Question 1

Broadly, the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to:

Accepted Answer

A)  align financial institutions' actions with society's interests. 
B)  increase the number of foreign firms listing on U.S. stock exchanges. 
C)  require CEOs to attest to the accuracy of their companies' financial reports. 
D)  increase consumer protection in pharmaceutical products.

Question 2

Monitoring by shareholders is usually accomplished through:

Accepted Answer

A)  management consultants. 
B)  government auditors. 
C)  the firm's top managers. 
D)  the Board of Directors.

Question 3

Historically, ____ have been at the center of German corporate governance structure.

Accepted Answer

A)  banks 
B)  institutional shareholders 
C)  public pension funds 
D)  government agencies

Question 4

In the modern U.S. corporation, the ownership and managerial control of the firm are separated.

Accepted Answer

A) True 
 B)False

Question 5

The way that U.S. corporate Boards of Directors are presently structured, they have little influence on the unethical behavior of top management.

Accepted Answer

A) True 
 B)False

Question 6

Research suggests that institutional activism may not have a strong direct effect on firm performance but may indirectly influence the targeted firm's strategic decisions, including those concerned with international diversification and innovation.

Accepted Answer

A) True 
 B)False

Question 7

Ethically responsible companies design and use governance mechanisms that will at least minimally satisfy stakeholders' interests.

Accepted Answer

A) True 
 B)False

Question 8

Because of recent ineffective performance, Boards of Directors are experiencing increasing pressure from shareholders, lawmakers, and regulators to be more effective in preventing managers from acting in their own interest.

Accepted Answer

A) True 
 B)False

Question 9

Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentive compensation such as stock awards and options.

Accepted Answer

A) True 
 B)False

Question 10

The market for corporate control is composed of individuals and firms that buy ownership positions or take over potentially undervalued corporations and make changes to those corporations, including the replacement of the top managers.

Accepted Answer

A) True 
 B)False

Question 11

Usually, large-block shareholders are considered to be those shareholders with at least ____ percent of the firm's stock.

Accepted Answer

A)  5 
B)  25 
C)  50 
D)  75

Question 12

Corporate governance is important to nations because:

Accepted Answer

A)  shareholders want large stock returns. 
B)  firms seek to invest in nations with national governance standards that are acceptable to them. 
C)  company Boards have lobbied for strong governance. 
D)  the United States requires that other nations adopt its governance practices.

Question 13

International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Afghanistan and other foreign assignments. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. Who is ultimately responsible for the corporate climate that resulted in this wrongdoing?

Accepted Answer

A)  The director of food service for IFS 
B)  The Board of Directors of IFS 
C)  The employees directly involved in the wrongdoing 
D)  The head of contract services for the Marines

Question 14

Research evidence suggests that ownership concentration is associated with lower levels of firm diversification, which conforms to the interests of stockholders.

Accepted Answer

A) True 
 B)False

Question 15

The CEO and Chairman of the Board of Directors Alta Corp. is dismayed by a lack of effort and insights his directors provide during Board meetings. The directors are all outsiders, experienced, and run their own successful firms. The CEO/chair genuinely seeks their greater involvement. What would you recommend?

Accepted Answer

A)  Requiring that the directors own stock in the company. 
B)  Establishing a formal process to evaluate the Board's performance. 
C)  Electing a lead director. 
D)  All of these options are correct.

Question 16

Ownership of many modern corporations is now concentrated in the hands of institutional investors rather than individual stockholders.

Accepted Answer

A) True 
 B)False

Question 17

Managerial employment risk is the:

Accepted Answer

A)  risk that managers will behave opportunistically. 
B)  risk undertaken by managers to earn stock options. 
C)  managers' risk of job loss, loss of compensation, and/or loss of reputation. 
D)  risk managers will not find a new top management position if they should be dismissed.

Question 18

Both top executives and owners of the firm wish to diversify the firm to reduce risk.

Accepted Answer

A) True 
 B)False

Question 19

For top-level managers, Board acceptance of the acquiring firm's offer usually leads to job loss because the acquiring firm wants new leadership. If the offer is refused, however, the job loss risk is minimal.

Accepted Answer

A) True 
 B)False

Question 20

Corporate governance is all of the following EXCEPT:

Accepted Answer

A)  mechanisms used to determine and control the strategic direction and performance of organizations. 
B)  a means to establish and maintain harmony between owners and top managers whose interests may conflict. 
C)  ensuring that top managers' interests are aligned with the interests of stockholders. 
D)  resolve conflicts among corporate employees.

Exam 10: Corporate Governance

Broadly, the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to:

Monitoring by shareholders is usually accomplished through:

Historically, ____ have been at the center of German corporate governance structure.

In the modern U.S. corporation, the ownership and managerial control of the firm are separated.

The way that U.S. corporate Boards of Directors are presently structured, they have little influence on the unethical behavior of top management.

Research suggests that institutional activism may not have a strong direct effect on firm performance but may indirectly influence the targeted firm's strategic decisions, including those concerned with international diversification and innovation.

Ethically responsible companies design and use governance mechanisms that will at least minimally satisfy stakeholders' interests.

Because of recent ineffective performance, Boards of Directors are experiencing increasing pressure from shareholders, lawmakers, and regulators to be more effective in preventing managers from acting in their own interest.

Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses, and long-term incentive compensation such as stock awards and options.

The market for corporate control is composed of individuals and firms that buy ownership positions or take over potentially undervalued corporations and make changes to those corporations, including the replacement of the top managers.

Usually, large-block shareholders are considered to be those shareholders with at least ____ percent of the firm's stock.

Corporate governance is important to nations because:

Research evidence suggests that ownership concentration is associated with lower levels of firm diversification, which conforms to the interests of stockholders.

Ownership of many modern corporations is now concentrated in the hands of institutional investors rather than individual stockholders.

Managerial employment risk is the:

Both top executives and owners of the firm wish to diversify the firm to reduce risk.

For top-level managers, Board acceptance of the acquiring firm's offer usually leads to job loss because the acquiring firm wants new leadership. If the offer is refused, however, the job loss risk is minimal.

Corporate governance is all of the following EXCEPT: