Question 1

Identify a true statement about fiduciary duties.

Accepted Answer

A) A fiduciary is obligated to work for the greatest advantage for stakeholders. 
B) The executives of a corporation cannot be legally bound by fiducial obligations. 
C) A fiduciary is obligated to maximize profits for managers. 
D) Fiduciary duties include the duty of care.

Question 2

TinyToys Inc. is a company that manufactures toys. Which of the following would be its secondary stakeholder?

Accepted Answer

A) Other local toy manufacturers 
B) Companies that supply its raw materials 
C) People who purchase its toys 
D) People who work for the company

Question 3

How did the general-purpose corporations formed in the twentieth century grow?

Accepted Answer

A) By allowing investors to run the corporation 
B) By relying on investors to run the corporation 
C) By selling products and services to the investors at reduced prices 
D) By offering investors a share of ownership in the company, or stock

Question 4

________ is best described as the processes and structures that provide the ultimate decision making authority for a firm.

Accepted Answer

A) Strategic management 
B) Corporate responsibility 
C) Corporate governance 
D) Corporate management

Question 5

Which of the following statements is true of the agency problem facing the modern public corporation?

Accepted Answer

A) It arises when a corporation hires a private agency to conduct audits of its business practices. 
B) It arises when a government agency is assigned with the task of identifying corrupt practices by a corporation. 
C) It arises as a consequence of the separation of ownership and control in the corporation. 
D) It arises as a consequence of the managers of the corporation focusing on enhancing shareholder value.

Question 6

RedMart Corp. operates a chain of supermarkets. The managers and other employees of the company have been on strike for months due to their differences with its owners. As a result, the share price of the company has fallen drastically. Pro Investments Inc. purchases a majority of the shares of RedMart, confident that it can manage the company better. The problem faced by RedMart Corp. as result of the separation of ownership and control can be termed as a(n)_________.

Accepted Answer

A) hostile takeover 
B) proxy fight 
C) agency problem 
D) accountability problem

Question 7

Fatima wants to start a small business. She does not want to share the profits of her business with anyone else. In this scenario, Fatima should most likely opt for which of the following types of business ownership?

Accepted Answer

A) A joint venture 
B) An individual proprietorship 
C) A partnership 
D) A corporation

Question 8

________ is a model of the corporation suggesting that a firm is the sum total of its contracts with different stakeholders.

Accepted Answer

A) Nexus of contracts 
B) Shareholder primacy 
C) Stakeholder model 
D) Supplier contracts

Question 9

ShopEazy Inc. operates a chain of supermarkets. The managers and employees of the company have been on strike for months due to their differences with its owners. As a result, the share price of the company has fallen to a historic low. Zeltro Investments decides to purchase a majority of ShopEazy's shares, confident that it can manage the company better. In this scenario, Zeltro Investments can be best categorized as a(n)________.

Accepted Answer

A) corporate raider 
B) venture capitalist 
C) secondary stakeholder 
D) angel investor

Question 10

Chemica Corp. is a company that manufactures household chemicals and fertilizers used in farming. The government of the state in which it operates will be affected by the business through the _________.

Accepted Answer

A) effect its products have on environmental pollution 
B) reputation of the company 
C) earnings generated by the company 
D) employment opportunities that the company generates

Question 11

___ are those values that define for an individual, group, or society things that are morally right or wrong.

Accepted Answer

The answer of ___ are those values that define for...

Question 12

A ___ is a formal declaration of a company's core values, business objectives, and ethical aspirations.

Accepted Answer

The answer of A ___ is a formal declaration of...

Question 13

Jiao, a student of business management, claims that the shareholder primacy model is better than the stakeholder model of business management. Which of the following statements best supports her claim?

Accepted Answer

A) The customers are the legal owners of the corporation's assets. 
B) The most important input into making a business successful is wealth. 
C) The shareholders own stock of a corporation that they can easily trade. 
D) The shareholders have different objectives for investing in a firm.

Question 14

The ________ of a corporation have a legal fiduciary duty to act in the best interests of the corporation's owners.

Accepted Answer

A) customers 
B) suppliers 
C) directors 
D) distributors

Question 15

________ is the right to buy a certain number of the corporation's shares at a specified future date for a specified price.

Accepted Answer

A) Pay for performance 
B) Stock-based compensation 
C) A stock grant 
D) A stock option

Question 16

Explain the difference between the shareholder primacy model and the stakeholder model.

Accepted Answer

The answer of Explain the difference between the shareholder primacy...

Question 17

Antonia owns and runs a bakery in her neighborhood. She is the only person responsible for the liabilities of her bakery. Her bakery is an example of a(n)________.

Accepted Answer

A) individual proprietorship 
B) corporation 
C) partnership 
D) joint venture

Question 18

Briefly describe agency problems. How can they destroy value in an organization?

Accepted Answer

The answer of Briefly describe agency problems. How can they...

Question 19

HMR Inc. is a company that manufactures household chemicals and fertilizers used in farming. Its customers consist of farmers and other people who purchase its products. Its suppliers will be most affected by the business through the ________.

Accepted Answer

A) working conditions of the company 
B) reputation of the company 
C) earnings it generates for its investors 
D) chemicals and other products sold by it

Question 20

Identify a feature of the stakeholder model.

Accepted Answer

A) It holds that the executive team should be legally and morally obligated to work for the owners of a corporation. 
B) It holds that financial capital is the most important input into making a business successful. 
C) It holds that no group should enjoy primacy in decision making. 
D) It was advocated by Professor Adolf Berle.

Exam 13: Corporate Governance and Ethics