act in the best interests of the firm:

A widely held corporation is one in which:

A closely held corporation is one that:

Shareholder voting rights should:

"Corporate governance" refers to aspects of the corporation like:

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."

In the United States,incorporation occurs:

Which one of the following is implicit in applying "Economic Darwinism"?

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?

Adolph Berle and Gardiner Means argued that widely held corporations will be run inefficiently by professional managers.Yet large,publicly-traded corporations continue to produce the bulk of the free world's output.A widely held corporation survives because:

Which of these groups is an external monitor in a publicly traded company?

Bebchuk and Fried's managerial power theory states that:

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

Introduction

Economists View of Behavior

Exchange and Markets

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